AB 816: Cooperative corporations: worker cooperatives.
- Session Year: 2015-2016
- House: Assembly
- Latest Version Date: 2015-08-12
Existing law, the Consumer Cooperative Corporation Law, governs the organization and operation of consumer cooperative corporations. The law specifies the provisions that may be set forth in the articles of incorporation of a consumer cooperative. Existing law provides for, among other things, information to be included in a corporations bylaws, definitions necessary for purposes of defining patrons, and requirements as to voting rights of members. Except as specified, existing law requires that the voting power of members having voting rights in a cooperative corporation be equal. Existing law also requires cooperative corporations to hold a meeting of members annually. Existing law makes the violation of specified provisions a crime.
This bill would rename the law the Cooperative Corporation Law, and authorize a cooperative corporation to elect to designate itself as a worker cooperative in its articles of incorporation. The bill would require that 51% of the workers shall be worker-members or candidates. The bill would authorize a worker cooperative to apportion and distribute its net earnings and losses at the time and in the manner specified in the articles of incorporation or bylaws. The bill would require a worker cooperative to only make patronage distributions to the worker-member class. The bill would define the patrons of a worker cooperative as worker-members and authorize their patronage to be measured by work performed. The bill would authorize a worker cooperative to issue a membership, that is not divisible into partial memberships, having the rights, privileges, preferences, restrictions, or conditions as provided in the articles or bylaws.
This bill would also authorize a worker cooperative to establish itself as a capital account cooperative in its articles or bylaws, in which case the entire net book value of the corporation would be reflected in member capital accounts, one for each member, and an unallocated capital account, if any, as specified.
This bill would also authorize a worker cooperative to establish itself as a collective board worker cooperative, in which all worker-members serve on the board. A collective board worker cooperative would not be required to hold an annual meeting of members.
This bill would authorize 2 or more worker cooperatives to consolidate, as specified, prescribe the actions to be taken upon the dissolution of a worker cooperative, and make other conforming changes.
The Corporate Securities Law of 1968 generally regulates the offer and sale of securities in this state. That law requires the offer and sale of securities to be qualified with the Commissioner of Business Oversight, and exempts specified transactions or securities from qualification. That law makes it unlawful for a person in connection with the offer or sale of a security to engage in fraudulent or misleading acts or omissions.
The shares or memberships by a corporation subject to the Consumer Cooperative Corporation Law are exempt from the qualification requirement, if the investment does not exceed $300.
The bill would increase the investment limitation of the above-referenced exemption from qualification from $300 to $1,000.
Existing law, the Consumer Cooperative Corporation Law, governs the organization and operation of consumer cooperative corporations. The law specifies the provisions that may be set forth in the articles of incorporation of a consumer cooperative. Existing law provides for, among other things, information to be included in a corporations bylaws, definitions necessary for purposes of defining patrons, and requirements as to voting rights of members. Except as specified, existing law requires that the voting power of members having voting rights in a cooperative corporation be equal. Existing law also requires cooperative corporations to hold a meeting of members annually. Existing law makes the violation of specified provisions a crime.
This bill would rename the law the Cooperative Corporation Law, and authorize a cooperative corporation to elect to designate itself as a worker cooperative in its articles of incorporation. The bill would require that 51% of the workers shall be worker-members or candidates. The bill would authorize a worker cooperative to apportion and distribute its net earnings and losses at the time and in the manner specified in the articles of incorporation or bylaws. The bill would require a worker cooperative to only make patronage distributions to the worker-member class. The bill would define the patrons of a worker cooperative as worker-members and authorize their patronage to be measured by work performed. The bill would authorize a worker cooperative to issue a membership, that is not divisible into partial memberships, having the rights, privileges, preferences, restrictions, or conditions as provided in the articles or bylaws.
This bill would also authorize a worker cooperative to establish itself as a capital account cooperative in its articles or bylaws, in which case the entire net book value of the corporation would be reflected in member capital accounts, one for each member, and an unallocated capital account, if any, as specified.
This bill would also authorize a worker cooperative to establish itself as a collective board worker cooperative, in which all worker-members serve on the board. A collective board worker cooperative would not be required to hold an annual meeting of members.
This bill would authorize 2 or more worker cooperatives to consolidate, as specified, prescribe the actions to be taken upon the dissolution of a worker cooperative, and make other conforming changes.
The Corporate Securities Law of 1968 generally regulates the offer and sale of securities in this state. That law requires the offer and sale of securities to be qualified with the Commissioner of Business Oversight, and exempts specified transactions or securities from qualification. That law makes it unlawful for a person in connection with the offer or sale of a security to engage in fraudulent or misleading acts or omissions.
The shares or memberships by a corporation subject to the Consumer Cooperative Corporation Law are exempt from the qualification requirement, if the investment does not exceed $300.
The bill would increase the investment limitation of the above-referenced exemption from qualification from $300 to $1,000.
Existing law, the Consumer Cooperative Corporation Law, governs the organization and operation of consumer cooperative corporations. The law specifies the provisions that may be set forth in the articles of incorporation of a consumer cooperative. Existing law provides for, among other things, information to be included in a corporations bylaws, definitions necessary for purposes of defining patrons, and requirements as to voting rights of members. Except as specified, existing law requires that the voting power of members having voting rights in a cooperative corporation be equal. Existing law also requires cooperative corporations to hold a meeting of members annually. Existing law makes the violation of specified provisions a crime.
This bill would rename the law the Cooperative Corporation Law, and authorize a cooperative corporation to elect to designate itself as a worker cooperative in its articles of incorporation. The bill would require that 51% of the workers shall be worker-members or candidates. The bill would authorize a worker cooperative to apportion and distribute its net earnings and losses at the time and in the manner specified in the articles of incorporation or bylaws. The bill would require a worker cooperative to only make patronage distributions to the worker-member class. The bill would define the patrons of a worker cooperative as worker-members and authorize their patronage to be measured by work performed. The bill would authorize a worker cooperative to issue a membership, that is not divisible into partial memberships, having the rights, privileges, preferences, restrictions or conditions as provided in the articles or bylaws.
This bill would also authorize a worker cooperative to establish itself as a capital account cooperative in its articles or bylaws, in which case the entire net book value of the corporation would be reflected in member capital accounts, one for each member, and an unallocated capital account, if any, as specified.
This bill would also authorize a worker cooperative to establish itself as a collective board worker cooperative, in which all worker members serve on the board. A collective board worker cooperative would not be required to hold an annual meeting of members.
This bill would authorize 2 or more worker cooperatives to consolidate, as specified, prescribe the actions to be taken upon the dissolution of a worker cooperative, and make other conforming changes.
The Corporate Securities Law of 1968 generally regulates the offer and sale of securities in this state. That law requires the offer and sale of securities to be qualified with the Commissioner of Business Oversight, and exempts specified transactions or securities from qualification. That law makes it unlawful for a person in connection with the offer or sale of a security to engage in fraudulent or misleading acts or omissions.
The shares or memberships by a corporation subject to the Consumer Cooperative Corporation Law are exempt from the qualification requirement, if the investment does not exceed $300.
The bill would increase the investment limitation of the above-referenced exemption from qualification from $300 to $1,000.
Existing law, the Consumer Cooperative Corporation Law, governs the organization and operation of consumer cooperative corporations. The law specifies the provisions that may be set forth in the articles of incorporation of a consumer cooperative. Existing law provides for, among other things, information to be included in a corporations bylaws, definitions necessary for purposes of defining patrons, and requirements as to voting rights of members. Except as specified, existing law requires that the voting power of members having voting rights in a cooperative corporation be equal. Existing law also requires cooperative corporations to hold a meeting of members annually. Existing law makes the violation of specified provisions a crime.
This bill would rename the law the Cooperative Corporation Law, and authorize a cooperative corporation to elect to designate itself as a worker cooperative in its articles of incorporation. The bill would require that 51% of the workers shall be worker-members or candidates. The bill would authorize a worker cooperative to apportion and distribute its net earnings and losses at the time and in the manner specified in the articles of incorporation or bylaws. The bill would require a worker cooperative to only make patronage distributions to the worker-member class. The bill would define the patrons of a worker cooperative as worker-members and authorize their patronage to be measured by work performed or personal services contributed. performed. The bill would authorize a worker cooperative to issue an indivisible a membership, that is not divisible into partial memberships, having the rights, privileges, preferences, restrictions or conditions as provided in the articles or bylaws.
This bill would also authorize a worker cooperative to establish itself as a capital account cooperative in its articles or bylaws, in which case the entire net book value of the corporation would be reflected in member capital accounts, one for each member, and an unallocated capital account, if any, as specified.
This bill would also authorize a worker cooperative to establish itself as a collective board worker cooperative, in which all worker members serve on the board. A collective board worker cooperative would not be required to hold an annual meeting of members.
This bill would authorize 2 or more worker cooperatives to consolidate, as specified, prescribe the actions to be taken upon the dissolution of a worker cooperative, and make other conforming changes.
The Corporate Securities Law of 1968 generally regulates the offer and sale of securities in this state. That law requires the offer and sale of securities to be qualified with the Commissioner of Business Oversight, and exempts specified transactions or securities from the qualification, and certain interests from the definition of a security. qualification. That law makes it unlawful for a person in connection with the offer or sale of a security to engage in fraudulent or misleading acts of or omissions.
The issuance of shares or memberships by a corporation subject to the Consumer Cooperative Corporation Law is are exempt from, from the qualification requirement, if the investment does not exceed $300.
The bill would increase the investment limitation of the above-referenced exemption from qualification from $300 to $1,000.
Existing law, the Consumer Cooperative Corporation Law, governs the organization and operation of consumer cooperative corporations. The law specifies the provisions that may be set forth in the articles of incorporation of a consumer cooperative. Existing law provides for, among other things, information to be included in a corporations bylaws, definitions necessary for purposes of defining patrons, and requirements as to voting rights of members. Except as specified, existing law requires that the voting power of members having voting rights in a cooperative corporation be equal. Existing law also requires cooperative corporations to hold a meeting of members annually. Existing law makes the violation of specified provisions a crime.
This bill would rename the law the General Cooperative Corporation Law, and authorize a cooperative corporation to elect to designate itself as a worker cooperative in its articles of incorporation. The bill would require that 51% of the workers shall be worker-members or eligible for membership within 2 years of having become a worker. candidates. The bill would authorize a worker cooperative to apportion and distribute its net earnings and losses at the time and in the manner specified in the articles of incorporation or bylaws. The bill would require a worker cooperative to only make patronage distributions to the worker-member class. The bill would define the patrons of a worker cooperative as worker-members and authorize their patronage to be measured by work performed or personal services contributed. The bill would authorize a worker cooperative to issue an indivisible membership having the rights, privileges, preferences, restrictions or conditions as provided in the articles or bylaws.
This bill would also authorize a worker cooperative to establish itself as a capital account cooperative in its articles or bylaws, in which case the entire net book value of the corporation would be reflected in member capital accounts, one for each member, and an unallocated capital account, if any, as specified.
This bill would also authorize a worker cooperative to establish itself as a collective board worker cooperative, in which all worker members serve on the board. A collective board worker cooperative would not be required to hold an annual meeting of members.
This bill would authorize 2 or more worker cooperatives to consolidate, as specified, prescribe the actions to be taken upon the dissolution of a worker cooperative, and make other conforming changes.
The Corporate Securities Law of 1968 generally regulates the offer and sale of securities in this state. That law requires the offer and sale of securities to be qualified with the Commissioner of Business Oversight, and exempts specified transactions or securities from the qualification, and certain interests from the definition of a security. That law makes it unlawful for a person in connection with the offer or sale of a security to engage in fraudulent or misleading acts of omissions.
The issuance of shares or memberships by a corporation subject to the Consumer Cooperative Corporation Law is exempt from, the qualification requirement, if the investment does not exceed $300.
The bill would increase the investment limitation of the above-referenced exemption from qualification from $300 to $1,000.
Existing law, the Consumer Cooperative Corporation Law, governs the organization and operation of consumer cooperative corporations. The law specifies the provisions that may be set forth in the articles of incorporation of a consumer cooperative. Existing law provides for, among other things, information to be included in a corporations bylaws, definitions necessary for purposes of defining patrons, and requirements as to voting rights of members. Except as specified, existing law requires that the voting power of members having voting rights in a cooperative corporation be equal. Existing law also requires cooperative corporations to hold a meeting of members annually. Existing law makes the violation of specified provisions a crime.
This bill would rename the law the General Cooperative Corporation Law, and authorize a cooperative corporation to elect to designate itself as a worker cooperative in its articles of incorporation. The bill would require that 51% of the workers shall be worker-members or eligible for membership within 2 years of having become a worker. The bill would authorize a worker cooperative to suspend a worker-member without prior notice if specified requirements are met. The bill would authorize a worker cooperative to apportion and distribute its net earnings and losses at the time and in the manner specified in the articles of incorporation or bylaws. The bill would require a worker cooperative to only make patronage distributions to the worker-member class. The bill would define the patrons of a worker cooperative as worker-members and authorize their patronage to be measured by work performed or personal services contributed. The bill would authorize a worker cooperative to issue an indivisible membership having the rights, privileges, preferences, restrictions or conditions as provided in the articles or bylaws.
This bill would also authorize a worker cooperative to establish itself as a capital account cooperative in its articles or bylaws, in which case the entire net book value of the corporation would be reflected in member capital accounts, one for each member, and an unallocated capital account, if any, as specified.
This bill would also authorize a worker cooperative to establish itself as a collective board worker cooperative, in which all worker members serve on the board. A collective board worker cooperative would not be required to hold an annual meeting of members.
This bill would authorize two 2 or more worker cooperatives to consolidate, as specified, prescribe the actions to be taken upon the dissolution of a worker cooperative, and make other conforming changes.
The Corporate Securities Law of 1968 generally regulates the offer and sale of securities in this state. That law requires the offer and sale of securities to be qualified with the Commissioner of Business Oversight, and exempts specified transactions or securities from the qualification, and certain interests from the definition of a security. That law makes it unlawful for a person in connection with the offer or sale of a security to engage in fraudulent or misleading acts of omissions.The issuance of shares or memberships by a corporation subject to the Consumer Cooperative Corporation Law is exempt from, the qualification requirement, if the investment does not exceed $300.The bill would increase the investment limitation of the above-referenced exemption from qualification from $300 to $1,000. The bill would exclude any written notice of allocation, as defined, issued by a specified type of organization, and a membership interest in a collective board worker cooperative, from the definition of a security. The bill would exclude shares or memberships issued by a worker cooperative from qualification, provided that the aggregate investment of any shareholder or member does not exceed $5,000.Because this bill would change the definition of existing crimes, this bill would create a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing law, the Consumer Cooperative Corporation Law, governs the organization and operation of consumer cooperative corporations. The law specifies the provisions that may be set forth in the articles of incorporation of a consumer cooperative. Existing law provides for, among other things, information to be included in a corporations bylaws, definitions necessary for purposes of defining patrons, and requirements as to voting rights of members. Except as specified, existing law requires that the voting power of members having voting rights in a cooperative corporation be equal. Existing law also requires cooperative corporations to hold a meeting of members annually. Existing law makes the violation of specified provisions a crime.
This bill would rename the law the General Cooperative Corporation Law, and authorize a cooperative corporation to elect to designate itself as a worker cooperative in its articles of incorporation. The bill would require that 51% of the workers shall be worker-members or eligible for membership within 2 years of having become a worker. The bill would authorize a worker cooperative to suspend a worker-member without prior notice if specified requirements are met. The bill would authorize a worker cooperative to apportion and distribute its net earnings and losses at the time and in the manner specified in the articles of incorporation or bylaws. The bill would require a worker cooperative to only make patronage distributions to the worker-member class. The bill would define the patrons of a worker cooperative as worker-members and authorize their patronage to be measured by work performed or personal services contributed. The bill would exempt worker cooperatives from the requirement that voting power of members be equal. The bill would authorize a worker cooperative to issue only one type of an indivisible membership having the same rights, privileges, preferences, restrictions or conditions as all other worker members as provided in the articles or bylaws.
This bill would also authorize a worker cooperative to establish itself as a capital account cooperative in its articles or bylaws, in which case the entire net book value of the corporation would be reflected in member capital accounts, one for each member, and an unallocated capital account, if any, as specified.
This bill would also authorize a worker cooperative to establish itself as a collective board worker cooperative, in which all worker members serve on the board. A collective board worker cooperative would not be required to hold an annual meeting of members.
This bill would authorize two or more worker cooperatives to consolidate, as specified, proscribe prescribe the actions to be taken upon the dissolution of a worker cooperative, and make other conforming changes.
The Corporate Securities Law of 1968 generally regulates the offer and sale of securities in this state. That law requires the offer and sale of securities to be qualified with the Commissioner of Business Oversight, and exempts specified transactions or securities from the qualification, and certain interests from the definition of a security. That law makes it unlawful for a person in connection with the offer or sale of a security to engage in fraudulent or misleading acts of omissions.
The issuance of shares or memberships by a corporation subject to the Consumer Cooperative Corporation Law is exempt from, the qualification requirement, if the investment does not exceed $300.
The bill would increase the investment limitation of the above-referenced exemption from qualification from $300 to $1,000. The bill would exclude any written notice of allocation, as defined, issued by a specified type of organization, and a membership interest in a collective board worker cooperative, from the definition of a security. The bill would exclude shares or memberships issued by a worker cooperative from qualification, provided that the aggregate investment of any shareholder or member does not exceed $5,000.
Because this bill would change the definition of existing crimes, this bill would create a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Existing law, the Consumer Cooperative Corporation Law, governs the organization and operation of consumer cooperative corporations. The law specifies the provisions that may be set forth in the articles of incorporation of a consumer cooperative. Existing law provides for, among other things, information to be included in a corporations bylaws, definitions necessary for purposes of defining patrons, and requirements as to voting rights of members. Except as specified, existing law requires that the voting power of members having voting rights in a cooperative corporation be equal. Existing law also requires cooperative corporations to hold a meeting of members annually. Existing law makes the violation of specified provisions a crime.
This bill would rename the law the General Cooperative Corporation Law, and authorize a cooperative corporation to elect to designate itself as a worker cooperative in its articles of incorporation. The bill would authorize a worker cooperative to apportion and distribute its net earnings and losses at the time and in the manner specified in the articles of incorporation or bylaws. The bill would define the patrons of a worker cooperative as worker-members and authorize their patronage to be measured by work performed or personal services contributed. The bill would exempt worker cooperatives from the requirement that voting power of members be equal. The bill would authorize a worker cooperative to issue only one type of indivisible membership having the same rights, privileges, preferences, restrictions or conditions as all other worker members as provided in the articles or bylaws.
This bill would also authorize a worker cooperative to establish itself as a capital account cooperative in its articles or bylaws, in which case the entire net book value of the corporation would be reflected in member capital accounts, one for each member, and an unallocated capital account, if any, as specified.
This bill would also authorize a worker cooperative to establish itself as a collective board worker cooperative, in which all worker members serve on the board. A collective board worker cooperative would not be required to hold an annual meeting of members.
This bill would authorize two or more worker cooperatives to consolidate, as specified, proscribe the actions to be taken upon the dissolution of a worker cooperative, and make other conforming changes.
The Corporate Securities Law of 1968 generally regulates the offer and sale of securities in this state. That law requires the offer and sale of securities to be qualified with the Commissioner of Business Oversight, and exempts specified transactions or securities from the qualification, and certain interests from the definition of a security. That law makes it unlawful for a person in connection with the offer or sale of a security to engage in fraudulent or misleading acts of omissions.
The issuance of shares or memberships by a corporation subject to the Consumer Cooperative Corporation Law is exempt from, the qualification requirement, if the investment does not exceed $300.
The bill would increase the investment limitation of the above-referenced exemption from qualification from $300 to $1,000. The bill would exclude any written notice of allocation, as defined, issued by a specified type of organization, and a membership interest in a collective board worker cooperative, from the definition of a security. The bill would exclude shares or memberships issued by a worker cooperative from qualification, provided that the aggregate investment of any shareholder or member does not exceed $5,000.
Because this bill would change the definition of existing crimes, this bill would create a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
The Legislature finds and declares all of the following:
(a)A worker cooperative has the purpose of creating and maintaining sustainable jobs and generating wealth in order to improve the quality of life of its worker-members, dignify human work, allow workers democratic self-management, and promote community and local development in this state.
(b)The purpose of this act is to amend the Consumer Cooperative Corporation Law to clarify that the law applies to cooperatives in general, not just consumer cooperatives, and to create more visibility for worker cooperatives. This act is intended to provide a definition of worker cooperative for purposes of this act, and not for purposes of other laws.
SEC. 2.The heading of Part 2 (commencing with Section 12200) of Division 3 of Title 1 of the Corporations Code is amended to read:2.COOPERATIVE CORPORATIONSSEC. 3.Section 12200 of the Corporations Code is amended to read:12200.This part shall be known as the Cooperative Corporation Law. This part is intended primarily to apply to the organization and operation of cooperatives, including, but not limited to, consumer cooperatives, worker cooperatives, and cooperatives formed for the purpose of recycling or treating hazardous waste that elect to incorporate under its provisions.
SEC. 4.Section 12201.5 is added to the Corporations Code, to read:12201.5.(a)Notwithstanding Section 12201, the net earnings and losses of a worker cooperative shall be apportioned and distributed at the time and in the manner specified in the articles of incorporation or bylaws.
(b)Net earnings declared as patronage distributions with respect to a period of time, and paid to a creditor or member, shall be apportioned among the members in accordance with the ratio that each members patronage during the period bears to total patronage by all members during the period.
(c)The apportionment, distribution, and payment of net earnings required by subdivision (a) may be paid in cash, credits, written notices of allocation, or capital stock issued by the worker cooperative.
SEC. 5.Section 12228.3 is added to the Corporations Code, to read:12228.3.Capital account cooperative is a worker cooperative in which the entire net book value is reflected in member capital accounts, one for each member, and an unallocated capital account, if any.
SEC. 6.Section 12230.5 is added to the Corporations Code, to read:12230.5.Collective board worker cooperative means a worker cooperative in which there is only one class of members consisting of worker-members, all of whom are members of the board.
SEC. 7.Section 12238 of the Corporations Code is amended to read:12238.(a)Member means any person who, pursuant to a specific provision of a corporations articles or bylaws, has the right to vote for the election of a director or directors, or possesses proprietary interests in the corporation.
(b)The articles or bylaws may confer some or all of the rights of a member, set forth in this part, upon any person or persons who do not have any of the voting rights referred to in subdivision (a).
(c)Where a member of a corporation is not a natural person, such member may authorize in writing one or more natural persons to vote on its behalf on any or all matters which may require a vote of the members.
(d)A person is not a member by virtue of any of the following:
(1)Any rights such person has as a delegate.
(2)Any rights such person has to designate or select a director or directors.
(3)Any rights such person has as a director.
(e)Worker-member means a member of a worker cooperative who is a natural person and also a patron of a worker cooperative.
(f) Community investor means a person who is not a worker-member and who holds a share or other proprietary interest in a worker cooperative.
(g)Worker means a natural person contributing labor or services to a worker cooperative. Candidate means a worker who is being considered for membership in a worker cooperative, as defined in the corporations articles or bylaws.
SEC. 8.Section 12243 of the Corporations Code is amended to read:12243.(a)(1)If the corporation is organized to provide goods or services to its members, the corporations patrons are those who purchase those types of goods from, or use those types of services of, the corporation. If the corporation is organized to market, process, or otherwise handle its members products or services, the corporations patrons are those persons whose products or services are so marketed, processed, or handled by the corporation.
(2)Patronage of a patron is measured by the volume or value, or both, of a patrons purchases of products from, and use of services furnished by, the corporation, and by products and services provided by the patron to the corporation for marketing.
(b)(1)If the corporation is organized as a worker cooperative, the corporations patrons are its worker-members.
(2)If the corporation is organized as a worker cooperative, patronage may be measured by work performed, including, but not limited to, wages earned, number of hours worked, number of jobs created, or some combination of these measures.
SEC. 9.Section 12253 of the Corporations Code is amended to read:12253.(a)Voting power means the power to vote for the election of directors at the time any determination of voting power is made and does not include the right to vote upon the happening of some condition or event that has not yet occurred.
(b)If different classes of memberships are entitled to vote as separate classes for different members of the board, the determination of percentage of voting power shall be made on the basis of the percentage of the total number of authorized directors that the memberships in question (whether of one or more classes) have the power to elect in an election at which all memberships then entitled to vote for the election of any directors are voted.
(c)Community investor voting power in a worker cooperative shall be provided in the articles or bylaws, and is limited to approval rights only over a merger, sale of major assets, reorganization, or dissolution. Approval rights shall not include the right to propose any action.
SEC. 10.Section 12253.5 is added to the Corporations Code, to read:12253.5.Worker cooperative or employment cooperative means a corporation formed under this part that includes a class of worker-members who are natural persons whose patronage consists of labor contributed to or other work performed for the corporation. Election to be organized as a worker cooperative or an employment cooperative does not create a presumption that workers are employees of the corporation for any purposes. At least 51 percent of the workers shall be worker-members or candidates.
SEC. 11.Section 12310 of the Corporations Code is amended to read:12310.The articles of incorporation of a corporation formed under this part shall set forth:
(a)The name of the corporation.
(b)The following statement:
This corporation is a cooperative corporation organized under the Cooperative Corporation Law. The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the law.
[The articles may include a further description of the corporations purpose.]
(c)The name and street address in this state of the corporations initial agent for service of process in accordance with subdivision (b) of Section 12570.
(d)The initial street address of the corporation.
(e)The initial mailing address of the corporation, if different from the initial street address.
(f)Whether the voting power or the proprietary interests of the members are equal or unequal. If the voting power or proprietary interests of the members are unequal, the articles shall state either (i) the general rule or rules by which the voting power and proprietary interests of the members shall be determined or (ii) that such rule or rules shall be prescribed in the corporations bylaws. Equal voting power means voting power apportioned on the basis of one vote for each member. Equal proprietary rights means property rights apportioned on the basis of one proprietary unit for each member.
(g)Pursuant to Section 12310.5, the articles of incorporation may state whether the cooperative has elected to be governed as a worker cooperative.
SEC. 12.Section 12310.5 is added to the Corporations Code, to read:12310.5.(a)A corporation organized under this part may elect to be governed as a worker cooperative by making the following statement in its articles of incorporation or its amended articles of incorporation:
This corporation is a worker cooperative corporation organized under the Cooperative Corporation Law.
(b)A corporation that makes the election to be governed as a worker cooperative, unless expressly exempted, shall be governed by all the provisions of this part.
SEC. 13.Section 12317 is added to the Corporations Code, to read:12317.(a)A worker cooperative may, in its articles or bylaws, establish itself as a capital account cooperative.
(b)The articles or bylaws of a capital account cooperative may authorize assignment of a portion of retained net earnings and net losses to an unallocated capital account. The unallocated capital account in a capital account cooperative shall reflect any paid-in capital and retained net earnings not allocated to individual members. Earnings assigned to the unallocated capital account may be used for any and all corporate purposes, as determined by the board of directors.
(c)The system of member and unallocated capital accounts may be used to determine the redemption price of member shares, capital stock, and written notices of allocation. The articles or bylaws may provide for the capital account cooperative worker cooperative to pay or credit interest on the balance in each members capital account.
(d)The articles or bylaws of a capital account cooperative may permit the periodic redemption of written notices of allocation and capital stock and shall provide for recall and redemption of membership shares upon termination of membership in the cooperative. However, no redemption may occur that would result in the liability of any director or officer pursuant to Article 2 (commencing with Section 12370) of Chapter 2.
(e)As used in this section, written notice of allocation has the same meaning as defined in Section 1388 (b) of the Internal Revenue Code.
SEC. 14.Section 12404 of the Corporations Code is amended to read:12404.Except as permitted in Sections 12314 and 12404.5, the voting power of members having voting rights shall be equal.
SEC. 15.Section 12404.5 is added to the Corporations Code, to read:12404.5.(a)The worker-members of a worker cooperative shall have voting power as provided in subdivision (a) of Section 12253.
(b)Community investors have voting power only as provided in subdivision (c) of Section 12253.
SEC. 16.Section 12420 of the Corporations Code is amended to read:12420.(a)Except as provided in subdivision (b), a corporation may issue memberships having different rights, privileges, preferences, restrictions, or conditions, as provided in its articles or bylaws. If the articles or bylaws authorize at least one class of voting memberships, a corporation may also authorize and issue additional classes of memberships, preferred or otherwise, that are divisible into a series or are nonvoting or both.
(b)All worker-members shall have the rights, privileges, preferences, restrictions, or conditions as provided in the articles or bylaws. This membership shall not be divided into partial memberships.
(c)A worker cooperative shall only make patronage distributions to the worker-member class.
SEC. 17.Section 12431 of the Corporations Code is amended to read:12431.(a)No member may be expelled or suspended, and no membership or memberships may be terminated or suspended, except according to procedures satisfying the requirements of this section. An expulsion, termination, or suspension not in accord with this section shall be void and without effect.
(b)Any expulsion, suspension, or termination must be done in good faith and in a fair and reasonable manner. Any procedure that conforms to the requirements of subdivision (c) or (d) is fair and reasonable, but a court may also find other procedures to be fair and reasonable when the full circumstances of the suspension, termination, or expulsion are considered.
(c)A procedure is fair and reasonable if all of the following occur:
(1)The provisions of the procedure have been set forth in the articles or bylaws, or copies of such provisions are sent annually to all the members as required by the articles or bylaws.
(2)It provides the giving of 15 days prior notice of the expulsion, suspension, or termination and the reasons therefor.
(3)It provides an opportunity for the member to be heard, orally or in writing, not less than five days before the effective date of the expulsion, suspension, or termination by a person or body authorized to decide that the proposed expulsion, termination, or suspension not take place.
(d)Any notice required under this section may be given by any method reasonably calculated to provide actual notice. Any notice given by mail must be given by first-class or registered mail sent to the last address of the members shown on the corporations records.
(e)Any action challenging an expulsion, suspension, or termination of membership, including any claim alleging defective notice, must be commenced within one year after the date of the expulsion, suspension, or termination. In the event such an action is successful the court may order any relief, including reinstatement, it finds equitable under the circumstances, but no vote of the members or of the board may be set aside solely because a person was at the time of the vote wrongfully excluded by virtue of the challenged expulsion, suspension, or termination, unless the court finds further that the wrongful expulsion, suspension, or termination was in bad faith and for the purpose, and with the effect, of wrongfully excluding the member from the vote or from the meeting at which the vote took place, so as to affect the outcome of the vote.
(f)This section governs only the procedures for expulsion, suspension, or termination and not the substantive grounds therefor. An expulsion, suspension, or termination based upon substantive grounds which violate contractual or other rights of the member or are otherwise unlawful is not made valid by compliance with this section.
(g)A member who is expelled or suspended or whose membership is terminated shall be liable for any charges incurred, services or benefits actually rendered, dues, assessments, or fees incurred before expulsion, suspension, or termination or arising from contract or otherwise.
SEC. 18.Section 12454.5 is added to the Corporations Code, to read:12454.5.(a)A worker cooperative may create an indivisible reserves account that shall not be distributed to members.
(b)Funds in the indivisible reserves account shall only derive from non-patronage-sourced income, in a manner provided in the articles or bylaws, or by the board, and shall be used as capital for the cooperative.
SEC. 19.Section 12460 of the Corporations Code is amended to read:12460.(a)Meetings of members may be held at a place within or without this state that is stated in or fixed in accordance with the bylaws. If no other place is so stated or fixed, meetings of members shall be held at the principal executive office of the corporation. Unless prohibited by the bylaws of the corporation, if authorized by the board of directors in its sole discretion, and subject to the requirement of consent in clause (b) of Section 20 and those guidelines and procedures as the board of directors may adopt, members not physically present in person at a meeting of members may, by electronic transmission by and to the corporation (Sections 20 and 21) or by electronic video screen communication, participate in a meeting of members, be deemed present in person, and vote at a meeting of members whether that meeting is to be held at a designated place or in whole or in part by means of electronic transmission by and to the corporation or by electronic video screen communication, in accordance with subdivision (f).
(b)Except as provided in Section 12460.5, a regular meeting of members shall be held annually. In any year in which directors are elected, the election shall be held at the regular meeting unless the directors are chosen in some other manner authorized by law. Any other proper business may be transacted at the meeting.
(c)If a corporation fails to hold the regular meeting for a period of 60 days after the date designated therefor or, if no date has been designated, for a period of 15 months after the formation of the corporation or after its last regular meeting, or if the corporation fails to hold a written ballot for a period of 60 days after the date designated therefor, then the superior court of the proper county may summarily order the meeting to be held or the ballot to be conducted upon the application of a member, after notice to the corporation giving it an opportunity to be heard.
(d)The votes represented at a meeting called or by written ballot ordered pursuant to subdivision (c) and entitled to be cast on the business to be transacted shall constitute a quorum, notwithstanding any provision of the articles or bylaws or provision in this part to the contrary. The court may issue such orders as may be appropriate including, without limitation, orders designating the time and place of the meeting, the record date for determination of members entitled to vote, and the form of notice of the meeting.
(e)Special meetings of members for any lawful purpose may be called by the board, the chairman of the board, the president, or other persons, if any, as are specified in the bylaws. In addition, special meetings of members for any lawful purpose may be called by 5 percent or more of the members, however, in a worker cooperative with more than four worker-members, a special meeting may only be called by the greater of three worker-members or 5 percent of the worker-members. In a worker cooperative with fewer than four worker-members, special meetings may be called by one worker-member.
(f)A meeting of the members may be conducted, in whole or in part, by electronic transmission by and to the corporation or by electronic video screen communication (1) if the corporation implements reasonable measures to provide members 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 concurrently with those proceedings, and (2) if any member votes or takes other action at the meeting by means of electronic transmission to the corporation or electronic video screen communication, a record of that vote or action is maintained by the corporation. Any request by a corporation to a member pursuant to clause (b) of Section 20 for consent to conduct a meeting of members by electronic transmission by and to the corporation, shall include a notice that absent consent of the member pursuant to clause (b) of Section 20, the meeting shall be held at a physical location in accordance with subdivision (a).
SEC. 20.Section 12460.5 is added to the Corporations Code, to read:12460.5.Notwithstanding Section 12460, a collective board worker cooperative shall not be required to hold an annual meeting of members.
SEC. 21.Section 12461 of the Corporations Code is amended to read:12461.(a)Whenever members are required or permitted to take any action at a meeting, a written notice of the meeting shall be given not less than 10 nor more than 90 days before the date of the meeting to each member who, on the record date for notice of the meeting, is entitled to vote thereat; provided, however, that if notice is given by mail, and the notice is not mailed by first-class, registered, or certified mail, that notice shall be given not less than 20 days before the meeting. A worker cooperative shall provide notice of the meeting not less than 48 hours before the meeting if the meeting is a meeting of only worker-members, provided that the notice is delivered personally to every worker-member. Subject to subdivision (f), and subdivision (b) of Section 12462, that notice shall state the place, date, and time of the meeting, the means of electronic transmission by and to the corporation (Sections 20 and 21) or electronic video screen communication, if any, by which members may participate in that meeting, and (1) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted, or (2) in the case of the regular meeting, those matters which the board, at the time the notice is given, intends to present for action by the members, but, except as provided in subdivision (b) of Section 12462, any proper matter may be presented at the meeting for such action. The notice of any meeting at which directors are to be elected shall include the names of all those who are nominees at the time the notice is given to members.
(b)Notice of a members meeting or any report shall be given personally, by electronic transmission by the corporation, or by mail or other means of written communication, addressed to a member at the address of such member appearing on the books of the corporation or given by the member to the corporation for purpose of notice; or if no such address appears or is given, at the place where the principal office of the corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal office is located. An affidavit of giving of any notice or report in accordance with the provisions of this part, executed by the secretary, assistant secretary, or any transfer agent, shall be prima facie evidence of the giving of the notice or report.
If any notice or report addressed to the member at the address of such member appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate the United States Postal Service is unable to deliver the notice or report to the member at such address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available for the member upon written demand of the member at the principal office of the corporation for a period of one year from the date of the giving of the notice or report to all other members.
Notice given by electronic transmission by the corporation under this subdivision shall be valid only if it complies with Section 20. Notwithstanding the foregoing, notice shall not be given by electronic transmission by the corporation under this subdivision after either of the following:
(1)The corporation is unable to deliver two consecutive notices to the member by that means.
(2)The inability to so deliver the notices to the member becomes known to the secretary, any assistant secretary, the transfer agent, or other person responsible for the giving of the notice.
(c)Upon request in writing to the corporation addressed to the attention of the chairman of the board, president, vice president, or secretary by any person (other than the board) entitled to call a special meeting of members, the officer forthwith shall cause notice to be given to the members entitled to vote that a meeting will be held at a time fixed by the board not less than 35 nor more than 90 days after the receipt of the request. If the notice is not given within 20 days after receipt of the request, the persons entitled to call the meeting may give the notice or the superior court of the proper county shall summarily order the giving of the notice, after notice to the corporation giving it an opportunity to be heard. The court may issue such orders as may be appropriate, including, without limitation, orders designating the time and place of the meeting, the record date for determination of members entitled to vote, and the form of notice.
(d)When a members meeting is adjourned to another time or place, unless the bylaws otherwise require and except as provided in this subdivision, notice need not be given of the adjourned meeting if the time and place thereof (or the means of electronic transmission by and to the corporation or electronic video screen communication, if any, by which members may participate) are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each member of record entitled to vote at the meeting.
(e)The transactions of any meeting of members however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present, and if, either before or after the meeting, each of the persons entitled to vote, not present in person, provides a waiver of notice or consent to the holding of the meeting or an approval of the minutes thereof in writing. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of and presence at such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required by this part to be included in the notice but not so included, if such objection is expressly made at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of members need be specified in any written waiver of notice, consent to the holding of the meeting, or approval of the minutes thereof, unless otherwise provided in the articles or bylaws, except as provided in subdivision (f).
(f)Any approval of the members required under Section 12362, 12364, 12373, 12502, or 12658 other than unanimous approval by those entitled to vote, shall be valid only if the general nature of the proposal so approved was stated in the notice of meeting or in any written waiver of notice.
(g)A court may find that notice not given in conformity with this section is still valid, if it was given in a fair and reasonable manner.
(h)Subject to the provisions of subdivision (i), and unless prohibited by the articles or bylaws, prior to any regular or special meeting of members, the board may authorize distribution of a written ballot to every member entitled to vote at the meeting. Such ballot shall set forth the action proposed to be taken at the meeting, shall provide an opportunity to specify approval or disapproval of the proposed action, and shall state that unless revoked by the member voting in person at the meeting, the ballot will be counted if received by the corporation on or before the time of the meeting with respect to which it was sent. If ballots are so distributed with respect to a meeting, the number of members voting at the meeting by unrevoked written ballots shall be deemed present at the meeting for purposes of determining the existence of a quorum pursuant to subdivision (a) of Section 12462 but only with respect to the proposed action referred to in the ballots. These ballots shall be distributed in a manner consistent with the requirements of subdivision (b) and Section 12464.
(i)Unless prohibited by the articles or bylaws, written ballots may be distributed in a manner contemplated by subdivision (h) with respect to the election of directors, except that no ballots may be so distributed with respect to the election of directors if cumulative voting is permitted pursuant to Section 12484.
SEC. 22.Section 12530 of the Corporations Code is amended to read:12530.Except as provided in Section 12530.5, any corporation may merge with another domestic corporation, foreign corporation, or other business entity. However, a merger with a nonprofit public benefit corporation or a nonprofit religious corporation must have the prior written consent of the Attorney General.
SEC. 23.Section 12530.5 is added to the Corporations Code, to read:12530.5.Notwithstanding Section 12530, a worker cooperative that has not revoked its election to be governed as a worker cooperative under Section 12310.5 shall not consolidate or merge with another corporation other than another worker cooperative. Two or more worker cooperatives may merge or consolidate in a manner consistent with this chapter.
SEC. 24.Section 12653 of the Corporations Code is amended to read:12653.(a)After determining that all the known debts and liabilities of a corporation in the process of winding up have been paid or adequately provided for, the board shall distribute all the remaining corporate assets in the manner provided in Sections 12655, 12656, and 12656.5.
(b)If the winding up is by court proceeding or subject to court supervision, the distribution shall not be made until after the expiration of any period for the presentation of claims that has been prescribed by order of the court.
(c)Anything to the contrary notwithstanding, assets, if any, that are not subject to attachment, execution, or sale for the corporations debts and liabilities may be distributed pursuant to Sections 12655, 12656, and 12656.5 even though all debts and liabilities have not been paid or adequately provided for.
SEC. 25.Section 12656.5 is added to the Corporations Code, to read:12656.5.(a)After complying with the provisions of Section 12653, and except as otherwise provided in Section 12655, upon dissolution of a worker cooperative the majority of the unallocated capital account shall be distributed to members on the basis of any of the following, as specified in the articles of incorporation or bylaws of the cooperative:
(1)Patronage.
(2)Capital contributions.
(3)A combination of patronage and capital contributions.
(b)A worker cooperative is authorized to include patronage provided by past and current members in its distribution of the unallocated capital account.
(c)Subdivision (a) shall not apply to any amounts in the indivisible reserve account. Any amount in the indivisible reserve account shall, upon dissolution, be allocated to a cooperative development organization designated in the articles of incorporation or the bylaws.
SEC. 26.Section 25100 of the Corporations Code is amended to read:25100.The following securities are exempted from Sections 25110, 25120, and 25130:
(a)Any security (including a revenue obligation) issued or guaranteed by the United States, any state, any city, county, city and county, public district, public authority, public corporation, public entity, or political subdivision of a state or any agency or corporate or other instrumentality of any one or more of the foregoing; or any certificate of deposit for any of the foregoing.
(b)Any security issued or guaranteed by Canada, any Canadian province, any political subdivision or municipality of that province, or by any other foreign government with which the United States currently maintains diplomatic relations, if the security is recognized as a valid obligation by the issuer or guarantor; or any certificate of deposit for any of the foregoing.
(c)Any security issued or guaranteed by and representing an interest in or a direct obligation of a national bank or a bank or trust company incorporated under the laws of this state, and any security issued by a bank to one or more other banks and representing an interest in an asset of the issuing bank.
(d)Any security issued or guaranteed by a federal savings association or federal savings bank or federal land bank or joint land bank or national farm loan association or by any savings association, as defined in subdivision (a) of Section 5102 of the Financial Code, which is subject to the supervision and regulation of the Commissioner of Business Oversight of this state.
(e)Any security (other than an interest in all or portions of a parcel or parcels of real property which are subdivided land or a subdivision or in a real estate development), the issuance of which is subject to authorization by the Insurance Commissioner, the Public Utilities Commission, or the Real Estate Commissioner of this state.
(f)Any security consisting of any interest in all or portions of a parcel or parcels of real property that are subdivided lands or a subdivision or in a real estate development; provided that the exemption in this subdivision shall not be applicable to: (1) any investment contract sold or offered for sale with, or as part of, that interest, or (2) any person engaged in the business of selling, distributing, or supplying water for irrigation purposes or domestic use that is not a public utility except that the exemption is applicable to any security of a mutual water company (other than an investment contract as described in paragraph (1)) offered or sold in connection with subdivided lands pursuant to Chapter 2 (commencing with Section 14310) of Part 7 of Division 3 of Title 1.
(g)Any mutual capital certificates or savings accounts, as defined in the Savings Association Law, issued by a savings association, as defined by subdivision (a) of Section 5102 of the Financial Code, and holding a license or certificate of authority then in force from the Commissioner of Business Oversight of this state.
(h)Any security issued or guaranteed by any federal credit union, or by any credit union organized and supervised, or regulated, under the Credit Union Law.
(i)Any security issued or guaranteed by any railroad, other common carrier, public utility, or public utility holding company which is (1) subject to the jurisdiction of the Interstate Commerce Commission or its successor or (2) a holding company registered with the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935 or a subsidiary of that company within the meaning of that act or (3) regulated in respect of the issuance or guarantee of the security by a governmental authority of the United States, of any state, of Canada or of any Canadian province; and the security is subject to registration with or authorization of issuance by that authority.
(j)Any security (except evidences of indebtedness, whether interest bearing or not) of an issuer (1) organized exclusively for educational, benevolent, fraternal, religious, charitable, social, or reformatory purposes and not for pecuniary profit, if no part of the net earnings of the issuer inures to the benefit of any private shareholder or individual, or (2) organized as a chamber of commerce or trade or professional association. The fact that amounts received from memberships or dues or both will or may be used to construct or otherwise acquire facilities for use by members of the nonprofit organization does not disqualify the organization for this exemption. This exemption does not apply to the securities of any nonprofit organization if any promoter thereof expects or intends to make a profit directly or indirectly from any business or activity associated with the organization or operation of that nonprofit organization or from remuneration received from that nonprofit organization.
(k)Any agreement, commonly known as a life income contract, of an issuer (1) organized exclusively for educational, benevolent, fraternal, religious, charitable, social, or reformatory purposes and not for pecuniary profit and (2) which the commissioner designates by rule or order, with a donor in consideration of a donation of property to that issuer and providing for the payment to the donor or persons designated by him or her of income or specified periodic payments from the donated property or other property for the life of the donor or those other persons.
(l)Any note, draft, bill of exchange, or bankers acceptance which is freely transferable and of prime quality, arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which evidences an obligation to pay cash within nine months of the date of issuance, exclusive of days of grace, or any renewal of that paper which is likewise limited, or any guarantee of that paper or of that renewal, provided that the paper is not offered to the public in amounts of less than twenty-five thousand dollars ($25,000) in the aggregate to any one purchaser. In addition, the commissioner may, by rule or order, exempt any issuer of any notes, drafts, bills of exchange or bankers acceptances from qualification of those securities when the commissioner finds that the qualification is not necessary or appropriate in the public interest or for the protection of investors.
(m)Any security issued by any corporation organized and existing under the provisions of Chapter 1 (commencing with Section 54001) of Division 20 of the Food and Agricultural Code.
(n)Any beneficial interest in an employees pension, profit-sharing, stock bonus, or similar benefit plan which meets the requirements for qualification under Section 401 of the federal Internal Revenue Code or any statute amendatory thereof or supplementary thereto. A determination letter from the Internal Revenue Service stating that an employees pension, profit-sharing, stock bonus, or similar benefit plan meets those requirements shall be conclusive evidence that the plan is an employees pension, profit-sharing, stock bonus, or similar benefit plan within the meaning of the first sentence of this subdivision until the date the determination letter is revoked in writing by the Internal Revenue Service, regardless of whether or not the revocation is retroactive.
(o)Any security listed or approved for listing upon notice of issuance on a national securities exchange, if the exchange has been certified by rule or order of the commissioner and any warrant or right to purchase or subscribe to the security. The exemption afforded by this subdivision does not apply to securities listed or approved for listing upon notice of issuance on a national securities exchange, in a rollup transaction unless the rollup transaction is an eligible rollup transaction as defined in Section 25014.7.
That certification of any exchange shall be made by the commissioner upon the written request of the exchange if the commissioner finds that the exchange, in acting on applications for listing of common stock, substantially applies the minimum standards set forth in either subparagraph (A) or (B) of paragraph (1), and, in considering suspension or removal from listing, substantially applies each of the criteria set forth in paragraph (2).
(1)Listing standards:
(A)(i)Shareholders equity of at least four million dollars ($4,000,000).
(ii)Pretax income of at least seven hundred fifty thousand dollars ($750,000) in the issuers last fiscal year or in two of its last three fiscal years.
(iii)Minimum public distribution of 500,000 shares (exclusive of the holdings of officers, directors, controlling shareholders, and other concentrated or family holdings), together with a minimum of 800 public holders or minimum public distribution of 1,000,000 shares together with a minimum of 400 public holders. The exchange may also consider the listing of a companys securities if the company has a minimum of 500,000 shares publicly held, a minimum of 400 shareholders and daily trading volume in the issue has been approximately 2,000 shares or more for the six months preceding the date of application. In evaluating the suitability of an issue for listing under this trading provision, the exchange shall review the nature and frequency of that activity and any other factors as it may determine to be relevant in ascertaining whether the issue is suitable for trading. A security that trades infrequently shall not be considered for listing under this paragraph even though average daily volume amounts to 2,000 shares per day or more.
Companies whose securities are concentrated in a limited geographical area, or whose securities are largely held in block by institutional investors, normally may not be considered eligible for listing unless the public distribution appreciably exceeds 500,000 shares.
(iv)Minimum price of three dollars ($3) per share for a reasonable period of time prior to the filing of a listing application; provided, however, in certain instances an exchange may favorably consider listing an issue selling for less than three dollars ($3) per share after considering all pertinent factors, including market conditions in general, whether historically the issue has sold above three dollars ($3) per share, the applicants capitalization, and the number of outstanding and publicly held shares of the issue.
(v)An aggregate market value for publicly held shares of at least three million dollars ($3,000,000).
(B)(i)Shareholders equity of at least four million dollars ($4,000,000).
(ii)Minimum public distribution set forth in clause (iii) of subparagraph (A) of paragraph (1).
(iii)Operating history of at least three years.
(iv)An aggregate market value for publicly held shares of at least fifteen million dollars ($15,000,000).
(2)Criteria for consideration of suspension or removal from listing:
(A)If a company that (A) has shareholders equity of less than one million dollars ($1,000,000) has sustained net losses in each of its two most recent fiscal years, or (B) has net tangible assets of less than three million dollars ($3,000,000) and has sustained net losses in three of its four most recent fiscal years.
(B)If the number of shares publicly held (excluding the holdings of officers, directors, controlling shareholders, and other concentrated or family holdings) is less than 150,000.
(C)If the total number of shareholders is less than 400 or if the number of shareholders of lots of 100 shares or more is less than 300.
(D)If the aggregate market value of shares publicly held is less than seven hundred fifty thousand dollars ($750,000).
(E)If shares of common stock sell at a price of less than three dollars ($3) per share for a substantial period of time and the issuer shall fail to effectuate a reverse stock split of the shares within a reasonable period of time after being requested by the exchange to take that action.
A national securities exchange, certified by rule or order of the commissioner under this subdivision, shall file annual reports when requested to do so by the commissioner. The annual reports shall contain, by issuer: the variances granted to an exchanges listing standards, including variances from corporate governance and voting rights standards, for any security of that issuer; the reasons for the variances; a discussion of the review procedure instituted by the exchange to determine the effect of the variances on investors and whether the variances should be continued; and any other information that the commissioner deems relevant. The purpose of these reports is to assist the commissioner in determining whether the quantitative and qualitative requirements of this subdivision are substantially being met by the exchange in general or with regard to any particular security.
The commissioner after appropriate notice and opportunity for hearing in accordance with the provisions of the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, may, in his or her discretion, by rule or order, decertify any exchange previously certified that ceases substantially to apply the minimum standards or criteria as set forth in paragraphs (1) and (2).
A rule or order of certification shall conclusively establish that any security listed or approved for listing upon notice of issuance on any exchange named in a rule or order of certification, and any warrant or right to purchase or subscribe to that security, is exempt under this subdivision until the adoption by the commissioner of any rule or order decertifying the exchange.
(p)A promissory note secured by a lien on real property, which is neither one of a series of notes of equal priority secured by interests in the same real property nor a note in which beneficial interests are sold to more than one person or entity.
(q)Any unincorporated interindemnity or reciprocal or interinsurance contract, that qualifies under the provisions of Section 1280.7 of the Insurance Code, between members of a cooperative corporation, organized and operating under Part 2 (commencing with Section 12200) of Division 3 of Title 1, and whose members consist only of physicians and surgeons licensed in California, which contracts indemnify solely in respect to medical malpractice claims against the members, and which do not collect in advance of loss any moneys other than contributions by each member to a collective reserve trust fund or for necessary expenses of administration.
(1)Whenever it appears to the commissioner that any person has engaged or is about to engage in any act or practice constituting a violation of any provision of Section 1280.7 of the Insurance Code, the commissioner may, in the commissioners discretion, bring an action in the name of the people of the State of California in the superior court to enjoin the acts or practices or to enforce compliance with Section 1280.7 of the Insurance Code. Upon a proper showing a permanent or preliminary injunction, a restraining order, or a writ of mandate shall be granted and a receiver or conservator may be appointed for the defendant or the defendants assets.
(2)The commissioner may, in the commissioners discretion, (A) make public or private investigations within or outside of this state as the commissioner deems necessary to determine whether any person has violated or is about to violate any provision of Section 1280.7 of the Insurance Code or to aid in the enforcement of Section 1280.7, and (B) publish information concerning the violation of Section 1280.7.
(3)For the purpose of any investigation or proceeding under this section, the commissioner or any officer designated by the commissioner may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, agreements, or other documents or records which the commissioner deems relevant or material to the inquiry.
(4)In case of contumacy by, or refusal to obey a subpoena issued to, any person, the superior court, upon application by the commissioner, may issue to the person an order requiring the person to appear before the commissioner, or the officer designated by the commissioner, to produce documentary evidence, if so ordered, or to give evidence touching the matter under investigation or in question. Failure to obey the order of the court may be punished by the court as a contempt.
(5)No person is excused from attending or testifying or from producing any document or record before the commissioner or in obedience to the subpoena of the commissioner or any officer designated by the commissioner, or in any proceeding instituted by the commissioner, on the ground that the testimony or evidence (documentary or otherwise), required of the person may tend to incriminate the person or subject the person to a penalty or forfeiture, but no individual may be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which the person is compelled, after validly claiming the privilege against self-incrimination, to testify or produce evidence (documentary or otherwise), except that the individual testifying is not exempt from prosecution and punishment for perjury or contempt committed in testifying.
(6)The cost of any review, examination, audit, or investigation made by the commissioner under Section 1280.7 of the Insurance Code shall be paid to the commissioner by the person subject to the review, examination, audit, or investigation, and the commissioner may maintain an action for the recovery of these costs in any court of competent jurisdiction. In determining the cost, the commissioner may use the actual amount of the salary or other compensation paid to the persons making the review, examination, audit, or investigation plus the actual amount of expenses including overhead reasonably incurred in the performance of the work.
The recoverable cost of each review, examination, audit, or investigation made by the commissioner under Section 1280.7 of the Insurance Code shall not exceed twenty-five thousand dollars ($25,000), except that costs exceeding twenty-five thousand dollars ($25,000) shall be recoverable if the costs are necessary to prevent a violation of any provision of Section 1280.7 of the Insurance Code.
(r)Any shares or memberships issued by any corporation organized and existing pursuant to the provisions of Part 2 (commencing with Section 12200) of Division 3 of Title 1, provided the aggregate investment of any shareholder or member in shares or memberships sold pursuant to this subdivision does not exceed one thousand dollars ($1,000). This exemption does not apply to the shares or memberships of that corporation if any promoter thereof expects or intends to make a profit directly or indirectly from any business or activity associated with the corporation or the operation of the corporation or from remuneration, other than reasonable salary, received from the corporation. This exemption does not apply to nonvoting shares or memberships of that corporation issued to any person who does not possess, and who will not acquire in connection with the issuance of nonvoting shares or memberships, voting power (Section 12253) in the corporation. This exemption also does not apply to shares or memberships issued by a nonprofit cooperative corporation organized to facilitate the creation of an unincorporated interindemnity arrangement that provides indemnification for medical malpractice to its physician and surgeon members as set forth in subdivision (q).
(s)Any security consisting of or representing an interest in a pool of mortgage loans that meets each of the following requirements:
(1)The pool consists of whole mortgage loans or participation interests in those loans, which loans were originated or acquired in the ordinary course of business by a national bank or federal savings association or federal savings bank having its principal office in this state, by a bank incorporated under the laws of this state or by a savings association as defined in subdivision (a) of Section 5102 of the Financial Code and which is subject to the supervision and regulation of the Commissioner of Financial Institutions, and each of which at the time of transfer to the pool is an authorized investment for the originating or acquiring institution.
(2)The pool of mortgage loans is held in trust by a trustee which is a financial institution specified in paragraph (1) as trustee or otherwise.
(3)The loans are serviced by a financial institution specified in paragraph (1).
(4)The security is not offered in amounts of less than twenty-five thousand dollars ($25,000) in the aggregate to any one purchaser.
(5)The security is offered pursuant to a registration under the Securities Act of 1933, or pursuant to an exemption under Regulation A under that act, or in the opinion of counsel for the issuer, is offered pursuant to an exemption under Section 4(2) of that act.
(t)(1)Any security issued or guaranteed by and representing an interest in or a direct obligation of an industrial loan company incorporated under the laws of the state and authorized by the Commissioner of Financial Institutions to engage in industrial loan business.
(2)Any investment certificate in or issued by any industrial loan company that is organized under the laws of a state of the United States other than this state, that is insured by the Federal Deposit Insurance Corporation, and that maintains a branch office in this state.
The Legislature finds and declares all of the following:
(a)A worker cooperative has the purpose of creating and maintaining sustainable jobs and generating wealth in order to improve the quality of life of its worker-members, dignify human work, allow workers democratic self-management, and promote community and local development in this state.
(b)The purpose of this act is to amend the Consumer Cooperative Corporation Law to clarify that the law applies to cooperatives in general, not just consumer cooperatives, and to create more visibility for worker cooperatives. This act is intended to provide a definition of worker cooperative for purposes of this act, and not for purposes of other laws.
SEC. 2.The heading of Part 2 (commencing with Section 12200) of Division 3 of Title 1 of the Corporations Code is amended to read:2.COOPERATIVE CORPORATIONSSEC. 3.Section 12200 of the Corporations Code is amended to read:12200.This part shall be known as the Cooperative Corporation Law. This part is intended primarily to apply to the organization and operation of cooperatives, including, but not limited to, consumer cooperatives, worker cooperatives, and cooperatives formed for the purpose of recycling or treating hazardous waste that elect to incorporate under its provisions.
SEC. 4.Section 12201.5 is added to the Corporations Code, to read:12201.5.(a)Notwithstanding Section 12201, the net earnings and losses of a worker cooperative shall be apportioned and distributed at the time and in the manner specified in the articles of incorporation or bylaws.
(b)Net earnings declared as patronage distributions with respect to a period of time, and paid to a creditor or member, shall be apportioned among the members in accordance with the ratio that each members patronage during the period bears to total patronage by all members during the period.
(c)The apportionment, distribution, and payment of net earnings required by subdivision (a) may be paid in cash, credits, written notices of allocation, or capital stock issued by the worker cooperative.
SEC. 5.Section 12228.3 is added to the Corporations Code, to read:12228.3.Capital account cooperative is a worker cooperative in which the entire net book value is reflected in member capital accounts, one for each member, and an unallocated capital account, if any.
SEC. 6.Section 12230.5 is added to the Corporations Code, to read:12230.5.Collective board worker cooperative means a worker cooperative in which there is only one class of members consisting of worker-members, all of whom are members of the board.
SEC. 7.Section 12238 of the Corporations Code is amended to read:12238.(a)Member means any person who, pursuant to a specific provision of a corporations articles or bylaws, has the right to vote for the election of a director or directors, or possesses proprietary interests in the corporation.
(b)The articles or bylaws may confer some or all of the rights of a member, set forth in this part, upon any person or persons who do not have any of the voting rights referred to in subdivision (a).
(c)Where a member of a corporation is not a natural person, such member may authorize in writing one or more natural persons to vote on its behalf on any or all matters which may require a vote of the members.
(d)A person is not a member by virtue of any of the following:
(1)Any rights such person has as a delegate.
(2)Any rights such person has to designate or select a director or directors.
(3)Any rights such person has as a director.
(e)Worker-member means a member of a worker cooperative who is a natural person and also a patron of a worker cooperative.
(f) Community investor means a person who is not a worker-member and who holds a share or other proprietary interest in a worker cooperative.
(g)Worker means a natural person contributing labor or services to a worker cooperative. Candidate means a worker who is being considered for membership in a worker cooperative, as defined in the corporations articles or bylaws.
SEC. 8.Section 12243 of the Corporations Code is amended to read:12243.(a)(1)If the corporation is organized to provide goods or services to its members, the corporations patrons are those who purchase those types of goods from, or use those types of services of, the corporation. If the corporation is organized to market, process, or otherwise handle its members products or services, the corporations patrons are those persons whose products or services are so marketed, processed, or handled by the corporation.
(2)Patronage of a patron is measured by the volume or value, or both, of a patrons purchases of products from, and use of services furnished by, the corporation, and by products and services provided by the patron to the corporation for marketing.
(b)(1)If the corporation is organized as a worker cooperative, the corporations patrons are its worker-members.
(2)If the corporation is organized as a worker cooperative, patronage may be measured by work performed, including, but not limited to, wages earned, number of hours worked, number of jobs created, or some combination of these measures.
SEC. 9.Section 12253 of the Corporations Code is amended to read:12253.(a)Voting power means the power to vote for the election of directors at the time any determination of voting power is made and does not include the right to vote upon the happening of some condition or event that has not yet occurred.
(b)If different classes of memberships are entitled to vote as separate classes for different members of the board, the determination of percentage of voting power shall be made on the basis of the percentage of the total number of authorized directors that the memberships in question (whether of one or more classes) have the power to elect in an election at which all memberships then entitled to vote for the election of any directors are voted.
(c)Community investor voting power in a worker cooperative shall be provided in the articles or bylaws, and is limited to approval rights only over a merger, sale of major assets, reorganization, or dissolution. Approval rights shall not include the right to propose any action.
SEC. 10.Section 12253.5 is added to the Corporations Code, to read:12253.5.Worker cooperative or employment cooperative means a corporation formed under this part that includes a class of worker-members who are natural persons whose patronage consists of labor contributed to or other work performed for the corporation. Election to be organized as a worker cooperative or an employment cooperative does not create a presumption that workers are employees of the corporation for any purposes. At least 51 percent of the workers shall be worker-members or candidates.
SEC. 11.Section 12310 of the Corporations Code is amended to read:12310.The articles of incorporation of a corporation formed under this part shall set forth:
(a)The name of the corporation.
(b)The following statement:
This corporation is a cooperative corporation organized under the Cooperative Corporation Law. The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the law.
[The articles may include a further description of the corporations purpose.]
(c)The name and street address in this state of the corporations initial agent for service of process in accordance with subdivision (b) of Section 12570.
(d)The initial street address of the corporation.
(e)The initial mailing address of the corporation, if different from the initial street address.
(f)Whether the voting power or the proprietary interests of the members are equal or unequal. If the voting power or proprietary interests of the members are unequal, the articles shall state either (i) the general rule or rules by which the voting power and proprietary interests of the members shall be determined or (ii) that such rule or rules shall be prescribed in the corporations bylaws. Equal voting power means voting power apportioned on the basis of one vote for each member. Equal proprietary rights means property rights apportioned on the basis of one proprietary unit for each member.
(g)Pursuant to Section 12310.5, the articles of incorporation may state whether the cooperative has elected to be governed as a worker cooperative.
SEC. 12.Section 12310.5 is added to the Corporations Code, to read:12310.5.(a)A corporation organized under this part may elect to be governed as a worker cooperative by making the following statement in its articles of incorporation or its amended articles of incorporation:
This corporation is a worker cooperative corporation organized under the Cooperative Corporation Law.
(b)A corporation that makes the election to be governed as a worker cooperative, unless expressly exempted, shall be governed by all the provisions of this part.
SEC. 13.Section 12317 is added to the Corporations Code, to read:12317.(a)A worker cooperative may, in its articles or bylaws, establish itself as a capital account cooperative.
(b)The articles or bylaws of a capital account cooperative may authorize assignment of a portion of retained net earnings and net losses to an unallocated capital account. The unallocated capital account in a capital account cooperative shall reflect any paid-in capital and retained net earnings not allocated to individual members. Earnings assigned to the unallocated capital account may be used for any and all corporate purposes, as determined by the board of directors.
(c)The system of member and unallocated capital accounts may be used to determine the redemption price of member shares, capital stock, and written notices of allocation. The articles or bylaws may provide for the capital account cooperative worker cooperative to pay or credit interest on the balance in each members capital account.
(d)The articles or bylaws of a capital account cooperative may permit the periodic redemption of written notices of allocation and capital stock and shall provide for recall and redemption of membership shares upon termination of membership in the cooperative. However, no redemption may occur that would result in the liability of any director or officer pursuant to Article 2 (commencing with Section 12370) of Chapter 2.
(e)As used in this section, written notice of allocation has the same meaning as defined in Section 1388 (b) of the Internal Revenue Code.
SEC. 14.Section 12404 of the Corporations Code is amended to read:12404.Except as permitted in Sections 12314 and 12404.5, the voting power of members having voting rights shall be equal.
SEC. 15.Section 12404.5 is added to the Corporations Code, to read:12404.5.(a)The worker-members of a worker cooperative shall have voting power as provided in subdivision (a) of Section 12253.
(b)Community investors have voting power only as provided in subdivision (c) of Section 12253.
SEC. 16.Section 12420 of the Corporations Code is amended to read:12420.(a)Except as provided in subdivision (b), a corporation may issue memberships having different rights, privileges, preferences, restrictions, or conditions, as provided in its articles or bylaws. If the articles or bylaws authorize at least one class of voting memberships, a corporation may also authorize and issue additional classes of memberships, preferred or otherwise, that are divisible into a series or are nonvoting or both.
(b)All worker-members shall have the rights, privileges, preferences, restrictions, or conditions as provided in the articles or bylaws. This membership shall not be divided into partial memberships.
(c)A worker cooperative shall only make patronage distributions to the worker-member class.
SEC. 17.Section 12431 of the Corporations Code is amended to read:12431.(a)No member may be expelled or suspended, and no membership or memberships may be terminated or suspended, except according to procedures satisfying the requirements of this section. An expulsion, termination, or suspension not in accord with this section shall be void and without effect.
(b)Any expulsion, suspension, or termination must be done in good faith and in a fair and reasonable manner. Any procedure that conforms to the requirements of subdivision (c) or (d) is fair and reasonable, but a court may also find other procedures to be fair and reasonable when the full circumstances of the suspension, termination, or expulsion are considered.
(c)A procedure is fair and reasonable if all of the following occur:
(1)The provisions of the procedure have been set forth in the articles or bylaws, or copies of such provisions are sent annually to all the members as required by the articles or bylaws.
(2)It provides the giving of 15 days prior notice of the expulsion, suspension, or termination and the reasons therefor.
(3)It provides an opportunity for the member to be heard, orally or in writing, not less than five days before the effective date of the expulsion, suspension, or termination by a person or body authorized to decide that the proposed expulsion, termination, or suspension not take place.
(d)Any notice required under this section may be given by any method reasonably calculated to provide actual notice. Any notice given by mail must be given by first-class or registered mail sent to the last address of the members shown on the corporations records.
(e)Any action challenging an expulsion, suspension, or termination of membership, including any claim alleging defective notice, must be commenced within one year after the date of the expulsion, suspension, or termination. In the event such an action is successful the court may order any relief, including reinstatement, it finds equitable under the circumstances, but no vote of the members or of the board may be set aside solely because a person was at the time of the vote wrongfully excluded by virtue of the challenged expulsion, suspension, or termination, unless the court finds further that the wrongful expulsion, suspension, or termination was in bad faith and for the purpose, and with the effect, of wrongfully excluding the member from the vote or from the meeting at which the vote took place, so as to affect the outcome of the vote.
(f)This section governs only the procedures for expulsion, suspension, or termination and not the substantive grounds therefor. An expulsion, suspension, or termination based upon substantive grounds which violate contractual or other rights of the member or are otherwise unlawful is not made valid by compliance with this section.
(g)A member who is expelled or suspended or whose membership is terminated shall be liable for any charges incurred, services or benefits actually rendered, dues, assessments, or fees incurred before expulsion, suspension, or termination or arising from contract or otherwise.
SEC. 18.Section 12454.5 is added to the Corporations Code, to read:12454.5.(a)A worker cooperative may create an indivisible reserves account that shall not be distributed to members.
(b)Funds in the indivisible reserves account shall only derive from non-patronage-sourced income, in a manner provided in the articles or bylaws, or by the board, and shall be used as capital for the cooperative.
SEC. 19.Section 12460 of the Corporations Code is amended to read:12460.(a)Meetings of members may be held at a place within or without this state that is stated in or fixed in accordance with the bylaws. If no other place is so stated or fixed, meetings of members shall be held at the principal executive office of the corporation. Unless prohibited by the bylaws of the corporation, if authorized by the board of directors in its sole discretion, and subject to the requirement of consent in clause (b) of Section 20 and those guidelines and procedures as the board of directors may adopt, members not physically present in person at a meeting of members may, by electronic transmission by and to the corporation (Sections 20 and 21) or by electronic video screen communication, participate in a meeting of members, be deemed present in person, and vote at a meeting of members whether that meeting is to be held at a designated place or in whole or in part by means of electronic transmission by and to the corporation or by electronic video screen communication, in accordance with subdivision (f).
(b)Except as provided in Section 12460.5, a regular meeting of members shall be held annually. In any year in which directors are elected, the election shall be held at the regular meeting unless the directors are chosen in some other manner authorized by law. Any other proper business may be transacted at the meeting.
(c)If a corporation fails to hold the regular meeting for a period of 60 days after the date designated therefor or, if no date has been designated, for a period of 15 months after the formation of the corporation or after its last regular meeting, or if the corporation fails to hold a written ballot for a period of 60 days after the date designated therefor, then the superior court of the proper county may summarily order the meeting to be held or the ballot to be conducted upon the application of a member, after notice to the corporation giving it an opportunity to be heard.
(d)The votes represented at a meeting called or by written ballot ordered pursuant to subdivision (c) and entitled to be cast on the business to be transacted shall constitute a quorum, notwithstanding any provision of the articles or bylaws or provision in this part to the contrary. The court may issue such orders as may be appropriate including, without limitation, orders designating the time and place of the meeting, the record date for determination of members entitled to vote, and the form of notice of the meeting.
(e)Special meetings of members for any lawful purpose may be called by the board, the chairman of the board, the president, or other persons, if any, as are specified in the bylaws. In addition, special meetings of members for any lawful purpose may be called by 5 percent or more of the members, however, in a worker cooperative with more than four worker-members, a special meeting may only be called by the greater of three worker-members or 5 percent of the worker-members. In a worker cooperative with fewer than four worker-members, special meetings may be called by one worker-member.
(f)A meeting of the members may be conducted, in whole or in part, by electronic transmission by and to the corporation or by electronic video screen communication (1) if the corporation implements reasonable measures to provide members 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 concurrently with those proceedings, and (2) if any member votes or takes other action at the meeting by means of electronic transmission to the corporation or electronic video screen communication, a record of that vote or action is maintained by the corporation. Any request by a corporation to a member pursuant to clause (b) of Section 20 for consent to conduct a meeting of members by electronic transmission by and to the corporation, shall include a notice that absent consent of the member pursuant to clause (b) of Section 20, the meeting shall be held at a physical location in accordance with subdivision (a).
SEC. 20.Section 12460.5 is added to the Corporations Code, to read:12460.5.Notwithstanding Section 12460, a collective board worker cooperative shall not be required to hold an annual meeting of members.
SEC. 21.Section 12461 of the Corporations Code is amended to read:12461.(a)Whenever members are required or permitted to take any action at a meeting, a written notice of the meeting shall be given not less than 10 nor more than 90 days before the date of the meeting to each member who, on the record date for notice of the meeting, is entitled to vote thereat; provided, however, that if notice is given by mail, and the notice is not mailed by first-class, registered, or certified mail, that notice shall be given not less than 20 days before the meeting. A worker cooperative shall provide notice of the meeting not less than 48 hours before the meeting if the meeting is a meeting of only worker-members, provided that the notice is delivered personally to every worker-member. Subject to subdivision (f), and subdivision (b) of Section 12462, that notice shall state the place, date, and time of the meeting, the means of electronic transmission by and to the corporation (Sections 20 and 21) or electronic video screen communication, if any, by which members may participate in that meeting, and (1) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted, or (2) in the case of the regular meeting, those matters which the board, at the time the notice is given, intends to present for action by the members, but, except as provided in subdivision (b) of Section 12462, any proper matter may be presented at the meeting for such action. The notice of any meeting at which directors are to be elected shall include the names of all those who are nominees at the time the notice is given to members.
(b)Notice of a members meeting or any report shall be given personally, by electronic transmission by the corporation, or by mail or other means of written communication, addressed to a member at the address of such member appearing on the books of the corporation or given by the member to the corporation for purpose of notice; or if no such address appears or is given, at the place where the principal office of the corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal office is located. An affidavit of giving of any notice or report in accordance with the provisions of this part, executed by the secretary, assistant secretary, or any transfer agent, shall be prima facie evidence of the giving of the notice or report.
If any notice or report addressed to the member at the address of such member appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate the United States Postal Service is unable to deliver the notice or report to the member at such address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available for the member upon written demand of the member at the principal office of the corporation for a period of one year from the date of the giving of the notice or report to all other members.
Notice given by electronic transmission by the corporation under this subdivision shall be valid only if it complies with Section 20. Notwithstanding the foregoing, notice shall not be given by electronic transmission by the corporation under this subdivision after either of the following:
(1)The corporation is unable to deliver two consecutive notices to the member by that means.
(2)The inability to so deliver the notices to the member becomes known to the secretary, any assistant secretary, the transfer agent, or other person responsible for the giving of the notice.
(c)Upon request in writing to the corporation addressed to the attention of the chairman of the board, president, vice president, or secretary by any person (other than the board) entitled to call a special meeting of members, the officer forthwith shall cause notice to be given to the members entitled to vote that a meeting will be held at a time fixed by the board not less than 35 nor more than 90 days after the receipt of the request. If the notice is not given within 20 days after receipt of the request, the persons entitled to call the meeting may give the notice or the superior court of the proper county shall summarily order the giving of the notice, after notice to the corporation giving it an opportunity to be heard. The court may issue such orders as may be appropriate, including, without limitation, orders designating the time and place of the meeting, the record date for determination of members entitled to vote, and the form of notice.
(d)When a members meeting is adjourned to another time or place, unless the bylaws otherwise require and except as provided in this subdivision, notice need not be given of the adjourned meeting if the time and place thereof (or the means of electronic transmission by and to the corporation or electronic video screen communication, if any, by which members may participate) are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each member of record entitled to vote at the meeting.
(e)The transactions of any meeting of members however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present, and if, either before or after the meeting, each of the persons entitled to vote, not present in person, provides a waiver of notice or consent to the holding of the meeting or an approval of the minutes thereof in writing. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of and presence at such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required by this part to be included in the notice but not so included, if such objection is expressly made at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of members need be specified in any written waiver of notice, consent to the holding of the meeting, or approval of the minutes thereof, unless otherwise provided in the articles or bylaws, except as provided in subdivision (f).
(f)Any approval of the members required under Section 12362, 12364, 12373, 12502, or 12658 other than unanimous approval by those entitled to vote, shall be valid only if the general nature of the proposal so approved was stated in the notice of meeting or in any written waiver of notice.
(g)A court may find that notice not given in conformity with this section is still valid, if it was given in a fair and reasonable manner.
(h)Subject to the provisions of subdivision (i), and unless prohibited by the articles or bylaws, prior to any regular or special meeting of members, the board may authorize distribution of a written ballot to every member entitled to vote at the meeting. Such ballot shall set forth the action proposed to be taken at the meeting, shall provide an opportunity to specify approval or disapproval of the proposed action, and shall state that unless revoked by the member voting in person at the meeting, the ballot will be counted if received by the corporation on or before the time of the meeting with respect to which it was sent. If ballots are so distributed with respect to a meeting, the number of members voting at the meeting by unrevoked written ballots shall be deemed present at the meeting for purposes of determining the existence of a quorum pursuant to subdivision (a) of Section 12462 but only with respect to the proposed action referred to in the ballots. These ballots shall be distributed in a manner consistent with the requirements of subdivision (b) and Section 12464.
(i)Unless prohibited by the articles or bylaws, written ballots may be distributed in a manner contemplated by subdivision (h) with respect to the election of directors, except that no ballots may be so distributed with respect to the election of directors if cumulative voting is permitted pursuant to Section 12484.
SEC. 22.Section 12530 of the Corporations Code is amended to read:12530.Except as provided in Section 12530.5, any corporation may merge with another domestic corporation, foreign corporation, or other business entity. However, a merger with a nonprofit public benefit corporation or a nonprofit religious corporation must have the prior written consent of the Attorney General.
SEC. 23.Section 12530.5 is added to the Corporations Code, to read:12530.5.Notwithstanding Section 12530, a worker cooperative that has not revoked its election to be governed as a worker cooperative under Section 12310.5 shall not consolidate or merge with another corporation other than another worker cooperative. Two or more worker cooperatives may merge or consolidate in a manner consistent with this chapter.
SEC. 24.Section 12653 of the Corporations Code is amended to read:12653.(a)After determining that all the known debts and liabilities of a corporation in the process of winding up have been paid or adequately provided for, the board shall distribute all the remaining corporate assets in the manner provided in Sections 12655, 12656, and 12656.5.
(b)If the winding up is by court proceeding or subject to court supervision, the distribution shall not be made until after the expiration of any period for the presentation of claims that has been prescribed by order of the court.
(c)Anything to the contrary notwithstanding, assets, if any, that are not subject to attachment, execution, or sale for the corporations debts and liabilities may be distributed pursuant to Sections 12655, 12656, and 12656.5 even though all debts and liabilities have not been paid or adequately provided for.
SEC. 25.Section 12656.5 is added to the Corporations Code, to read:12656.5.(a)After complying with the provisions of Section 12653, and except as otherwise provided in Section 12655, upon dissolution of a worker cooperative the majority of the unallocated capital account shall be distributed to members on the basis of any of the following, as specified in the articles of incorporation or bylaws of the cooperative:
(1)Patronage.
(2)Capital contributions.
(3)A combination of patronage and capital contributions.
(b)A worker cooperative is authorized to include patronage provided by past and current members in its distribution of the unallocated capital account.
(c)Subdivision (a) shall not apply to any amounts in the indivisible reserve account. Any amount in the indivisible reserve account shall, upon dissolution, be allocated to a cooperative development organization designated in the articles of incorporation or the bylaws.
SEC. 26.Section 25100 of the Corporations Code is amended to read:25100.The following securities are exempted from Sections 25110, 25120, and 25130:
(a)Any security (including a revenue obligation) issued or guaranteed by the United States, any state, any city, county, city and county, public district, public authority, public corporation, public entity, or political subdivision of a state or any agency or corporate or other instrumentality of any one or more of the foregoing; or any certificate of deposit for any of the foregoing.
(b)Any security issued or guaranteed by Canada, any Canadian province, any political subdivision or municipality of that province, or by any other foreign government with which the United States currently maintains diplomatic relations, if the security is recognized as a valid obligation by the issuer or guarantor; or any certificate of deposit for any of the foregoing.
(c)Any security issued or guaranteed by and representing an interest in or a direct obligation of a national bank or a bank or trust company incorporated under the laws of this state, and any security issued by a bank to one or more other banks and representing an interest in an asset of the issuing bank.
(d)Any security issued or guaranteed by a federal savings association or federal savings bank or federal land bank or joint land bank or national farm loan association or by any savings association, as defined in subdivision (a) of Section 5102 of the Financial Code, which is subject to the supervision and regulation of the Commissioner of Business Oversight of this state.
(e)Any security (other than an interest in all or portions of a parcel or parcels of real property which are subdivided land or a subdivision or in a real estate development), the issuance of which is subject to authorization by the Insurance Commissioner, the Public Utilities Commission, or the Real Estate Commissioner of this state.
(f)Any security consisting of any interest in all or portions of a parcel or parcels of real property that are subdivided lands or a subdivision or in a real estate development; provided that the exemption in this subdivision shall not be applicable to: (1) any investment contract sold or offered for sale with, or as part of, that interest, or (2) any person engaged in the business of selling, distributing, or supplying water for irrigation purposes or domestic use that is not a public utility except that the exemption is applicable to any security of a mutual water company (other than an investment contract as described in paragraph (1)) offered or sold in connection with subdivided lands pursuant to Chapter 2 (commencing with Section 14310) of Part 7 of Division 3 of Title 1.
(g)Any mutual capital certificates or savings accounts, as defined in the Savings Association Law, issued by a savings association, as defined by subdivision (a) of Section 5102 of the Financial Code, and holding a license or certificate of authority then in force from the Commissioner of Business Oversight of this state.
(h)Any security issued or guaranteed by any federal credit union, or by any credit union organized and supervised, or regulated, under the Credit Union Law.
(i)Any security issued or guaranteed by any railroad, other common carrier, public utility, or public utility holding company which is (1) subject to the jurisdiction of the Interstate Commerce Commission or its successor or (2) a holding company registered with the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935 or a subsidiary of that company within the meaning of that act or (3) regulated in respect of the issuance or guarantee of the security by a governmental authority of the United States, of any state, of Canada or of any Canadian province; and the security is subject to registration with or authorization of issuance by that authority.
(j)Any security (except evidences of indebtedness, whether interest bearing or not) of an issuer (1) organized exclusively for educational, benevolent, fraternal, religious, charitable, social, or reformatory purposes and not for pecuniary profit, if no part of the net earnings of the issuer inures to the benefit of any private shareholder or individual, or (2) organized as a chamber of commerce or trade or professional association. The fact that amounts received from memberships or dues or both will or may be used to construct or otherwise acquire facilities for use by members of the nonprofit organization does not disqualify the organization for this exemption. This exemption does not apply to the securities of any nonprofit organization if any promoter thereof expects or intends to make a profit directly or indirectly from any business or activity associated with the organization or operation of that nonprofit organization or from remuneration received from that nonprofit organization.
(k)Any agreement, commonly known as a life income contract, of an issuer (1) organized exclusively for educational, benevolent, fraternal, religious, charitable, social, or reformatory purposes and not for pecuniary profit and (2) which the commissioner designates by rule or order, with a donor in consideration of a donation of property to that issuer and providing for the payment to the donor or persons designated by him or her of income or specified periodic payments from the donated property or other property for the life of the donor or those other persons.
(l)Any note, draft, bill of exchange, or bankers acceptance which is freely transferable and of prime quality, arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which evidences an obligation to pay cash within nine months of the date of issuance, exclusive of days of grace, or any renewal of that paper which is likewise limited, or any guarantee of that paper or of that renewal, provided that the paper is not offered to the public in amounts of less than twenty-five thousand dollars ($25,000) in the aggregate to any one purchaser. In addition, the commissioner may, by rule or order, exempt any issuer of any notes, drafts, bills of exchange or bankers acceptances from qualification of those securities when the commissioner finds that the qualification is not necessary or appropriate in the public interest or for the protection of investors.
(m)Any security issued by any corporation organized and existing under the provisions of Chapter 1 (commencing with Section 54001) of Division 20 of the Food and Agricultural Code.
(n)Any beneficial interest in an employees pension, profit-sharing, stock bonus, or similar benefit plan which meets the requirements for qualification under Section 401 of the federal Internal Revenue Code or any statute amendatory thereof or supplementary thereto. A determination letter from the Internal Revenue Service stating that an employees pension, profit-sharing, stock bonus, or similar benefit plan meets those requirements shall be conclusive evidence that the plan is an employees pension, profit-sharing, stock bonus, or similar benefit plan within the meaning of the first sentence of this subdivision until the date the determination letter is revoked in writing by the Internal Revenue Service, regardless of whether or not the revocation is retroactive.
(o)Any security listed or approved for listing upon notice of issuance on a national securities exchange, if the exchange has been certified by rule or order of the commissioner and any warrant or right to purchase or subscribe to the security. The exemption afforded by this subdivision does not apply to securities listed or approved for listing upon notice of issuance on a national securities exchange, in a rollup transaction unless the rollup transaction is an eligible rollup transaction as defined in Section 25014.7.
That certification of any exchange shall be made by the commissioner upon the written request of the exchange if the commissioner finds that the exchange, in acting on applications for listing of common stock, substantially applies the minimum standards set forth in either subparagraph (A) or (B) of paragraph (1), and, in considering suspension or removal from listing, substantially applies each of the criteria set forth in paragraph (2).
(1)Listing standards:
(A)(i)Shareholders equity of at least four million dollars ($4,000,000).
(ii)Pretax income of at least seven hundred fifty thousand dollars ($750,000) in the issuers last fiscal year or in two of its last three fiscal years.
(iii)Minimum public distribution of 500,000 shares (exclusive of the holdings of officers, directors, controlling shareholders, and other concentrated or family holdings), together with a minimum of 800 public holders or minimum public distribution of 1,000,000 shares together with a minimum of 400 public holders. The exchange may also consider the listing of a companys securities if the company has a minimum of 500,000 shares publicly held, a minimum of 400 shareholders and daily trading volume in the issue has been approximately 2,000 shares or more for the six months preceding the date of application. In evaluating the suitability of an issue for listing under this trading provision, the exchange shall review the nature and frequency of that activity and any other factors as it may determine to be relevant in ascertaining whether the issue is suitable for trading. A security that trades infrequently shall not be considered for listing under this paragraph even though average daily volume amounts to 2,000 shares per day or more.
Companies whose securities are concentrated in a limited geographical area, or whose securities are largely held in block by institutional investors, normally may not be considered eligible for listing unless the public distribution appreciably exceeds 500,000 shares.
(iv)Minimum price of three dollars ($3) per share for a reasonable period of time prior to the filing of a listing application; provided, however, in certain instances an exchange may favorably consider listing an issue selling for less than three dollars ($3) per share after considering all pertinent factors, including market conditions in general, whether historically the issue has sold above three dollars ($3) per share, the applicants capitalization, and the number of outstanding and publicly held shares of the issue.
(v)An aggregate market value for publicly held shares of at least three million dollars ($3,000,000).
(B)(i)Shareholders equity of at least four million dollars ($4,000,000).
(ii)Minimum public distribution set forth in clause (iii) of subparagraph (A) of paragraph (1).
(iii)Operating history of at least three years.
(iv)An aggregate market value for publicly held shares of at least fifteen million dollars ($15,000,000).
(2)Criteria for consideration of suspension or removal from listing:
(A)If a company that (A) has shareholders equity of less than one million dollars ($1,000,000) has sustained net losses in each of its two most recent fiscal years, or (B) has net tangible assets of less than three million dollars ($3,000,000) and has sustained net losses in three of its four most recent fiscal years.
(B)If the number of shares publicly held (excluding the holdings of officers, directors, controlling shareholders, and other concentrated or family holdings) is less than 150,000.
(C)If the total number of shareholders is less than 400 or if the number of shareholders of lots of 100 shares or more is less than 300.
(D)If the aggregate market value of shares publicly held is less than seven hundred fifty thousand dollars ($750,000).
(E)If shares of common stock sell at a price of less than three dollars ($3) per share for a substantial period of time and the issuer shall fail to effectuate a reverse stock split of the shares within a reasonable period of time after being requested by the exchange to take that action.
A national securities exchange, certified by rule or order of the commissioner under this subdivision, shall file annual reports when requested to do so by the commissioner. The annual reports shall contain, by issuer: the variances granted to an exchanges listing standards, including variances from corporate governance and voting rights standards, for any security of that issuer; the reasons for the variances; a discussion of the review procedure instituted by the exchange to determine the effect of the variances on investors and whether the variances should be continued; and any other information that the commissioner deems relevant. The purpose of these reports is to assist the commissioner in determining whether the quantitative and qualitative requirements of this subdivision are substantially being met by the exchange in general or with regard to any particular security.
The commissioner after appropriate notice and opportunity for hearing in accordance with the provisions of the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, may, in his or her discretion, by rule or order, decertify any exchange previously certified that ceases substantially to apply the minimum standards or criteria as set forth in paragraphs (1) and (2).
A rule or order of certification shall conclusively establish that any security listed or approved for listing upon notice of issuance on any exchange named in a rule or order of certification, and any warrant or right to purchase or subscribe to that security, is exempt under this subdivision until the adoption by the commissioner of any rule or order decertifying the exchange.
(p)A promissory note secured by a lien on real property, which is neither one of a series of notes of equal priority secured by interests in the same real property nor a note in which beneficial interests are sold to more than one person or entity.
(q)Any unincorporated interindemnity or reciprocal or interinsurance contract, that qualifies under the provisions of Section 1280.7 of the Insurance Code, between members of a cooperative corporation, organized and operating under Part 2 (commencing with Section 12200) of Division 3 of Title 1, and whose members consist only of physicians and surgeons licensed in California, which contracts indemnify solely in respect to medical malpractice claims against the members, and which do not collect in advance of loss any moneys other than contributions by each member to a collective reserve trust fund or for necessary expenses of administration.
(1)Whenever it appears to the commissioner that any person has engaged or is about to engage in any act or practice constituting a violation of any provision of Section 1280.7 of the Insurance Code, the commissioner may, in the commissioners discretion, bring an action in the name of the people of the State of California in the superior court to enjoin the acts or practices or to enforce compliance with Section 1280.7 of the Insurance Code. Upon a proper showing a permanent or preliminary injunction, a restraining order, or a writ of mandate shall be granted and a receiver or conservator may be appointed for the defendant or the defendants assets.
(2)The commissioner may, in the commissioners discretion, (A) make public or private investigations within or outside of this state as the commissioner deems necessary to determine whether any person has violated or is about to violate any provision of Section 1280.7 of the Insurance Code or to aid in the enforcement of Section 1280.7, and (B) publish information concerning the violation of Section 1280.7.
(3)For the purpose of any investigation or proceeding under this section, the commissioner or any officer designated by the commissioner may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, agreements, or other documents or records which the commissioner deems relevant or material to the inquiry.
(4)In case of contumacy by, or refusal to obey a subpoena issued to, any person, the superior court, upon application by the commissioner, may issue to the person an order requiring the person to appear before the commissioner, or the officer designated by the commissioner, to produce documentary evidence, if so ordered, or to give evidence touching the matter under investigation or in question. Failure to obey the order of the court may be punished by the court as a contempt.
(5)No person is excused from attending or testifying or from producing any document or record before the commissioner or in obedience to the subpoena of the commissioner or any officer designated by the commissioner, or in any proceeding instituted by the commissioner, on the ground that the testimony or evidence (documentary or otherwise), required of the person may tend to incriminate the person or subject the person to a penalty or forfeiture, but no individual may be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which the person is compelled, after validly claiming the privilege against self-incrimination, to testify or produce evidence (documentary or otherwise), except that the individual testifying is not exempt from prosecution and punishment for perjury or contempt committed in testifying.
(6)The cost of any review, examination, audit, or investigation made by the commissioner under Section 1280.7 of the Insurance Code shall be paid to the commissioner by the person subject to the review, examination, audit, or investigation, and the commissioner may maintain an action for the recovery of these costs in any court of competent jurisdiction. In determining the cost, the commissioner may use the actual amount of the salary or other compensation paid to the persons making the review, examination, audit, or investigation plus the actual amount of expenses including overhead reasonably incurred in the performance of the work.
The recoverable cost of each review, examination, audit, or investigation made by the commissioner under Section 1280.7 of the Insurance Code shall not exceed twenty-five thousand dollars ($25,000), except that costs exceeding twenty-five thousand dollars ($25,000) shall be recoverable if the costs are necessary to prevent a violation of any provision of Section 1280.7 of the Insurance Code.
(r)Any shares or memberships issued by any corporation organized and existing pursuant to the provisions of Part 2 (commencing with Section 12200) of Division 3 of Title 1, provided the aggregate investment of any shareholder or member in shares or memberships sold pursuant to this subdivision does not exceed one thousand dollars ($1,000). This exemption does not apply to the shares or memberships of that corporation if any promoter thereof expects or intends to make a profit directly or indirectly from any business or activity associated with the corporation or the operation of the corporation or from remuneration, other than reasonable salary, received from the corporation. This exemption does not apply to nonvoting shares or memberships of that corporation issued to any person who does not possess, and who will not acquire in connection with the issuance of nonvoting shares or memberships, voting power (Section 12253) in the corporation. This exemption also does not apply to shares or memberships issued by a nonprofit cooperative corporation organized to facilitate the creation of an unincorporated interindemnity arrangement that provides indemnification for medical malpractice to its physician and surgeon members as set forth in subdivision (q).
(s)Any security consisting of or representing an interest in a pool of mortgage loans that meets each of the following requirements:
(1)The pool consists of whole mortgage loans or participation interests in those loans, which loans were originated or acquired in the ordinary course of business by a national bank or federal savings association or federal savings bank having its principal office in this state, by a bank incorporated under the laws of this state or by a savings association as defined in subdivision (a) of Section 5102 of the Financial Code and which is subject to the supervision and regulation of the Commissioner of Financial Institutions, and each of which at the time of transfer to the pool is an authorized investment for the originating or acquiring institution.
(2)The pool of mortgage loans is held in trust by a trustee which is a financial institution specified in paragraph (1) as trustee or otherwise.
(3)The loans are serviced by a financial institution specified in paragraph (1).
(4)The security is not offered in amounts of less than twenty-five thousand dollars ($25,000) in the aggregate to any one purchaser.
(5)The security is offered pursuant to a registration under the Securities Act of 1933, or pursuant to an exemption under Regulation A under that act, or in the opinion of counsel for the issuer, is offered pursuant to an exemption under Section 4(2) of that act.
(t)(1)Any security issued or guaranteed by and representing an interest in or a direct obligation of an industrial loan company incorporated under the laws of the state and authorized by the Commissioner of Financial Institutions to engage in industrial loan business.
(2)Any investment certificate in or issued by any industrial loan company that is organized under the laws of a state of the United States other than this state, that is insured by the Federal Deposit Insurance Corporation, and that maintains a branch office in this state.
The Legislature finds and declares all of the following:
(a)A worker cooperative has the purpose of creating and maintaining sustainable jobs and generating wealth in order to improve the quality of life of its worker-members, dignify human work, allow workers democratic self-management, and promote community and local development in this state.
(b)The purpose of this act is to amend the Consumer Cooperative Corporation Law to clarify that the law applies to cooperatives in general, not just consumer cooperatives, and to create more visibility for worker cooperatives. This act is intended to provide a definition of worker cooperative for purposes of this act, and not for purposes of other laws.
SEC. 2.The heading of Part 2 (commencing with Section 12200) of Division 3 of Title 1 of the Corporations Code is amended to read:2.COOPERATIVE CORPORATIONSSEC. 3.Section 12200 of the Corporations Code is amended to read:12200.This part shall be known as the Cooperative Corporation Law. This part is intended primarily to apply to the organization and operation of cooperatives, including, but not limited to, consumer cooperatives, worker cooperatives, and cooperatives formed for the purpose of recycling or treating hazardous waste that elect to incorporate under its provisions.
SEC. 4.Section 12201.5 is added to the Corporations Code, to read:12201.5.(a)Notwithstanding Section 12201, the net earnings and losses of a worker cooperative shall be apportioned and distributed at the time and in the manner specified in the articles of incorporation or bylaws.
(b)Net earnings declared as patronage distributions with respect to a period of time, and paid to a creditor or member, shall be apportioned among the members in accordance with the ratio that each members patronage during the period bears to total patronage by all members during the period.
(c)The apportionment, distribution, and payment of net earnings required by subdivision (a) may be paid in cash, credits, written notices of allocation, or capital stock issued by the worker cooperative.
SEC. 5.Section 12228.3 is added to the Corporations Code, to read:12228.3.Capital account cooperative is a worker cooperative in which the entire net book value is reflected in member capital accounts, one for each member, and an unallocated capital account, if any.
SEC. 6.Section 12230.5 is added to the Corporations Code, to read:12230.5.Collective board worker cooperative means a worker cooperative in which there is only one class of members consisting of worker-members, all of whom are members of the board.
SEC. 7.Section 12238 of the Corporations Code is amended to read:12238.(a)Member means any person who, pursuant to a specific provision of a corporations articles or bylaws, has the right to vote for the election of a director or directors, or possesses proprietary interests in the corporation.
(b)The articles or bylaws may confer some or all of the rights of a member, set forth in this part, upon any person or persons who do not have any of the voting rights referred to in subdivision (a).
(c)Where a member of a corporation is not a natural person, such member may authorize in writing one or more natural persons to vote on its behalf on any or all matters which may require a vote of the members.
(d)A person is not a member by virtue of any of the following:
(1)Any rights such person has as a delegate.
(2)Any rights such person has to designate or select a director or directors.
(3)Any rights such person has as a director.
(e)Worker-member means a member of a worker cooperative who is a natural person and also a patron of a worker cooperative.
(f) Community investor means a person who is not a worker-member and who holds a share or other proprietary interest in a worker cooperative.
(g)Worker means a natural person contributing labor or services to a worker cooperative. Candidate means a worker who is being considered for membership in a worker cooperative, as defined in the corporations articles or bylaws.
SEC. 8.Section 12243 of the Corporations Code is amended to read:12243.(a)(1)If the corporation is organized to provide goods or services to its members, the corporations patrons are those who purchase those types of goods from, or use those types of services of, the corporation. If the corporation is organized to market, process, or otherwise handle its members products or services, the corporations patrons are those persons whose products or services are so marketed, processed, or handled by the corporation.
(2)Patronage of a patron is measured by the volume or value, or both, of a patrons purchases of products from, and use of services furnished by, the corporation, and by products and services provided by the patron to the corporation for marketing.
(b)(1)If the corporation is organized as a worker cooperative, the corporations patrons are its worker-members.
(2)If the corporation is organized as a worker cooperative, patronage may be measured by work performed, including including, but not limited to, wages earned, number of hours worked, number of jobs created, or some combination of these measures.
SEC. 9.Section 12253 of the Corporations Code is amended to read:12253.(a)Voting power means the power to vote for the election of directors at the time any determination of voting power is made and does not include the right to vote upon the happening of some condition or event that has not yet occurred.
(b)If different classes of memberships are entitled to vote as separate classes for different members of the board, the determination of percentage of voting power shall be made on the basis of the percentage of the total number of authorized directors that the memberships in question (whether of one or more classes) have the power to elect in an election at which all memberships then entitled to vote for the election of any directors are voted.
(c)Community investor voting power in a worker cooperative shall be provided in the articles or bylaws, and is limited to approval rights only over a merger, sale of major assets, reorganization, or dissolution. Approval rights shall not include the right to propose any action.
SEC. 10.Section 12253.5 is added to the Corporations Code, to read:12253.5.Worker cooperative or employment cooperative means a corporation formed under this part that includes a class of worker-members who are natural persons whose patronage consists of labor contributed to, personal services performed for, to or other work performed for the corporation. Election to be organized as a worker cooperative or an employment cooperative does not create a presumption that workers are employees of the corporation for any purposes. At least 51 percent of the workers shall be worker-members or candidates.
SEC. 11.Section 12310 of the Corporations Code is amended to read:12310.The articles of incorporation of a corporation formed under this part shall set forth:
(a)The name of the corporation.
(b)The following statement:
This corporation is a cooperative corporation organized under the Cooperative Corporation Law. The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the law.
[The articles may include a further description of the corporations purpose.]
(c)The name and street address in this state of the corporations initial agent for service of process in accordance with subdivision (b) of Section 12570.
(d)The initial street address of the corporation.
(e)The initial mailing address of the corporation, if different from the initial street address.
(f)Whether the voting power or the proprietary interests of the members are equal or unequal. If the voting power or proprietary interests of the members are unequal, the articles shall state either (i) the general rule or rules by which the voting power and proprietary interests of the members shall be determined or (ii) that such rule or rules shall be prescribed in the corporations bylaws. Equal voting power means voting power apportioned on the basis of one vote for each member. Equal proprietary rights means property rights apportioned on the basis of one proprietary unit for each member.
(g)Pursuant to Section 12310.5, the articles of incorporation may state whether the cooperative has elected to be governed as a worker cooperative.
SEC. 12.Section 12310.5 is added to the Corporations Code, to read:12310.5.(a)A corporation organized under this part may elect to be governed as a worker cooperative by making the following statement in its articles of incorporation or its amended articles of incorporation:
This corporation is a worker cooperative corporation organized under the Cooperative Corporation Law.
(b)A corporation that makes the election to be governed as a worker cooperative, unless expressly exempted, shall be governed by all the provisions of this part.
SEC. 13.Section 12317 is added to the Corporations Code, to read:12317.(a)A worker cooperative may, in its articles or bylaws, establish itself as a capital account cooperative.
(b)The articles or bylaws of a capital account cooperative may authorize assignment of a portion of retained net earnings and net losses to an unallocated capital account. The unallocated capital account in a capital account cooperative shall reflect any paid-in capital and retained net earnings not allocated to individual members. Earnings assigned to the unallocated capital account may be used for any and all corporate purposes, as determined by the board of directors.
(c)The system of member and unallocated capital accounts may be used to determine the redemption price of member shares, capital stock, and written notices of allocation. The articles or bylaws may provide for the capital account cooperative worker cooperative to pay or credit interest on the balance in each members capital account.
(d)The articles or bylaws of a capital account cooperative may permit the periodic redemption of written notices of allocation and capital stock and shall provide for recall and redemption of membership shares upon termination of membership in the cooperative. However, no redemption may occur that would result in the liability of any director or officer pursuant to Article 2 (commencing with Section 12370) of Chapter 2.
(e)As used in this section, written notice of allocation has the same meaning as defined in Section 1388 (b) of the Internal Revenue Code.
SEC. 14.Section 12404 of the Corporations Code is amended to read:12404.Except as permitted in Sections 12314 and 12404.5, the voting power of members having voting rights shall be equal.
SEC. 15.Section 12404.5 is added to the Corporations Code, to read:12404.5.(a)The worker-members of a worker cooperative shall have voting power as provided in subdivision (a) of Section 12253.
(b)Community investors have voting power only as provided in subdivision (c) of Section 12253.
SEC. 16.Section 12420 of the Corporations Code is amended to read:12420.(a)Except as provided in subdivision (b), a corporation may issue memberships having different rights, privileges, preferences, restrictions, or conditions, as provided in its articles or bylaws. If the articles or bylaws authorize at least one class of voting memberships, a corporation may also authorize and issue additional classes of memberships, preferred or otherwise, that are divisible into a series or are nonvoting or both.
(b)All worker-members shall have the rights, privileges, preferences, restrictions, or conditions as provided in the articles or bylaws. This membership shall not be divided into partial memberships.
(c)A worker cooperative shall only make patronage distributions to the worker-member class.
SEC. 17.Section 12431 of the Corporations Code is amended to read:12431.(a)No member may be expelled or suspended, and no membership or memberships may be terminated or suspended, except according to procedures satisfying the requirements of this section. An expulsion, termination, or suspension not in accord with this section shall be void and without effect.
(b)Any expulsion, suspension, or termination must be done in good faith and in a fair and reasonable manner. Any procedure that conforms to the requirements of subdivision (c) or (d) is fair and reasonable, but a court may also find other procedures to be fair and reasonable when the full circumstances of the suspension, termination, or expulsion are considered.
(c)A procedure is fair and reasonable if all of the following occur:
(1)The provisions of the procedure have been set forth in the articles or bylaws, or copies of such provisions are sent annually to all the members as required by the articles or bylaws.
(2)It provides the giving of 15 days prior notice of the expulsion, suspension, or termination and the reasons therefor.
(3)It provides an opportunity for the member to be heard, orally or in writing, not less than five days before the effective date of the expulsion, suspension, or termination by a person or body authorized to decide that the proposed expulsion, termination, or suspension not take place.
(d)Any notice required under this section may be given by any method reasonably calculated to provide actual notice. Any notice given by mail must be given by first-class or registered mail sent to the last address of the members shown on the corporations records.
(e)Any action challenging an expulsion, suspension, or termination of membership, including any claim alleging defective notice, must be commenced within one year after the date of the expulsion, suspension, or termination. In the event such an action is successful the court may order any relief, including reinstatement, it finds equitable under the circumstances, but no vote of the members or of the board may be set aside solely because a person was at the time of the vote wrongfully excluded by virtue of the challenged expulsion, suspension, or termination, unless the court finds further that the wrongful expulsion, suspension, or termination was in bad faith and for the purpose, and with the effect, of wrongfully excluding the member from the vote or from the meeting at which the vote took place, so as to affect the outcome of the vote.
(f)This section governs only the procedures for expulsion, suspension, or termination and not the substantive grounds therefor. An expulsion, suspension, or termination based upon substantive grounds which violate contractual or other rights of the member or are otherwise unlawful is not made valid by compliance with this section.
(g)A member who is expelled or suspended or whose membership is terminated shall be liable for any charges incurred, services or benefits actually rendered, dues, assessments, or fees incurred before expulsion, suspension, or termination or arising from contract or otherwise.
SEC. 18.Section 12454.5 is added to the Corporations Code, to read:12454.5.(a)A worker cooperative may create an indivisible reserves account that shall not be distributed to members.
(b)Funds in the indivisible reserves account shall only derive from non-patronage-sourced income, in a manner provided in the articles or bylaws, or by the board, and shall be used as capital for the cooperative.
SEC. 19.Section 12460 of the Corporations Code is amended to read:12460.(a)Meetings of members may be held at a place within or without this state that is stated in or fixed in accordance with the bylaws. If no other place is so stated or fixed, meetings of members shall be held at the principal executive office of the corporation. Unless prohibited by the bylaws of the corporation, if authorized by the board of directors in its sole discretion, and subject to the requirement of consent in clause (b) of Section 20 and those guidelines and procedures as the board of directors may adopt, members not physically present in person at a meeting of members may, by electronic transmission by and to the corporation (Sections 20 and 21) or by electronic video screen communication, participate in a meeting of members, be deemed present in person, and vote at a meeting of members whether that meeting is to be held at a designated place or in whole or in part by means of electronic transmission by and to the corporation or by electronic video screen communication, in accordance with subdivision (f).
(b)Except as provided in Section 12460.5, a regular meeting of members shall be held annually. In any year in which directors are elected, the election shall be held at the regular meeting unless the directors are chosen in some other manner authorized by law. Any other proper business may be transacted at the meeting.
(c)If a corporation fails to hold the regular meeting for a period of 60 days after the date designated therefor or, if no date has been designated, for a period of 15 months after the formation of the corporation or after its last regular meeting, or if the corporation fails to hold a written ballot for a period of 60 days after the date designated therefor, then the superior court of the proper county may summarily order the meeting to be held or the ballot to be conducted upon the application of a member, after notice to the corporation giving it an opportunity to be heard.
(d)The votes represented at a meeting called or by written ballot ordered pursuant to subdivision (c) and entitled to be cast on the business to be transacted shall constitute a quorum, notwithstanding any provision of the articles or bylaws or provision in this part to the contrary. The court may issue such orders as may be appropriate including, without limitation, orders designating the time and place of the meeting, the record date for determination of members entitled to vote, and the form of notice of the meeting.
(e)Special meetings of members for any lawful purpose may be called by the board, the chairman of the board, the president, or other persons, if any, as are specified in the bylaws. In addition, special meetings of members for any lawful purpose may be called by 5 percent or more of the members, however, in a worker cooperative with more than four worker-members, a special meeting may only be called by the greater of three worker-members or 5 percent of the worker-members. In a worker cooperative with fewer than four worker-members, special meetings may be called by one worker-member.
(f)A meeting of the members may be conducted, in whole or in part, by electronic transmission by and to the corporation or by electronic video screen communication (1) if the corporation implements reasonable measures to provide members 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 concurrently with those proceedings, and (2) if any member votes or takes other action at the meeting by means of electronic transmission to the corporation or electronic video screen communication, a record of that vote or action is maintained by the corporation. Any request by a corporation to a member pursuant to clause (b) of Section 20 for consent to conduct a meeting of members by electronic transmission by and to the corporation, shall include a notice that absent consent of the member pursuant to clause (b) of Section 20, the meeting shall be held at a physical location in accordance with subdivision (a).
SEC. 20.Section 12460.5 is added to the Corporations Code, to read:12460.5.Notwithstanding Section 12460, a collective board worker cooperative shall not be required to hold an annual meeting of members.
SEC. 21.Section 12461 of the Corporations Code is amended to read:12461.(a)Whenever members are required or permitted to take any action at a meeting, a written notice of the meeting shall be given not less than 10 nor more than 90 days before the date of the meeting to each member who, on the record date for notice of the meeting, is entitled to vote thereat; provided, however, that if notice is given by mail, and the notice is not mailed by first-class, registered, or certified mail, that notice shall be given not less than 20 days before the meeting. A worker cooperative shall provide notice of the meeting not less than 48 hours before the meeting if the meeting is a meeting of only worker-members, provided that the notice is delivered personally to every worker-member. Subject to subdivision (f), and subdivision (b) of Section 12462, that notice shall state the place, date, and time of the meeting, the means of electronic transmission by and to the corporation (Sections 20 and 21) or electronic video screen communication, if any, by which members may participate in that meeting, and (1) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted, or (2) in the case of the regular meeting, those matters which the board, at the time the notice is given, intends to present for action by the members, but, except as provided in subdivision (b) of Section 12462, any proper matter may be presented at the meeting for such action. The notice of any meeting at which directors are to be elected shall include the names of all those who are nominees at the time the notice is given to members.
(b)Notice of a members meeting or any report shall be given personally, by electronic transmission by the corporation, or by mail or other means of written communication, addressed to a member at the address of such member appearing on the books of the corporation or given by the member to the corporation for purpose of notice; or if no such address appears or is given, at the place where the principal office of the corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal office is located. An affidavit of giving of any notice or report in accordance with the provisions of this part, executed by the secretary, assistant secretary, or any transfer agent, shall be prima facie evidence of the giving of the notice or report.
If any notice or report addressed to the member at the address of such member appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate the United States Postal Service is unable to deliver the notice or report to the member at such address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available for the member upon written demand of the member at the principal office of the corporation for a period of one year from the date of the giving of the notice or report to all other members.
Notice given by electronic transmission by the corporation under this subdivision shall be valid only if it complies with Section 20. Notwithstanding the foregoing, notice shall not be given by electronic transmission by the corporation under this subdivision after either of the following:
(1)The corporation is unable to deliver two consecutive notices to the member by that means.
(2)The inability to so deliver the notices to the member becomes known to the secretary, any assistant secretary, the transfer agent, or other person responsible for the giving of the notice.
(c)Upon request in writing to the corporation addressed to the attention of the chairman of the board, president, vice president, or secretary by any person (other than the board) entitled to call a special meeting of members, the officer forthwith shall cause notice to be given to the members entitled to vote that a meeting will be held at a time fixed by the board not less than 35 nor more than 90 days after the receipt of the request. If the notice is not given within 20 days after receipt of the request, the persons entitled to call the meeting may give the notice or the superior court of the proper county shall summarily order the giving of the notice, after notice to the corporation giving it an opportunity to be heard. The court may issue such orders as may be appropriate, including, without limitation, orders designating the time and place of the meeting, the record date for determination of members entitled to vote, and the form of notice.
(d)When a members meeting is adjourned to another time or place, unless the bylaws otherwise require and except as provided in this subdivision, notice need not be given of the adjourned meeting if the time and place thereof (or the means of electronic transmission by and to the corporation or electronic video screen communication, if any, by which members may participate) are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each member of record entitled to vote at the meeting.
(e)The transactions of any meeting of members however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present, and if, either before or after the meeting, each of the persons entitled to vote, not present in person, provides a waiver of notice or consent to the holding of the meeting or an approval of the minutes thereof in writing. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of and presence at such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required by this part to be included in the notice but not so included, if such objection is expressly made at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of members need be specified in any written waiver of notice, consent to the holding of the meeting, or approval of the minutes thereof, unless otherwise provided in the articles or bylaws, except as provided in subdivision (f).
(f)Any approval of the members required under Section 12362, 12364, 12373, 12502, or 12658 other than unanimous approval by those entitled to vote, shall be valid only if the general nature of the proposal so approved was stated in the notice of meeting or in any written waiver of notice.
(g)A court may find that notice not given in conformity with this section is still valid, if it was given in a fair and reasonable manner.
(h)Subject to the provisions of subdivision (i), and unless prohibited by the articles or bylaws, prior to any regular or special meeting of members, the board may authorize distribution of a written ballot to every member entitled to vote at the meeting. Such ballot shall set forth the action proposed to be taken at the meeting, shall provide an opportunity to specify approval or disapproval of the proposed action, and shall state that unless revoked by the member voting in person at the meeting, the ballot will be counted if received by the corporation on or before the time of the meeting with respect to which it was sent. If ballots are so distributed with respect to a meeting, the number of members voting at the meeting by unrevoked written ballots shall be deemed present at the meeting for purposes of determining the existence of a quorum pursuant to subdivision (a) of Section 12462 but only with respect to the proposed action referred to in the ballots. These ballots shall be distributed in a manner consistent with the requirements of subdivision (b) and Section 12464.
(i)Unless prohibited by the articles or bylaws, written ballots may be distributed in a manner contemplated by subdivision (h) with respect to the election of directors, except that no ballots may be so distributed with respect to the election of directors if cumulative voting is permitted pursuant to Section 12484.
SEC. 22.Section 12530 of the Corporations Code is amended to read:12530.Except as provided in Section 12530.5, any corporation may merge with another domestic corporation, foreign corporation, or other business entity. However, a merger with a nonprofit public benefit corporation or a nonprofit religious corporation must have the prior written consent of the Attorney General.
SEC. 23.Section 12530.5 is added to the Corporations Code, to read:12530.5.Notwithstanding Section 12530, a worker cooperative that has not revoked its election to be governed as a worker cooperative under Section 12310.5 shall not consolidate or merge with another corporation other than another worker cooperative. Two or more worker cooperatives may merge or consolidate in a manner consistent with this chapter.
SEC. 24.Section 12653 of the Corporations Code is amended to read:12653.(a)After determining that all the known debts and liabilities of a corporation in the process of winding up have been paid or adequately provided for, the board shall distribute all the remaining corporate assets in the manner provided in Sections 12655, 12656, and 12656.5.
(b)If the winding up is by court proceeding or subject to court supervision, the distribution shall not be made until after the expiration of any period for the presentation of claims that has been prescribed by order of the court.
(c)Anything to the contrary notwithstanding, assets, if any, that are not subject to attachment, execution, or sale for the corporations debts and liabilities may be distributed pursuant to Sections 12655, 12656, and 12656.5 even though all debts and liabilities have not been paid or adequately provided for.
SEC. 25.Section 12656.5 is added to the Corporations Code, to read:12656.5.(a)After complying with the provisions of Section 12653, and except as otherwise provided in Section 12655, upon dissolution of a worker cooperative the majority of the unallocated capital account shall be distributed to members on the basis of any of the following, as specified in the articles of incorporation or bylaws of the cooperative:
(1)Patronage.
(2)Capital contributions.
(3)A combination of patronage and capital contributions.
(b)A worker cooperative is authorized to include patronage provided by past and current members in its distribution of the unallocated capital account.
(c)Subdivision (a) shall not apply to any amounts in the indivisible reserve account. Any amount in the indivisible reserve account shall, upon dissolution, be allocated to a cooperative development organization designated in the articles of incorporation or the bylaws.
SEC. 26.Section 25100 of the Corporations Code is amended to read:25100.The following securities are exempted from Sections 25110, 25120, and 25130:
(a)Any security (including a revenue obligation) issued or guaranteed by the United States, any state, any city, county, city and county, public district, public authority, public corporation, public entity, or political subdivision of a state or any agency or corporate or other instrumentality of any one or more of the foregoing; or any certificate of deposit for any of the foregoing.
(b)Any security issued or guaranteed by Canada, any Canadian province, any political subdivision or municipality of that province, or by any other foreign government with which the United States currently maintains diplomatic relations, if the security is recognized as a valid obligation by the issuer or guarantor; or any certificate of deposit for any of the foregoing.
(c)Any security issued or guaranteed by and representing an interest in or a direct obligation of a national bank or a bank or trust company incorporated under the laws of this state, and any security issued by a bank to one or more other banks and representing an interest in an asset of the issuing bank.
(d)Any security issued or guaranteed by a federal savings association or federal savings bank or federal land bank or joint land bank or national farm loan association or by any savings association, as defined in subdivision (a) of Section 5102 of the Financial Code, which is subject to the supervision and regulation of the Commissioner of Business Oversight of this state.
(e)Any security (other than an interest in all or portions of a parcel or parcels of real property which are subdivided land or a subdivision or in a real estate development), the issuance of which is subject to authorization by the Insurance Commissioner, the Public Utilities Commission, or the Real Estate Commissioner of this state.
(f)Any security consisting of any interest in all or portions of a parcel or parcels of real property that are subdivided lands or a subdivision or in a real estate development; provided that the exemption in this subdivision shall not be applicable to: (1) any investment contract sold or offered for sale with, or as part of, that interest, or (2) any person engaged in the business of selling, distributing, or supplying water for irrigation purposes or domestic use that is not a public utility except that the exemption is applicable to any security of a mutual water company (other than an investment contract as described in paragraph (1)) offered or sold in connection with subdivided lands pursuant to Chapter 2 (commencing with Section 14310) of Part 7 of Division 3 of Title 1.
(g)Any mutual capital certificates or savings accounts, as defined in the Savings Association Law, issued by a savings association, as defined by subdivision (a) of Section 5102 of the Financial Code, and holding a license or certificate of authority then in force from the Commissioner of Business Oversight of this state.
(h)Any security issued or guaranteed by any federal credit union, or by any credit union organized and supervised, or regulated, under the Credit Union Law.
(i)Any security issued or guaranteed by any railroad, other common carrier, public utility, or public utility holding company which is (1) subject to the jurisdiction of the Interstate Commerce Commission or its successor or (2) a holding company registered with the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935 or a subsidiary of that company within the meaning of that act or (3) regulated in respect of the issuance or guarantee of the security by a governmental authority of the United States, of any state, of Canada or of any Canadian province; and the security is subject to registration with or authorization of issuance by that authority.
(j)Any security (except evidences of indebtedness, whether interest bearing or not) of an issuer (1) organized exclusively for educational, benevolent, fraternal, religious, charitable, social, or reformatory purposes and not for pecuniary profit, if no part of the net earnings of the issuer inures to the benefit of any private shareholder or individual, or (2) organized as a chamber of commerce or trade or professional association. The fact that amounts received from memberships or dues or both will or may be used to construct or otherwise acquire facilities for use by members of the nonprofit organization does not disqualify the organization for this exemption. This exemption does not apply to the securities of any nonprofit organization if any promoter thereof expects or intends to make a profit directly or indirectly from any business or activity associated with the organization or operation of that nonprofit organization or from remuneration received from that nonprofit organization.
(k)Any agreement, commonly known as a life income contract, of an issuer (1) organized exclusively for educational, benevolent, fraternal, religious, charitable, social, or reformatory purposes and not for pecuniary profit and (2) which the commissioner designates by rule or order, with a donor in consideration of a donation of property to that issuer and providing for the payment to the donor or persons designated by him or her of income or specified periodic payments from the donated property or other property for the life of the donor or those other persons.
(l)Any note, draft, bill of exchange, or bankers acceptance which is freely transferable and of prime quality, arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which evidences an obligation to pay cash within nine months of the date of issuance, exclusive of days of grace, or any renewal of that paper which is likewise limited, or any guarantee of that paper or of that renewal, provided that the paper is not offered to the public in amounts of less than twenty-five thousand dollars ($25,000) in the aggregate to any one purchaser. In addition, the commissioner may, by rule or order, exempt any issuer of any notes, drafts, bills of exchange or bankers acceptances from qualification of those securities when the commissioner finds that the qualification is not necessary or appropriate in the public interest or for the protection of investors.
(m)Any security issued by any corporation organized and existing under the provisions of Chapter 1 (commencing with Section 54001) of Division 20 of the Food and Agricultural Code.
(n)Any beneficial interest in an employees pension, profit-sharing, stock bonus, or similar benefit plan which meets the requirements for qualification under Section 401 of the federal Internal Revenue Code or any statute amendatory thereof or supplementary thereto. A determination letter from the Internal Revenue Service stating that an employees pension, profit-sharing, stock bonus, or similar benefit plan meets those requirements shall be conclusive evidence that the plan is an employees pension, profit-sharing, stock bonus, or similar benefit plan within the meaning of the first sentence of this subdivision until the date the determination letter is revoked in writing by the Internal Revenue Service, regardless of whether or not the revocation is retroactive.
(o)Any security listed or approved for listing upon notice of issuance on a national securities exchange, if the exchange has been certified by rule or order of the commissioner and any warrant or right to purchase or subscribe to the security. The exemption afforded by this subdivision does not apply to securities listed or approved for listing upon notice of issuance on a national securities exchange, in a rollup transaction unless the rollup transaction is an eligible rollup transaction as defined in Section 25014.7.
That certification of any exchange shall be made by the commissioner upon the written request of the exchange if the commissioner finds that the exchange, in acting on applications for listing of common stock, substantially applies the minimum standards set forth in either subparagraph (A) or (B) of paragraph (1), and, in considering suspension or removal from listing, substantially applies each of the criteria set forth in paragraph (2).
(1)Listing standards:
(A)(i)Shareholders equity of at least four million dollars ($4,000,000).
(ii)Pretax income of at least seven hundred fifty thousand dollars ($750,000) in the issuers last fiscal year or in two of its last three fiscal years.
(iii)Minimum public distribution of 500,000 shares (exclusive of the holdings of officers, directors, controlling shareholders, and other concentrated or family holdings), together with a minimum of 800 public holders or minimum public distribution of 1,000,000 shares together with a minimum of 400 public holders. The exchange may also consider the listing of a companys securities if the company has a minimum of 500,000 shares publicly held, a minimum of 400 shareholders and daily trading volume in the issue has been approximately 2,000 shares or more for the six months preceding the date of application. In evaluating the suitability of an issue for listing under this trading provision, the exchange shall review the nature and frequency of that activity and any other factors as it may determine to be relevant in ascertaining whether the issue is suitable for trading. A security that trades infrequently shall not be considered for listing under this paragraph even though average daily volume amounts to 2,000 shares per day or more.
Companies whose securities are concentrated in a limited geographical area, or whose securities are largely held in block by institutional investors, normally may not be considered eligible for listing unless the public distribution appreciably exceeds 500,000 shares.
(iv)Minimum price of three dollars ($3) per share for a reasonable period of time prior to the filing of a listing application; provided, however, in certain instances an exchange may favorably consider listing an issue selling for less than three dollars ($3) per share after considering all pertinent factors, including market conditions in general, whether historically the issue has sold above three dollars ($3) per share, the applicants capitalization, and the number of outstanding and publicly held shares of the issue.
(v)An aggregate market value for publicly held shares of at least three million dollars ($3,000,000).
(B)(i)Shareholders equity of at least four million dollars ($4,000,000).
(ii)Minimum public distribution set forth in clause (iii) of subparagraph (A) of paragraph (1).
(iii)Operating history of at least three years.
(iv)An aggregate market value for publicly held shares of at least fifteen million dollars ($15,000,000).
(2)Criteria for consideration of suspension or removal from listing:
(A)If a company that (A) has shareholders equity of less than one million dollars ($1,000,000) has sustained net losses in each of its two most recent fiscal years, or (B) has net tangible assets of less than three million dollars ($3,000,000) and has sustained net losses in three of its four most recent fiscal years.
(B)If the number of shares publicly held (excluding the holdings of officers, directors, controlling shareholders, and other concentrated or family holdings) is less than 150,000.
(C)If the total number of shareholders is less than 400 or if the number of shareholders of lots of 100 shares or more is less than 300.
(D)If the aggregate market value of shares publicly held is less than seven hundred fifty thousand dollars ($750,000).
(E)If shares of common stock sell at a price of less than three dollars ($3) per share for a substantial period of time and the issuer shall fail to effectuate a reverse stock split of the shares within a reasonable period of time after being requested by the exchange to take that action.
A national securities exchange, certified by rule or order of the commissioner under this subdivision, shall file annual reports when requested to do so by the commissioner. The annual reports shall contain, by issuer: the variances granted to an exchanges listing standards, including variances from corporate governance and voting rights standards, for any security of that issuer; the reasons for the variances; a discussion of the review procedure instituted by the exchange to determine the effect of the variances on investors and whether the variances should be continued; and any other information that the commissioner deems relevant. The purpose of these reports is to assist the commissioner in determining whether the quantitative and qualitative requirements of this subdivision are substantially being met by the exchange in general or with regard to any particular security.
The commissioner after appropriate notice and opportunity for hearing in accordance with the provisions of the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, may, in his or her discretion, by rule or order, decertify any exchange previously certified that ceases substantially to apply the minimum standards or criteria as set forth in paragraphs (1) and (2).
A rule or order of certification shall conclusively establish that any security listed or approved for listing upon notice of issuance on any exchange named in a rule or order of certification, and any warrant or right to purchase or subscribe to that security, is exempt under this subdivision until the adoption by the commissioner of any rule or order decertifying the exchange.
(p)A promissory note secured by a lien on real property, which is neither one of a series of notes of equal priority secured by interests in the same real property nor a note in which beneficial interests are sold to more than one person or entity.
(q)Any unincorporated interindemnity or reciprocal or interinsurance contract, that qualifies under the provisions of Section 1280.7 of the Insurance Code, between members of a cooperative corporation, organized and operating under Part 2 (commencing with Section 12200) of Division 3 of Title 1, and whose members consist only of physicians and surgeons licensed in California, which contracts indemnify solely in respect to medical malpractice claims against the members, and which do not collect in advance of loss any moneys other than contributions by each member to a collective reserve trust fund or for necessary expenses of administration.
(1)Whenever it appears to the commissioner that any person has engaged or is about to engage in any act or practice constituting a violation of any provision of Section 1280.7 of the Insurance Code, the commissioner may, in the commissioners discretion, bring an action in the name of the people of the State of California in the superior court to enjoin the acts or practices or to enforce compliance with Section 1280.7 of the Insurance Code. Upon a proper showing a permanent or preliminary injunction, a restraining order, or a writ of mandate shall be granted and a receiver or conservator may be appointed for the defendant or the defendants assets.
(2)The commissioner may, in the commissioners discretion, (A) make public or private investigations within or outside of this state as the commissioner deems necessary to determine whether any person has violated or is about to violate any provision of Section 1280.7 of the Insurance Code or to aid in the enforcement of Section 1280.7, and (B) publish information concerning the violation of Section 1280.7.
(3)For the purpose of any investigation or proceeding under this section, the commissioner or any officer designated by the commissioner may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, agreements, or other documents or records which the commissioner deems relevant or material to the inquiry.
(4)In case of contumacy by, or refusal to obey a subpoena issued to, any person, the superior court, upon application by the commissioner, may issue to the person an order requiring the person to appear before the commissioner, or the officer designated by the commissioner, to produce documentary evidence, if so ordered, or to give evidence touching the matter under investigation or in question. Failure to obey the order of the court may be punished by the court as a contempt.
(5)No person is excused from attending or testifying or from producing any document or record before the commissioner or in obedience to the subpoena of the commissioner or any officer designated by the commissioner, or in any proceeding instituted by the commissioner, on the ground that the testimony or evidence (documentary or otherwise), required of the person may tend to incriminate the person or subject the person to a penalty or forfeiture, but no individual may be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which the person is compelled, after validly claiming the privilege against self-incrimination, to testify or produce evidence (documentary or otherwise), except that the individual testifying is not exempt from prosecution and punishment for perjury or contempt committed in testifying.
(6)The cost of any review, examination, audit, or investigation made by the commissioner under Section 1280.7 of the Insurance Code shall be paid to the commissioner by the person subject to the review, examination, audit, or investigation, and the commissioner may maintain an action for the recovery of these costs in any court of competent jurisdiction. In determining the cost, the commissioner may use the actual amount of the salary or other compensation paid to the persons making the review, examination, audit, or investigation plus the actual amount of expenses including overhead reasonably incurred in the performance of the work.
The recoverable cost of each review, examination, audit, or investigation made by the commissioner under Section 1280.7 of the Insurance Code shall not exceed twenty-five thousand dollars ($25,000), except that costs exceeding twenty-five thousand dollars ($25,000) shall be recoverable if the costs are necessary to prevent a violation of any provision of Section 1280.7 of the Insurance Code.
(r)Any shares or memberships issued by any corporation organized and existing pursuant to the provisions of Part 2 (commencing with Section 12200) of Division 3 of Title 1, provided the aggregate investment of any shareholder or member in shares or memberships sold pursuant to this subdivision does not exceed one thousand dollars ($1,000). This exemption does not apply to the shares or memberships of that corporation if any promoter thereof expects or intends to make a profit directly or indirectly from any business or activity associated with the corporation or the operation of the corporation or from remuneration, other than reasonable salary, received from the corporation. This exemption does not apply to nonvoting shares or memberships of that corporation issued to any person who does not possess, and who will not acquire in connection with the issuance of nonvoting shares or memberships, voting power (Section 12253) in the corporation. This exemption also does not apply to shares or memberships issued by a nonprofit cooperative corporation organized to facilitate the creation of an unincorporated interindemnity arrangement that provides indemnification for medical malpractice to its physician and surgeon members as set forth in subdivision (q).
(s)Any security consisting of or representing an interest in a pool of mortgage loans that meets each of the following requirements:
(1)The pool consists of whole mortgage loans or participation interests in those loans, which loans were originated or acquired in the ordinary course of business by a national bank or federal savings association or federal savings bank having its principal office in this state, by a bank incorporated under the laws of this state or by a savings association as defined in subdivision (a) of Section 5102 of the Financial Code and which is subject to the supervision and regulation of the Commissioner of Financial Institutions, and each of which at the time of transfer to the pool is an authorized investment for the originating or acquiring institution.
(2)The pool of mortgage loans is held in trust by a trustee which is a financial institution specified in paragraph (1) as trustee or otherwise.
(3)The loans are serviced by a financial institution specified in paragraph (1).
(4)The security is not offered in amounts of less than twenty-five thousand dollars ($25,000) in the aggregate to any one purchaser.
(5)The security is offered pursuant to a registration under the Securities Act of 1933, or pursuant to an exemption under Regulation A under that act, or in the opinion of counsel for the issuer, is offered pursuant to an exemption under Section 4(2) of that act.
(t)(1)Any security issued or guaranteed by and representing an interest in or a direct obligation of an industrial loan company incorporated under the laws of the state and authorized by the Commissioner of Financial Institutions to engage in industrial loan business.
(2)Any investment certificate in or issued by any industrial loan company that is organized under the laws of a state of the United States other than this state, that is insured by the Federal Deposit Insurance Corporation, and that maintains a branch office in this state.
The Legislature finds and declares all of the following:
(a)A worker cooperative has the purpose of creating and maintaining sustainable jobs and generating wealth in order to improve the quality of life of its worker-members, dignify human work, allow workers democratic self-management, and promote community and local development in this state.
(b)The purpose of this act is to amend the Consumer Cooperative Corporation Law to clarify that the law applies to cooperatives in general, not just consumer cooperatives, and to create more visibility for worker cooperatives. This act is intended to provide a definition of worker cooperative for purposes of this act, and not for purposes of other laws.
SEC. 2.The heading of Part 2 (commencing with Section 12200) of Division 3 of Title 1 of the Corporations Code is amended to read:2.COOPERATIVE CORPORATIONSSEC. 3.Section 12200 of the Corporations Code is amended to read:12200.This part shall be known as the Cooperative Corporation Law. This part is intended primarily to apply to the organization and operation of cooperatives, including, but not limited to, consumer cooperatives, worker cooperatives, and cooperatives formed for the purpose of recycling or treating hazardous waste that elect to incorporate under its provisions.
SEC. 4.Section 12201.5 is added to the Corporations Code, to read:12201.5.(a)Notwithstanding Section 12201, the net earnings and losses of a worker cooperative shall be apportioned and distributed at the time and in the manner specified in the articles of incorporation or bylaws.
(b)Net earnings declared as patronage distributions with respect to a period of time, and paid to a creditor or member, shall be apportioned among the members in accordance with the ratio that each members patronage during the period bears to total patronage by all members during the period.
(c)The apportionment, distribution, and payment of net earnings required by subdivision (a) may be paid in cash, credits, written notices of allocation, or capital stock issued by the worker cooperative.
SEC. 5.Section 12228.3 is added to the Corporations Code, to read:12228.3.Capital account cooperative is a worker cooperative in which the entire net book value is reflected in member capital accounts, one for each member, and an unallocated capital account, if any.
SEC. 6.Section 12230.5 is added to the Corporations Code, to read:12230.5.Collective board worker cooperative means a worker cooperative in which there is only one class of members consisting of worker-members, all of whom are members of the board.
SEC. 7.Section 12238 of the Corporations Code is amended to read:12238.(a)Member means any person who, pursuant to a specific provision of a corporations articles or bylaws, has the right to vote for the election of a director or directors, or possesses proprietary interests in the corporation.
(b)The articles or bylaws may confer some or all of the rights of a member, set forth in this part, upon any person or persons who do not have any of the voting rights referred to in subdivision (a).
(c)Where a member of a corporation is not a natural person, such member may authorize in writing one or more natural persons to vote on its behalf on any or all matters which may require a vote of the members.
(d)A person is not a member by virtue of any of the following:
(1)Any rights such person has as a delegate.
(2)Any rights such person has to designate or select a director or directors.
(3)Any rights such person has as a director.
(e)Worker-member means a member of a worker cooperative who is a natural person and also a patron of a worker cooperative.
(f) Community investor means a person who is not a worker-member and who holds a share or other proprietary interest in a worker cooperative.
(g)Worker means a natural person contributing labor or services. services to a worker cooperative. Candidate means a worker who is being considered for membership, membership in a worker cooperative, as defined in the corporations articles or bylaws.
SEC. 8.Section 12243 of the Corporations Code is amended to read:12243.(a)(1)If the corporation is organized to provide goods or services to its members, the corporations patrons are those who purchase those types of goods from, or use those types of services of, the corporation. If the corporation is organized to market, process process, or otherwise handle its members products or services, the corporations patrons are those persons whose products or services are so marketed, processed, or handled by the corporation.
(2)Patronage of a patron is measured by the volume or value, or both, of a patrons purchases of products from, and use of services furnished by, the corporation, and by products and services provided by the patron to the corporation for marketing.
(b)(1)If the corporation is organized as a worker cooperative, the corporations patrons are its worker-members.
(2)If the corporation is organized as a worker cooperative, patronage may be measured by work performed or personal services contributed, performed, including wages earned, number of hours worked, number of jobs created, or some combination of these measures.
SEC. 9.Section 12253 of the Corporations Code is amended to read:12253.(a)Voting power means the power to vote for the election of directors at the time any determination of voting power is made and does not include the right to vote upon the happening of some condition or event that has not yet occurred.
(b)If different classes of memberships are entitled to vote as separate classes for different members of the board, the determination of percentage of voting power shall be made on the basis of the percentage of the total number of authorized directors that the memberships in question (whether of one or more classes) have the power to elect in an election at which all memberships then entitled to vote for the election of any directors are voted.
(c)Community investor voting power in a worker cooperative shall be provided in the articles or bylaws, and is limited to approval rights only over a merger, sale of major assets, reorganization, or dissolution. Approval rights shall not include the right to propose any action.
SEC. 10.Section 12253.5 is added to the Corporations Code, to read:12253.5.Worker cooperative or employment cooperative means a corporation formed under this part that includes a class of worker-members who are natural persons whose patronage consists of labor contributed to, personal services performed for, or other work performed for the corporation. Election to be organized as a worker cooperative or an employment cooperative does not create a presumption that workers are employees of the corporation for any purposes. At least 51 percent of the workers shall be worker-members or candidates.
SEC. 11.Section 12310 of the Corporations Code is amended to read:12310.The articles of incorporation of a corporation formed under this part shall set forth:
(a)The name of the corporation.
(b)The following statement:
This corporation is a cooperative corporation organized under the Cooperative Corporation Law. The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the law.
[The articles may include a further description of the corporations purpose.]
(c)The name and street address in this state of the corporations initial agent for service of process in accordance with subdivision (b) of Section 12570.
(d)The initial street address of the corporation.
(e)The initial mailing address of the corporation, if different from the initial street address.
(f)Whether the voting power or the proprietary interests of the members are equal or unequal. If the voting power or proprietary interests of the members are unequal, the articles shall state either (i) the general rule or rules by which the voting power and proprietary interests of the members shall be determined or (ii) that such rule or rules shall be prescribed in the corporations bylaws. Equal voting power means voting power apportioned on the basis of one vote for each member. Equal proprietary rights means property rights apportioned on the basis of one proprietary unit for each member.
(g)Pursuant to Section 12310.5, the articles of incorporation may state whether the cooperative has elected to be governed as a worker cooperative.
SEC. 12.Section 12310.5 is added to the Corporations Code, to read:12310.5.(a)A corporation organized under this part may elect to be governed as a worker cooperative by making the following statement in its articles of incorporation or its amended articles of incorporation:
This corporation is a worker cooperative corporation organized under the Cooperative Corporation Law.
(b)A corporation that makes the election to be governed as a worker cooperative, unless expressly exempted, shall be governed by all the provisions of this part.
SEC. 13.Section 12317 is added to the Corporations Code, to read:12317.(a)A worker cooperative may, in its articles or bylaws, establish itself as a capital account cooperative.
(b)The articles or bylaws of a capital account cooperative may authorize assignment of a portion of retained net earnings and net losses to an unallocated capital account. The unallocated capital account in a capital account cooperative shall reflect any paid-in capital, net losses, capital and retained net earnings not allocated to individual members. Earnings assigned to the unallocated capital account may be used for any and all corporate purposes, as determined by the board of directors.
(c)The system of member and unallocated capital accounts may be used to determine the redemption price of member shares, capital stock, and written notices of allocation. The articles or bylaws may provide for the capital account cooperative worker cooperative to pay or credit interest on the balance in each members capital account.
(d)The articles or bylaws of a capital account cooperative may permit the periodic redemption of written notices of allocation and capital stock and shall provide for recall and redemption of membership shares upon termination of membership in the cooperative. However, no redemption may occur that would result in the liability of any director or officer pursuant to Article 2 (commencing with Section 12370) of Chapter 2.
(e)As used in this section, written notice of allocation has the same meaning as defined in Section 1388 (b) of the Internal Revenue Code.
SEC. 14.Section 12404 of the Corporations Code is amended to read:12404.Except as permitted in Sections 12314 and 12404.5, the voting power of members having voting rights shall be equal.
SEC. 15.Section 12404.5 is added to the Corporations Code, to read:12404.5.(a)The worker-members of a worker cooperative shall have voting power as provided in subdivision (a) of Section 12253.
(b)Community investors have voting power only as provided in subdivision (c) of Section 12253.
SEC. 16.Section 12420 of the Corporations Code is amended to read:12420.(a)Except as provided in subdivision (b), a corporation may issue memberships having different rights, privileges, preferences, restrictions, or conditions, as provided in its articles or bylaws. If the articles or bylaws authorize at least one class of voting memberships, a corporation may also authorize and issue additional classes of memberships, preferred or otherwise, that are divisible into a series or are nonvoting or both.
(b)All worker-members shall have the rights, privileges, preferences, restrictions, or conditions as provided in the articles or bylaws. This membership shall be indivisible. not be divided into partial memberships.
(c)A worker cooperative shall only make patronage distributions to the worker-member class.
SEC. 17.Section 12431 of the Corporations Code is amended to read:12431.(a)No member may be expelled or suspended, and no membership or memberships may be terminated or suspended, except according to procedures satisfying the requirements of this section. An expulsion, termination, or suspension not in accord with this section shall be void and without effect.
(b)Any expulsion, suspension, or termination must be done in good faith and in a fair and reasonable manner. Any procedure that conforms to the requirements of subdivision (c) or (d) is fair and reasonable, but a court may also find other procedures to be fair and reasonable when the full circumstances of the suspension, termination, or expulsion are considered.
(c)A procedure is fair and reasonable when: if all of the following occur:
(1)The provisions of the procedure have been set forth in the articles or bylaws, or copies of such provisions are sent annually to all the members as required by the articles or bylaws; bylaws.
(2)It provides the giving of 15 days prior notice of the expulsion, suspension, or termination and the reasons therefor; and therefor.
(3)It provides an opportunity for the member to be heard, orally or in writing, not less than five days before the effective date of the expulsion, suspension, or termination by a person or body authorized to decide that the proposed expulsion, termination, or suspension not take place.
(d)Any notice required under this section may be given by any method reasonably calculated to provide actual notice. Any notice given by mail must be given by first-class or registered mail sent to the last address of the members shown on the corporations records.
(e)Any action challenging an expulsion, suspension, or termination of membership, including any claim alleging defective notice, must be commenced within one year after the date of the expulsion, suspension, or termination. In the event such an action is successful the court may order any relief, including reinstatement, it finds equitable under the circumstances, but no vote of the members or of the board may be set aside solely because a person was at the time of the vote wrongfully excluded by virtue of the challenged expulsion, suspension, or termination, unless the court finds further that the wrongful expulsion, suspension suspension, or termination was in bad faith and for the purpose, and with the effect, of wrongfully excluding the member from the vote or from the meeting at which the vote took place, so as to affect the outcome of the vote.
(f)This section governs only the procedures for expulsion, suspension, or termination and not the substantive grounds therefor. An expulsion, suspension, or termination based upon substantive grounds which violate contractual or other rights of the member or are otherwise unlawful is not made valid by compliance with this section.
(g)A member who is expelled or suspended or whose membership is terminated shall be liable for any charges incurred, services or benefits actually rendered, dues, assessments assessments, or fees incurred before expulsion, suspension, or termination or arising from contract or otherwise.
SEC. 18.Section 12454.5 is added to the Corporations Code, to read:12454.5.(a)A worker cooperative may create an indivisible reserves account that shall not be distributed to members.
(b)Funds in the indivisible reserves account shall, shall only derive from non-patronage-sourced income, in a manner provided in the articles or bylaws, or by the board, and shall be used as capital for the cooperative.
SEC. 19.Section 12460 of the Corporations Code is amended to read:12460.(a)Meetings of members may be held at a place within or without this state that is stated in or fixed in accordance with the bylaws. If no other place is so stated or fixed, meetings of members shall be held at the principal executive office of the corporation. Unless prohibited by the bylaws of the corporation, if authorized by the board of directors in its sole discretion, and subject to the requirement of consent in clause (b) of Section 20 and those guidelines and procedures as the board of directors may adopt, members not physically present in person at a meeting of members may, by electronic transmission by and to the corporation (Sections 20 and 21) or by electronic video screen communication, participate in a meeting of members, be deemed present in person, and vote at a meeting of members whether that meeting is to be held at a designated place or in whole or in part by means of electronic transmission by and to the corporation or by electronic video screen communication, in accordance with subdivision (f).
(b)Except as provided in Section 12460.5, a regular meeting of members shall be held annually. In any year in which directors are elected, the election shall be held at the regular meeting unless the directors are chosen in some other manner authorized by law. Any other proper business may be transacted at the meeting.
(c)If a corporation fails to hold the regular meeting for a period of 60 days after the date designated therefor or, if no date has been designated, for a period of 15 months after the formation of the corporation or after its last regular meeting, or if the corporation fails to hold a written ballot for a period of 60 days after the date designated therefor, then the superior court of the proper county may summarily order the meeting to be held or the ballot to be conducted upon the application of a member, after notice to the corporation giving it an opportunity to be heard.
(d)The votes represented at a meeting called or by written ballot ordered pursuant to subdivision (c) and entitled to be cast on the business to be transacted shall constitute a quorum, notwithstanding any provision of the articles or bylaws or provision in this part to the contrary. The court may issue such orders as may be appropriate including, without limitation, orders designating the time and place of the meeting, the record date for determination of members entitled to vote, and the form of notice of the meeting.
(e)Special meetings of members for any lawful purpose may be called by the board, the chairman of the board, the president, or other persons, if any, as are specified in the bylaws. In addition, special meetings of members for any lawful purpose may be called by 5 percent or more of the members, however, in a worker cooperative with more than four worker-members, a special meeting may only be called by the greater of three worker-members or 5 percent of the worker-members. In a worker cooperative with fewer than four worker-members, special meetings may be called by 5 percent of the worker-members. one worker-member.
(f)A meeting of the members may be conducted, in whole or in part, by electronic transmission by and to the corporation or by electronic video screen communication (1) if the corporation implements reasonable measures to provide members 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 concurrently with those proceedings, and (2) if any member votes or takes other action at the meeting by means of electronic transmission to the corporation or electronic video screen communication, a record of that vote or action is maintained by the corporation. Any request by a corporation to a member pursuant to clause (b) of Section 20 for consent to conduct a meeting of members by electronic transmission by and to the corporation, shall include a notice that absent consent of the member pursuant to clause (b) of Section 20, the meeting shall be held at a physical location in accordance with subdivision (a).
SEC. 20.Section 12460.5 is added to the Corporations Code, to read:12460.5.Notwithstanding Section 12460, a collective board worker cooperative shall not be required to hold an annual meeting of members.
SEC. 21.Section 12461 of the Corporations Code is amended to read:12461.(a)Whenever members are required or permitted to take any action at a meeting, a written notice of the meeting shall be given not less than 10 nor more than 90 days before the date of the meeting to each member who, on the record date for notice of the meeting, is entitled to vote thereat; provided, however, that if notice is given by mail, and the notice is not mailed by first-class, registered, or certified mail, that notice shall be given not less than 20 days before the meeting. A worker cooperative shall provide notice of the meeting not less than 48 hours before the meeting if the meeting is a meeting of only worker-members, provided that the notice is delivered personally. personally to every worker-member. Subject to subdivision (f), and subdivision (b) of Section 12462, that notice shall state the place, date, and time of the meeting, the means of electronic transmission by and to the corporation (Sections 20 and 21) or electronic video screen communication, if any, by which members may participate in that meeting, and (1) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted, or (2) in the case of the regular meeting, those matters which the board, at the time the notice is given, intends to present for action by the members, but, except as provided in subdivision (b) of Section 12462, any proper matter may be presented at the meeting for such action. The notice of any meeting at which directors are to be elected shall include the names of all those who are nominees at the time the notice is given to members.
(b)Notice of a members meeting or any report shall be given personally, by electronic transmission by the corporation, or by mail or other means of written communication, addressed to a member at the address of such member appearing on the books of the corporation or given by the member to the corporation for purpose of notice; or if no such address appears or is given, at the place where the principal office of the corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal office is located. An affidavit of giving of any notice or report in accordance with the provisions of this part, executed by the secretary, assistant secretary, or any transfer agent, shall be prima facie evidence of the giving of the notice or report.
If any notice or report addressed to the member at the address of such member appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate the United States Postal Service is unable to deliver the notice or report to the member at such address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available for the member upon written demand of the member at the principal office of the corporation for a period of one year from the date of the giving of the notice or report to all other members.
Notice given by electronic transmission by the corporation under this subdivision shall be valid only if it complies with Section 20. Notwithstanding the foregoing, notice shall not be given by electronic transmission by the corporation under this subdivision after either of the following:
(1)The corporation is unable to deliver two consecutive notices to the member by that means.
(2)The inability to so deliver the notices to the member becomes known to the secretary, any assistant secretary, the transfer agent, or other person responsible for the giving of the notice.
(c)Upon request in writing to the corporation addressed to the attention of the chairman of the board, president, vice president, or secretary by any person (other than the board) entitled to call a special meeting of members, the officer forthwith shall cause notice to be given to the members entitled to vote that a meeting will be held at a time fixed by the board not less than 35 nor more than 90 days after the receipt of the request. If the notice is not given within 20 days after receipt of the request, the persons entitled to call the meeting may give the notice or the superior court of the proper county shall summarily order the giving of the notice, after notice to the corporation giving it an opportunity to be heard. The court may issue such orders as may be appropriate, including, without limitation, orders designating the time and place of the meeting, the record date for determination of members entitled to vote vote, and the form of notice.
(d)When a members meeting is adjourned to another time or place, unless the bylaws otherwise require and except as provided in this subdivision, notice need not be given of the adjourned meeting if the time and place thereof (or the means of electronic transmission by and to the corporation or electronic video screen communication, if any, by which members may participate) are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each member of record entitled to vote at the meeting.
(e)The transactions of any meeting of members however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present, and if, either before or after the meeting, each of the persons entitled to vote, not present in person, provides a waiver of notice or consent to the holding of the meeting or an approval of the minutes thereof in writing. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of and presence at such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required by this part to be included in the notice but not so included, if such objection is expressly made at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of members need be specified in any written waiver of notice, consent to the holding of the meeting, or approval of the minutes thereof, unless otherwise provided in the articles or bylaws, except as provided in subdivision (f).
(f)Any approval of the members required under Section 12362, 12364, 12373, 12502, or 12658 other than unanimous approval by those entitled to vote, shall be valid only if the general nature of the proposal so approved was stated in the notice of meeting or in any written waiver of notice.
(g)A court may find that notice not given in conformity with this section is still valid, if it was given in a fair and reasonable manner.
(h)Subject to the provisions of subdivision (i), and unless prohibited by the articles or bylaws, prior to any regular or special meeting of members, the board may authorize distribution of a written ballot to every member entitled to vote at the meeting. Such ballot shall set forth the action proposed to be taken at the meeting, shall provide an opportunity to specify approval or disapproval of the proposed action, and shall state that unless revoked by the member voting in person at the meeting, the ballot will be counted if received by the corporation on or before the time of the meeting with respect to which it was sent. If ballots are so distributed with respect to a meeting, the number of members voting at the meeting by unrevoked written ballots shall be deemed present at the meeting for purposes of determining the existence of a quorum pursuant to subdivision (a) of Section 12462 but only with respect to the proposed action referred to in the ballots. These ballots shall be distributed in a manner consistent with the requirements of subdivision (b) and Section 12464.
(i)Unless prohibited by the articles or bylaws, written ballots may be distributed in a manner contemplated by subdivision (h) with respect to the election of directors, except that no ballots may be so distributed with respect to the election of directors if cumulative voting is permitted pursuant to Section 12484.
SEC. 22.Section 12530 of the Corporations Code is amended to read:12530.Except as provided in Section 12530.5, any corporation may merge with another domestic corporation, foreign corporation, or other business entity. However, a merger with a nonprofit public benefit corporation or a nonprofit religious corporation must have the prior written consent of the Attorney General.
SEC. 23.Section 12530.5 is added to the Corporations Code, to read:12530.5.Notwithstanding Section 12530, a worker cooperative that has not revoked its election to be governed as a worker cooperative under Section 12310.5 shall not consolidate or merge with another corporation other than another worker cooperative. Two or more worker cooperatives may merge or consolidate in a manner consistent with this chapter.
SEC. 24.Section 12653 of the Corporations Code is amended to read:12653.(a)After determining that all the known debts and liabilities of a corporation in the process of winding up have been paid or adequately provided for, the board shall distribute all the remaining corporate assets in the manner provided in Sections 12655, 12656, and 12656.5.
(b)If the winding up is by court proceeding or subject to court supervision, the distribution shall not be made until after the expiration of any period for the presentation of claims that has been prescribed by order of the court.
(c)Anything to the contrary notwithstanding, assets, if any, that are not subject to attachment, execution, or sale for the corporations debts and liabilities may be distributed pursuant to Sections 12655, 12656, and 12656.5 even though all debts and liabilities have not been paid or adequately provided for.
SEC. 25.Section 12656.5 is added to the Corporations Code, to read:12656.5.(a)After complying with the provisions of Section 12653, and except as otherwise provided in Section 12655, upon dissolution of a worker cooperative the majority of the unallocated capital account shall be distributed to members on the basis of the following: any of the following, as specified in the articles of incorporation or bylaws of the cooperative:
(1)Patronage.
(2)Capital contributions.
(3)A combination of patronage and capital contributions.
(b)A worker cooperative is authorized to include patronage provided by past and current members in its distribution of the unallocated capital account.
(c)Subdivision (a) shall not apply to any amounts in the indivisible reserve account. Any amount in the indivisible reserve account shall, upon dissolution, be allocated to a cooperative development organization designated in the articles of incorporation or the bylaws.
SEC. 26.Section 25100 of the Corporations Code is amended to read:25100.The following securities are exempted from Sections 25110, 25120, and 25130:
(a)Any security (including a revenue obligation) issued or guaranteed by the United States, any state, any city, county, city and county, public district, public authority, public corporation, public entity, or political subdivision of a state or any agency or corporate or other instrumentality of any one or more of the foregoing; or any certificate of deposit for any of the foregoing.
(b)Any security issued or guaranteed by Canada, any Canadian province, any political subdivision or municipality of that province, or by any other foreign government with which the United States currently maintains diplomatic relations, if the security is recognized as a valid obligation by the issuer or guarantor; or any certificate of deposit for any of the foregoing.
(c)Any security issued or guaranteed by and representing an interest in or a direct obligation of a national bank or a bank or trust company incorporated under the laws of this state, and any security issued by a bank to one or more other banks and representing an interest in an asset of the issuing bank.
(d)Any security issued or guaranteed by a federal savings association or federal savings bank or federal land bank or joint land bank or national farm loan association or by any savings association, as defined in subdivision (a) of Section 5102 of the Financial Code, which is subject to the supervision and regulation of the Commissioner of Business Oversight of this state.
(e)Any security (other than an interest in all or portions of a parcel or parcels of real property which are subdivided land or a subdivision or in a real estate development), the issuance of which is subject to authorization by the Insurance Commissioner, the Public Utilities Commission, or the Real Estate Commissioner of this state.
(f)Any security consisting of any interest in all or portions of a parcel or parcels of real property that are subdivided lands or a subdivision or in a real estate development; provided that the exemption in this subdivision shall not be applicable to: (1) any investment contract sold or offered for sale with, or as part of, that interest, or (2) any person engaged in the business of selling, distributing, or supplying water for irrigation purposes or domestic use that is not a public utility except that the exemption is applicable to any security of a mutual water company (other than an investment contract as described in paragraph (1)) offered or sold in connection with subdivided lands pursuant to Chapter 2 (commencing with Section 14310) of Part 7 of Division 3 of Title 1.
(g)Any mutual capital certificates or savings accounts, as defined in the Savings Association Law, issued by a savings association, as defined by subdivision (a) of Section 5102 of the Financial Code, and holding a license or certificate of authority then in force from the Commissioner of Business Oversight of this state.
(h)Any security issued or guaranteed by any federal credit union, or by any credit union organized and supervised, or regulated, under the Credit Union Law.
(i)Any security issued or guaranteed by any railroad, other common carrier, public utility, or public utility holding company which is (1) subject to the jurisdiction of the Interstate Commerce Commission or its successor or (2) a holding company registered with the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935 or a subsidiary of that company within the meaning of that act or (3) regulated in respect of the issuance or guarantee of the security by a governmental authority of the United States, of any state, of Canada or of any Canadian province; and the security is subject to registration with or authorization of issuance by that authority.
(j)Any security (except evidences of indebtedness, whether interest bearing or not) of an issuer (1) organized exclusively for educational, benevolent, fraternal, religious, charitable, social, or reformatory purposes and not for pecuniary profit, if no part of the net earnings of the issuer inures to the benefit of any private shareholder or individual, or (2) organized as a chamber of commerce or trade or professional association. The fact that amounts received from memberships or dues or both will or may be used to construct or otherwise acquire facilities for use by members of the nonprofit organization does not disqualify the organization for this exemption. This exemption does not apply to the securities of any nonprofit organization if any promoter thereof expects or intends to make a profit directly or indirectly from any business or activity associated with the organization or operation of that nonprofit organization or from remuneration received from that nonprofit organization.
(k)Any agreement, commonly known as a life income contract, of an issuer (1) organized exclusively for educational, benevolent, fraternal, religious, charitable, social, or reformatory purposes and not for pecuniary profit and (2) which the commissioner designates by rule or order, with a donor in consideration of a donation of property to that issuer and providing for the payment to the donor or persons designated by him or her of income or specified periodic payments from the donated property or other property for the life of the donor or those other persons.
(l)Any note, draft, bill of exchange, or bankers acceptance which is freely transferable and of prime quality, arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which evidences an obligation to pay cash within nine months of the date of issuance, exclusive of days of grace, or any renewal of that paper which is likewise limited, or any guarantee of that paper or of that renewal, provided that the paper is not offered to the public in amounts of less than twenty-five thousand dollars ($25,000) in the aggregate to any one purchaser. In addition, the commissioner may, by rule or order, exempt any issuer of any notes, drafts, bills of exchange or bankers acceptances from qualification of those securities when the commissioner finds that the qualification is not necessary or appropriate in the public interest or for the protection of investors.
(m)Any security issued by any corporation organized and existing under the provisions of Chapter 1 (commencing with Section 54001) of Division 20 of the Food and Agricultural Code.
(n)Any beneficial interest in an employees pension, profit-sharing, stock bonus, or similar benefit plan which meets the requirements for qualification under Section 401 of the federal Internal Revenue Code or any statute amendatory thereof or supplementary thereto. A determination letter from the Internal Revenue Service stating that an employees pension, profit-sharing, stock bonus, or similar benefit plan meets those requirements shall be conclusive evidence that the plan is an employees pension, profit-sharing, stock bonus, or similar benefit plan within the meaning of the first sentence of this subdivision until the date the determination letter is revoked in writing by the Internal Revenue Service, regardless of whether or not the revocation is retroactive.
(o)Any security listed or approved for listing upon notice of issuance on a national securities exchange, if the exchange has been certified by rule or order of the commissioner and any warrant or right to purchase or subscribe to the security. The exemption afforded by this subdivision does not apply to securities listed or approved for listing upon notice of issuance on a national securities exchange, in a rollup transaction unless the rollup transaction is an eligible rollup transaction as defined in Section 25014.7.
That certification of any exchange shall be made by the commissioner upon the written request of the exchange if the commissioner finds that the exchange, in acting on applications for listing of common stock, substantially applies the minimum standards set forth in either subparagraph (A) or (B) of paragraph (1), and, in considering suspension or removal from listing, substantially applies each of the criteria set forth in paragraph (2).
(1)Listing standards:
(A)(i)Shareholders equity of at least four million dollars ($4,000,000).
(ii)Pretax income of at least seven hundred fifty thousand dollars ($750,000) in the issuers last fiscal year or in two of its last three fiscal years.
(iii)Minimum public distribution of 500,000 shares (exclusive of the holdings of officers, directors, controlling shareholders, and other concentrated or family holdings), together with a minimum of 800 public holders or minimum public distribution of 1,000,000 shares together with a minimum of 400 public holders. The exchange may also consider the listing of a companys securities if the company has a minimum of 500,000 shares publicly held, a minimum of 400 shareholders and daily trading volume in the issue has been approximately 2,000 shares or more for the six months preceding the date of application. In evaluating the suitability of an issue for listing under this trading provision, the exchange shall review the nature and frequency of that activity and any other factors as it may determine to be relevant in ascertaining whether the issue is suitable for trading. A security that trades infrequently shall not be considered for listing under this paragraph even though average daily volume amounts to 2,000 shares per day or more.
Companies whose securities are concentrated in a limited geographical area, or whose securities are largely held in block by institutional investors, normally may not be considered eligible for listing unless the public distribution appreciably exceeds 500,000 shares.
(iv)Minimum price of three dollars ($3) per share for a reasonable period of time prior to the filing of a listing application; provided, however, in certain instances an exchange may favorably consider listing an issue selling for less than three dollars ($3) per share after considering all pertinent factors, including market conditions in general, whether historically the issue has sold above three dollars ($3) per share, the applicants capitalization, and the number of outstanding and publicly held shares of the issue.
(v)An aggregate market value for publicly held shares of at least three million dollars ($3,000,000).
(B)(i)Shareholders equity of at least four million dollars ($4,000,000).
(ii)Minimum public distribution set forth in clause (iii) of subparagraph (A) of paragraph (1).
(iii)Operating history of at least three years.
(iv)An aggregate market value for publicly held shares of at least fifteen million dollars ($15,000,000).
(2)Criteria for consideration of suspension or removal from listing:
(A)If a company that (A) has shareholders equity of less than one million dollars ($1,000,000) has sustained net losses in each of its two most recent fiscal years, or (B) has net tangible assets of less than three million dollars ($3,000,000) and has sustained net losses in three of its four most recent fiscal years.
(B)If the number of shares publicly held (excluding the holdings of officers, directors, controlling shareholders, and other concentrated or family holdings) is less than 150,000.
(C)If the total number of shareholders is less than 400 or if the number of shareholders of lots of 100 shares or more is less than 300.
(D)If the aggregate market value of shares publicly held is less than seven hundred fifty thousand dollars ($750,000).
(E)If shares of common stock sell at a price of less than three dollars ($3) per share for a substantial period of time and the issuer shall fail to effectuate a reverse stock split of the shares within a reasonable period of time after being requested by the exchange to take that action.
A national securities exchange, certified by rule or order of the commissioner under this subdivision, shall file annual reports when requested to do so by the commissioner. The annual reports shall contain, by issuer: the variances granted to an exchanges listing standards, including variances from corporate governance and voting rights standards, for any security of that issuer; the reasons for the variances; a discussion of the review procedure instituted by the exchange to determine the effect of the variances on investors and whether the variances should be continued; and any other information that the commissioner deems relevant. The purpose of these reports is to assist the commissioner in determining whether the quantitative and qualitative requirements of this subdivision are substantially being met by the exchange in general or with regard to any particular security.
The commissioner after appropriate notice and opportunity for hearing in accordance with the provisions of the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, may, in his or her discretion, by rule or order, decertify any exchange previously certified that ceases substantially to apply the minimum standards or criteria as set forth in paragraphs (1) and (2).
A rule or order of certification shall conclusively establish that any security listed or approved for listing upon notice of issuance on any exchange named in a rule or order of certification, and any warrant or right to purchase or subscribe to that security, is exempt under this subdivision until the adoption by the commissioner of any rule or order decertifying the exchange.
(p)A promissory note secured by a lien on real property, which is neither one of a series of notes of equal priority secured by interests in the same real property nor a note in which beneficial interests are sold to more than one person or entity.
(q)Any unincorporated interindemnity or reciprocal or interinsurance contract, that qualifies under the provisions of Section 1280.7 of the Insurance Code, between members of a cooperative corporation, organized and operating under Part 2 (commencing with Section 12200) of Division 3 of Title 1, and whose members consist only of physicians and surgeons licensed in California, which contracts indemnify solely in respect to medical malpractice claims against the members, and which do not collect in advance of loss any moneys other than contributions by each member to a collective reserve trust fund or for necessary expenses of administration.
(1)Whenever it appears to the commissioner that any person has engaged or is about to engage in any act or practice constituting a violation of any provision of Section 1280.7 of the Insurance Code, the commissioner may, in the commissioners discretion, bring an action in the name of the people of the State of California in the superior court to enjoin the acts or practices or to enforce compliance with Section 1280.7 of the Insurance Code. Upon a proper showing a permanent or preliminary injunction, a restraining order, or a writ of mandate shall be granted and a receiver or conservator may be appointed for the defendant or the defendants assets.
(2)The commissioner may, in the commissioners discretion, (A) make public or private investigations within or outside of this state as the commissioner deems necessary to determine whether any person has violated or is about to violate any provision of Section 1280.7 of the Insurance Code or to aid in the enforcement of Section 1280.7, and (B) publish information concerning the violation of Section 1280.7.
(3)For the purpose of any investigation or proceeding under this section, the commissioner or any officer designated by the commissioner may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, agreements, or other documents or records which the commissioner deems relevant or material to the inquiry.
(4)In case of contumacy by, or refusal to obey a subpoena issued to, any person, the superior court, upon application by the commissioner, may issue to the person an order requiring the person to appear before the commissioner, or the officer designated by the commissioner, to produce documentary evidence, if so ordered, or to give evidence touching the matter under investigation or in question. Failure to obey the order of the court may be punished by the court as a contempt.
(5)No person is excused from attending or testifying or from producing any document or record before the commissioner or in obedience to the subpoena of the commissioner or any officer designated by the commissioner, or in any proceeding instituted by the commissioner, on the ground that the testimony or evidence (documentary or otherwise), required of the person may tend to incriminate the person or subject the person to a penalty or forfeiture, but no individual may be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which the person is compelled, after validly claiming the privilege against self-incrimination, to testify or produce evidence (documentary or otherwise), except that the individual testifying is not exempt from prosecution and punishment for perjury or contempt committed in testifying.
(6)The cost of any review, examination, audit, or investigation made by the commissioner under Section 1280.7 of the Insurance Code shall be paid to the commissioner by the person subject to the review, examination, audit, or investigation, and the commissioner may maintain an action for the recovery of these costs in any court of competent jurisdiction. In determining the cost, the commissioner may use the actual amount of the salary or other compensation paid to the persons making the review, examination, audit, or investigation plus the actual amount of expenses including overhead reasonably incurred in the performance of the work.
The recoverable cost of each review, examination, audit, or investigation made by the commissioner under Section 1280.7 of the Insurance Code shall not exceed twenty-five thousand dollars ($25,000), except that costs exceeding twenty-five thousand dollars ($25,000) shall be recoverable if the costs are necessary to prevent a violation of any provision of Section 1280.7 of the Insurance Code.
(r)Any shares or memberships issued by any corporation organized and existing pursuant to the provisions of Part 2 (commencing with Section 12200) of Division 3 of Title 1, provided the aggregate investment of any shareholder or member in shares or memberships sold pursuant to this subdivision does not exceed one thousand dollars ($1,000). This exemption does not apply to the shares or memberships of that corporation if any promoter thereof expects or intends to make a profit directly or indirectly from any business or activity associated with the corporation or the operation of the corporation or from remuneration, other than reasonable salary, received from the corporation. This exemption does not apply to nonvoting shares or memberships of that corporation issued to any person who does not possess, and who will not acquire in connection with the issuance of nonvoting shares or memberships, voting power (Section 12253) in the corporation. This exemption also does not apply to shares or memberships issued by a nonprofit cooperative corporation organized to facilitate the creation of an unincorporated interindemnity arrangement that provides indemnification for medical malpractice to its physician and surgeon members as set forth in subdivision (q).
(s)Any security consisting of or representing an interest in a pool of mortgage loans that meets each of the following requirements:
(1)The pool consists of whole mortgage loans or participation interests in those loans, which loans were originated or acquired in the ordinary course of business by a national bank or federal savings association or federal savings bank having its principal office in this state, by a bank incorporated under the laws of this state or by a savings association as defined in subdivision (a) of Section 5102 of the Financial Code and which is subject to the supervision and regulation of the Commissioner of Financial Institutions, and each of which at the time of transfer to the pool is an authorized investment for the originating or acquiring institution.
(2)The pool of mortgage loans is held in trust by a trustee which is a financial institution specified in paragraph (1) as trustee or otherwise.
(3)The loans are serviced by a financial institution specified in paragraph (1).
(4)The security is not offered in amounts of less than twenty-five thousand dollars ($25,000) in the aggregate to any one purchaser.
(5)The security is offered pursuant to a registration under the Securities Act of 1933, or pursuant to an exemption under Regulation A under that act, or in the opinion of counsel for the issuer, is offered pursuant to an exemption under Section 4(2) of that act.
(t)(1)Any security issued or guaranteed by and representing an interest in or a direct obligation of an industrial loan company incorporated under the laws of the state and authorized by the Commissioner of Financial Institutions to engage in industrial loan business.
(2)Any investment certificate in or issued by any industrial loan company that is organized under the laws of a state of the United States other than this state, that is insured by the Federal Deposit Insurance Corporation, and that maintains a branch office in this state.
The Legislature finds and declares all of the following:
(a)A worker cooperative has the purpose of creating and maintaining sustainable jobs and generating wealth in order to improve the quality of life of its worker-members, dignify human work, allow workers democratic self-management, and promote community and local development in this state.
(b)The purpose of this act is to amend the Consumer Cooperative Corporation Law to clarify that the law applies to cooperatives in general, not just consumer cooperatives, and to create more visibility for worker cooperatives. This act is intended to provide a definition of worker cooperative for purposes of this act, and not for purposes of other laws.
SEC. 2.The heading of Part 2 (commencing with Section 12200) of Division 3 of Title 1 of the Corporations Code is amended to read:2.GENERAL COOPERATIVE CORPORATIONSSEC. 3.Section 12200 of the Corporations Code is amended to read:12200.This part shall be known as the General Cooperative Corporation Law. This part is intended primarily to apply to the organization and operation of cooperatives, including, but not limited to, consumer cooperatives, worker cooperatives, and cooperatives formed for the purpose of recycling or treating hazardous waste that elect to incorporate under its provisions.
SEC. 4.Section 12201.5 is added to the Corporations Code, to read:12201.5.(a)Notwithstanding Section 12201, the net earnings and losses of a worker cooperative shall be apportioned and distributed at the time and in the manner specified in the articles of incorporation or bylaws.
(b)Net earnings declared as patronage distributions with respect to a period of time, and paid to a creditor or member, shall be apportioned among the members in accordance with the ratio that each members patronage during the period bears to total patronage by all members during the period.
(c)The apportionment, distribution, and payment of net earnings required by subdivision (a) may be paid in cash, credits, written notices of allocation, or capital stock issued by the worker cooperative.
SEC. 5.Section 12228.3 is added to the Corporations Code, to read:12228.3.Capital account cooperative is a worker cooperative in which the entire net book value is reflected in member capital accounts, one for each member, and an unallocated capital account, if any.
SEC. 6.Section 12230.5 is added to the Corporations Code, to read:12230.5.Collective board worker cooperative means a worker cooperative in which there is only one class of members consisting of worker-members, all of whom are members of the board.
SEC. 7.Section 12238 of the Corporations Code is amended to read:12238.(a)Member means any person who, pursuant to a specific provision of a corporations articles or bylaws, has the right to vote for the election of a director or directors, or possesses proprietary interests in the corporation.
(b)The articles or bylaws may confer some or all of the rights of a member, set forth in this part, upon any person or persons who do not have any of the voting rights referred to in subdivision (a).
(c)Where a member of a corporation is not a natural person, such member may authorize in writing one or more natural persons to vote on its behalf on any or all matters which may require a vote of the members.
(d)A person is not a member by virtue of any of the following:
(1)Any rights such person has as a delegate.
(2)Any rights such person has to designate or select a director or directors.
(3)Any rights such person has as a director.
(e)Worker-member means a member who is a natural person and also a patron of a worker cooperative.
(f)Nonworker-member means a member of a worker cooperative Community investor means a person who is not a worker member. worker-member and who holds a share or other proprietary interest in a worker cooperative.
(g)Worker means a natural person contributing labor or services. A worker who is being considered for membership, as defined in the corporations articles or bylaws, shall be referred to as a candidate. Candidate means a worker who is being considered for membership, as defined in the corporations articles or bylaws.
SEC. 8.Section 12243 of the Corporations Code is amended to read:12243.(a)(1)If the corporation is organized to provide goods or services to its members, the corporations patrons are those who purchase those types of goods from, or use those types of services of, the corporation. If the corporation is organized to market, process or otherwise handle its members products or services, the corporations patrons are those persons whose products or services are so marketed, processed, or handled by the corporation.
(2)Patronage of a patron is measured by the volume or value, or both, of a patrons purchases of products from, and use of services furnished by, the corporation, and by products and services provided by the patron to the corporation for marketing.
(b)(1)If the corporation is organized as a worker cooperative, the corporations patrons are its worker-members.
(2)If the corporation is organized as a worker cooperative, patronage may be measured by work performed or personal services contributed, including wages earned, number of hours worked, number of jobs created, or some combination of these measures.
SEC. 9.Section 12253 of the Corporations Code is amended to read:12253.(a)Voting power means the power to vote for the election of directors at the time any determination of voting power is made and does not include the right to vote upon the happening of some condition or event that has not yet occurred.
(b)If different classes of memberships are entitled to vote as separate classes for different members of the board, the determination of percentage of voting power shall be made on the basis of the percentage of the total number of authorized directors that the memberships in question (whether of one or more classes) have the power to elect in an election at which all memberships then entitled to vote for the election of any directors are voted.
(c)Nonworker-member Community investor voting power in a worker cooperative shall be provided in the articles or bylaws, and is limited to approval rights only over a merger, sale of major assets, reorganization, or dissolution. Approval rights shall not include the right to propose any action.
SEC. 10.Section 12253.5 is added to the Corporations Code, to read:12253.5.Worker cooperative or employment cooperative means a corporation formed under this part that includes a class of worker-members who are natural persons whose patronage consists of labor contributed to, personal services performed for, or other work performed for the corporation. Election to be organized as a worker cooperative or an employment cooperative does not create a presumption that workers are employees of the corporation for any purposes. At least 51 percent of the workers shall be worker-members, or candidates for membership within two years of becoming a worker. worker-members or candidates.
SEC. 11.Section 12310 of the Corporations Code is amended to read:12310.The articles of incorporation of a corporation formed under this part shall set forth:
(a)The name of the corporation.
(b)The following statement:
This corporation is a cooperative corporation organized under the General Cooperative Corporation Law. The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the law.
[The articles may include a further description of the corporations purpose.]
(c)The name and street address in this state of the corporations initial agent for service of process in accordance with subdivision (b) of Section 12570.
(d)The initial street address of the corporation.
(e)The initial mailing address of the corporation, if different from the initial street address.
(f)Whether the voting power or the proprietary interests of the members are equal or unequal. If the voting power or proprietary interests of the members are unequal, the articles shall state either (i) the general rule or rules by which the voting power and proprietary interests of the members shall be determined or (ii) that such rule or rules shall be prescribed in the corporations bylaws. Equal voting power means voting power apportioned on the basis of one vote for each member. Equal proprietary rights means property rights apportioned on the basis of one proprietary unit for each member.
(g)Pursuant to Section 12310.5, the articles of incorporation may state whether the cooperative has elected to be governed as a worker cooperative.
SEC. 12.Section 12310.5 is added to the Corporations Code, to read:12310.5.(a)A corporation organized under this part may elect to be governed as a worker cooperative by making the following statement in its articles of incorporation or its amended articles of incorporation:
This corporation is a worker cooperative corporation organized under the General Cooperative Corporation Law.
(b)A corporation that makes the election to be governed as a worker cooperative, unless expressly exempted, shall be governed by all the provisions of this part.
SEC. 13.Section 12317 is added to the Corporations Code, to read:12317.(a)A worker cooperative may, in its articles or bylaws, establish itself as a capital account cooperative.
(b)The articles or bylaws of a capital account cooperative may authorize assignment of a portion of retained net earnings and net losses to an unallocated capital account. The unallocated capital account in a capital account cooperative shall reflect any paid-in capital, net losses, and retained net earnings not allocated to individual members. Earnings assigned to the unallocated capital account may be used for any and all corporate purposes, as determined by the board of directors.
(c)The system of member and unallocated capital accounts may be used to determine the redemption price of member shares, capital stock, and written notices of allocation. The articles or bylaws may provide for the capital account cooperative worker cooperative to pay or credit interest on the balance in each members capital account.
(d)The articles or bylaws of a capital account cooperative may permit the periodic redemption of written notices of allocation and capital stock and shall provide for recall and redemption of membership shares upon termination of membership in the cooperative. However, no redemption may occur that would result in the liability of any director or officer pursuant to Article 2 (commencing with Section 12370) of Chapter 2.
(e)As used in this section, written notice of allocation has the same meaning as defined in Section 1388 (b) of the Internal Revenue Code.
SEC. 14.Section 12404 of the Corporations Code is amended to read:12404.Except as permitted in Sections 12314 and 12404.5, the voting power of members having voting rights shall be equal.
SEC. 15.Section 12404.5 is added to the Corporations Code, to read:12404.5.(a)The worker-members of a worker cooperative shall have voting power as provided in subdivision (a) of Section 12253.
(b)Nonworker-members Community investors have voting power only as provided in subdivision (c) of Section 12253.
SEC. 16.Section 12420 of the Corporations Code is amended to read:12420.(a)Except as provided in subdivision (b), a corporation may issue memberships having different rights, privileges, preferences, restrictions, or conditions, as provided in its articles or bylaws. If the articles or bylaws authorize at least one class of voting memberships, a corporation may also authorize and issue additional classes of memberships, preferred or otherwise, that are divisible into a series or are nonvoting or both.
(b)All worker-members shall have the rights, privileges, preferences, restrictions, or conditions as provided in the articles or bylaws. This membership shall be indivisible.
(c)A worker cooperative shall only make patronage distributions to the worker-member class.
SEC. 17.Section 12431 of the Corporations Code is amended to read:12431.(a)No member may be expelled or suspended, and no membership or memberships may be terminated or suspended, except according to procedures satisfying the requirements of this section. An expulsion, termination, or suspension not in accord with this section shall be void and without effect.
(b)Any expulsion, suspension, or termination must be done in good faith and in a fair and reasonable manner. Any procedure that conforms to the requirements of subdivision (c) or (d) is fair and reasonable, but a court may also find other procedures to be fair and reasonable when the full circumstances of the suspension, termination, or expulsion are considered.
(c)A procedure is fair and reasonable when:
(1)The provisions of the procedure have been set forth in the articles or bylaws, or copies of such provisions are sent annually to all the members as required by the articles or bylaws;
(2)It provides the giving of 15 days prior notice of the expulsion, suspension, or termination and the reasons therefor; and
(3)It provides an opportunity for the member to be heard, orally or in writing, not less than five days before the effective date of the expulsion, suspension, or termination by a person or body authorized to decide that the proposed expulsion, termination, or suspension not take place.
(d)Any notice required under this section may be given by any method reasonably calculated to provide actual notice. Any notice given by mail must be given by first-class or registered mail sent to the last address of the members shown on the corporations records.
(e)Any action challenging an expulsion, suspension suspension, or termination of membership, including any claim alleging defective notice, must be commenced within one year after the date of the expulsion, suspension suspension, or termination. In the event such an action is successful the court may order any relief, including reinstatement, it finds equitable under the circumstances, but no vote of the members or of the board may be set aside solely because a person was at the time of the vote wrongfully excluded by virtue of the challenged expulsion, suspension suspension, or termination, unless the court finds further that the wrongful expulsion, suspension or termination was in bad faith and for the purpose, and with the effect, of wrongfully excluding the member from the vote or from the meeting at which the vote took place, so as to affect the outcome of the vote.
(f)This section governs only the procedures for expulsion, suspension suspension, or termination and not the substantive grounds therefor. An expulsion, suspension suspension, or termination based upon substantive grounds which violate contractual or other rights of the member or are otherwise unlawful is not made valid by compliance with this section.
(g)A member who is expelled or suspended or whose membership is terminated shall be liable for any charges incurred, services or benefits actually rendered, dues, assessments or fees incurred before expulsion, suspension suspension, or termination or arising from contract or otherwise.
SEC. 18.Section 12454.5 is added to the Corporations Code, to read:12454.5.(a)A worker cooperative may create an indivisible reserves account that shall not be distributed to members.
(b)Funds in the indivisible reserves account shall, in a manner provided in the articles or bylaws, or by the board, be used as capital for the cooperative.
SEC. 19.Section 12460 of the Corporations Code is amended to read:12460.(a)Meetings of members may be held at a place within or without this state that is stated in or fixed in accordance with the bylaws. If no other place is so stated or fixed, meetings of members shall be held at the principal executive office of the corporation. Unless prohibited by the bylaws of the corporation, if authorized by the board of directors in its sole discretion, and subject to the requirement of consent in clause (b) of Section 20 and those guidelines and procedures as the board of directors may adopt, members not physically present in person at a meeting of members may, by electronic transmission by and to the corporation (Sections 20 and 21) or by electronic video screen communication, participate in a meeting of members, be deemed present in person, and vote at a meeting of members whether that meeting is to be held at a designated place or in whole or in part by means of electronic transmission by and to the corporation or by electronic video screen communication, in accordance with subdivision (f).
(b)Except as provided in Section 12460.5, a regular meeting of members shall be held annually. In any year in which directors are elected, the election shall be held at the regular meeting unless the directors are chosen in some other manner authorized by law. Any other proper business may be transacted at the meeting.
(c)If a corporation fails to hold the regular meeting for a period of 60 days after the date designated therefor or, if no date has been designated, for a period of 15 months after the formation of the corporation or after its last regular meeting, or if the corporation fails to hold a written ballot for a period of 60 days after the date designated therefor, then the superior court of the proper county may summarily order the meeting to be held or the ballot to be conducted upon the application of a member, after notice to the corporation giving it an opportunity to be heard.
(d)The votes represented at a meeting called or by written ballot ordered pursuant to subdivision (c) and entitled to be cast on the business to be transacted shall constitute a quorum, notwithstanding any provision of the articles or bylaws or provision in this part to the contrary. The court may issue such orders as may be appropriate including, without limitation, orders designating the time and place of the meeting, the record date for determination of members entitled to vote, and the form of notice of the meeting.
(e)Special meetings of members for any lawful purpose may be called by the board, the chairman of the board, the president, or other persons, if any, as are specified in the bylaws. In addition, special meetings of members for any lawful purpose may be called by 5 percent or more of the members, however, in a worker cooperative with more than four worker-members, a special meeting may only be called by the greater of three worker-members or 5 percent of the worker-members. In a worker cooperative with fewer than four worker-members, special meetings may be called by 5 percent of the worker-members.
(f)A meeting of the members may be conducted, in whole or in part, by electronic transmission by and to the corporation or by electronic video screen communication (1) if the corporation implements reasonable measures to provide members 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 concurrently with those proceedings, and (2) if any member votes or takes other action at the meeting by means of electronic transmission to the corporation or electronic video screen communication, a record of that vote or action is maintained by the corporation. Any request by a corporation to a member pursuant to clause (b) of Section 20 for consent to conduct a meeting of members by electronic transmission by and to the corporation, shall include a notice that absent consent of the member pursuant to clause (b) of Section 20, the meeting shall be held at a physical location in accordance with subdivision (a).
SEC. 20.Section 12460.5 is added to the Corporations Code, to read:12460.5.Notwithstanding Section 12460, a collective board worker cooperative shall not be required to hold an annual meeting of members.
SEC. 21.Section 12461 of the Corporations Code is amended to read:12461.(a)Whenever members are required or permitted to take any action at a meeting, a written notice of the meeting shall be given not less than 10 nor more than 90 days before the date of the meeting to each member who, on the record date for notice of the meeting, is entitled to vote thereat; provided, however, that if notice is given by mail, and the notice is not mailed by first-class, registered, or certified mail, that notice shall be given not less than 20 days before the meeting. A worker cooperative shall provide notice of the meeting not less than 48 hours before the meeting if the meeting is a meeting of only worker-members, provided that the notice is delivered personally. Subject to subdivision (f), and subdivision (b) of Section 12462, that notice shall state the place, date date, and time of the meeting, the means of electronic transmission by and to the corporation (Sections 20 and 21) or electronic video screen communication, if any, by which members may participate in that meeting, and (1) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted, or (2) in the case of the regular meeting, those matters which the board, at the time the notice is given, intends to present for action by the members, but, except as provided in subdivision (b) of Section 12462, any proper matter may be presented at the meeting for such action. The notice of any meeting at which directors are to be elected shall include the names of all those who are nominees at the time the notice is given to members.
(b)Notice of a members meeting or any report shall be given personally, by electronic transmission by the corporation, or by mail or other means of written communication, addressed to a member at the address of such member appearing on the books of the corporation or given by the member to the corporation for purpose of notice; or if no such address appears or is given, at the place where the principal office of the corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal office is located. An affidavit of giving of any notice or report in accordance with the provisions of this part, executed by the secretary, assistant secretary secretary, or any transfer agent, shall be prima facie evidence of the giving of the notice or report.
If any notice or report addressed to the member at the address of such member appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate the United States Postal Service is unable to deliver the notice or report to the member at such address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available for the member upon written demand of the member at the principal office of the corporation for a period of one year from the date of the giving of the notice or report to all other members.
Notice given by electronic transmission by the corporation under this subdivision shall be valid only if it complies with Section 20. Notwithstanding the foregoing, notice shall not be given by electronic transmission by the corporation under this subdivision after either of the following:
(1)The corporation is unable to deliver two consecutive notices to the member by that means.
(2)The inability to so deliver the notices to the member becomes known to the secretary, any assistant secretary, the transfer agent, or other person responsible for the giving of the notice.
(c)Upon request in writing to the corporation addressed to the attention of the chairman of the board, president, vice president president, or secretary by any person (other than the board) entitled to call a special meeting of members, the officer forthwith shall cause notice to be given to the members entitled to vote that a meeting will be held at a time fixed by the board not less than 35 nor more than 90 days after the receipt of the request. If the notice is not given within 20 days after receipt of the request, the persons entitled to call the meeting may give the notice or the superior court of the proper county shall summarily order the giving of the notice, after notice to the corporation giving it an opportunity to be heard. The court may issue such orders as may be appropriate, including, without limitation, orders designating the time and place of the meeting, the record date for determination of members entitled to vote and the form of notice.
(d)When a members meeting is adjourned to another time or place, unless the bylaws otherwise require and except as provided in this subdivision, notice need not be given of the adjourned meeting if the time and place thereof (or the means of electronic transmission by and to the corporation or electronic video screen communication, if any, by which members may participate) are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each member of record entitled to vote at the meeting.
(e)The transactions of any meeting of members however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present, and if, either before or after the meeting, each of the persons entitled to vote, not present in person, provides a waiver of notice or consent to the holding of the meeting or an approval of the minutes thereof in writing. All such waivers, consents consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of and presence at such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required by this part to be included in the notice but not so included, if such objection is expressly made at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of members need be specified in any written waiver of notice, consent to the holding of the meeting meeting, or approval of the minutes thereof, unless otherwise provided in the articles or bylaws, except as provided in subdivision (f).
(f)Any approval of the members required under Section 12362, 12364, 12373, 12502 12502, or 12658 other than unanimous approval by those entitled to vote, shall be valid only if the general nature of the proposal so approved was stated in the notice of meeting or in any written waiver of notice.
(g)A court may find that notice not given in conformity with this section is still valid, if it was given in a fair and reasonable manner.
(h)Subject to the provisions of subdivision (i), and unless prohibited by the articles or bylaws, prior to any regular or special meeting of members, the board may authorize distribution of a written ballot to every member entitled to vote at the meeting. Such ballot shall set forth the action proposed to be taken at the meeting, shall provide an opportunity to specify approval or disapproval of the proposed action, and shall state that unless revoked by the member voting in person at the meeting, the ballot will be counted if received by the corporation on or before the time of the meeting with respect to which it was sent. If ballots are so distributed with respect to a meeting, the number of members voting at the meeting by unrevoked written ballots shall be deemed present at the meeting for purposes of determining the existence of a quorum pursuant to subdivision (a) of Section 12462 but only with respect to the proposed action referred to in the ballots. These ballots shall be distributed in a manner consistent with the requirements of subdivision (b) and Section 12464.
(i)Unless prohibited by the articles or bylaws, written ballots may be distributed in a manner contemplated by subdivision (h) with respect to the election of directors, except that no ballots may be so distributed with respect to the election of directors if cumulative voting is permitted pursuant to Section 12484.
SEC. 22.Section 12530 of the Corporations Code is amended to read:12530.Except as provided in Section 12530.5, any corporation may merge with another domestic corporation, foreign corporation, or other business entity. However, a merger with a nonprofit public benefit corporation or a nonprofit religious corporation must have the prior written consent of the Attorney General.
SEC. 23.Section 12530.5 is added to the Corporations Code, to read:12530.5.Notwithstanding Section 12530, a worker cooperative that has not revoked its election to be governed as a worker cooperative under Section 12310.5 shall not consolidate or merge with another corporation other than another worker cooperative. Two or more worker cooperatives may merge or consolidate in a manner consistent with this chapter.
SEC. 24.Section 12653 of the Corporations Code is amended to read:12653.(a)After determining that all the known debts and liabilities of a corporation in the process of winding up have been paid or adequately provided for, the board shall distribute all the remaining corporate assets in the manner provided in Sections 12655, 12656, and 12656.5.
(b)If the winding up is by court proceeding or subject to court supervision, the distribution shall not be made until after the expiration of any period for the presentation of claims that has been prescribed by order of the court.
(c)Anything to the contrary notwithstanding, assets, if any, that are not subject to attachment, execution execution, or sale for the corporations debts and liabilities may be distributed pursuant to Sections 12655, 12656, and 12656.5 even though all debts and liabilities have not been paid or adequately provided for.
SEC. 25.Section 12656.5 is added to the Corporations Code, to read:12656.5.(a)After complying with the provisions of Section 12653, and except as otherwise provided in Section 12655, upon dissolution of a worker cooperative the majority of the unallocated capital account shall be distributed to members on the basis of the following:
(1)Patronage.
(2)Capital contributions.
(3)A combination of patronage and capital contributions.
(b)A worker cooperative is authorized to include patronage provided by past and current members in its distribution of the unallocated capital account.
(c)Subdivision (a) shall not apply to any amounts in the indivisible reserve account. Any amount in the indivisible reserve account shall, upon dissolution, be allocated to a cooperative development organization designated in the articles of incorporation or the bylaws.
SEC. 26.Section 25100 of the Corporations Code is amended to read:25100.The following securities are exempted from Sections 25110, 25120, and 25130:
(a)Any security (including a revenue obligation) issued or guaranteed by the United States, any state, any city, county, city and county, public district, public authority, public corporation, public entity, or political subdivision of a state or any agency or corporate or other instrumentality of any one or more of the foregoing; or any certificate of deposit for any of the foregoing.
(b)Any security issued or guaranteed by Canada, any Canadian province, any political subdivision or municipality of that province, or by any other foreign government with which the United States currently maintains diplomatic relations, if the security is recognized as a valid obligation by the issuer or guarantor; or any certificate of deposit for any of the foregoing.
(c)Any security issued or guaranteed by and representing an interest in or a direct obligation of a national bank or a bank or trust company incorporated under the laws of this state, and any security issued by a bank to one or more other banks and representing an interest in an asset of the issuing bank.
(d)Any security issued or guaranteed by a federal savings association or federal savings bank or federal land bank or joint land bank or national farm loan association or by any savings association, as defined in subdivision (a) of Section 5102 of the Financial Code, which is subject to the supervision and regulation of the Commissioner of Business Oversight of this state.
(e)Any security (other than an interest in all or portions of a parcel or parcels of real property which are subdivided land or a subdivision or in a real estate development), the issuance of which is subject to authorization by the Insurance Commissioner, the Public Utilities Commission, or the Real Estate Commissioner of this state.
(f)Any security consisting of any interest in all or portions of a parcel or parcels of real property that are subdivided lands or a subdivision or in a real estate development; provided that the exemption in this subdivision shall not be applicable to: (1) any investment contract sold or offered for sale with, or as part of, that interest, or (2) any person engaged in the business of selling, distributing, or supplying water for irrigation purposes or domestic use that is not a public utility except that the exemption is applicable to any security of a mutual water company (other than an investment contract as described in paragraph (1)) offered or sold in connection with subdivided lands pursuant to Chapter 2 (commencing with Section 14310) of Part 7 of Division 3 of Title 1.
(g)Any mutual capital certificates or savings accounts, as defined in the Savings Association Law, issued by a savings association, as defined by subdivision (a) of Section 5102 of the Financial Code, and holding a license or certificate of authority then in force from the Commissioner of Business Oversight of this state.
(h)Any security issued or guaranteed by any federal credit union, or by any credit union organized and supervised, or regulated, under the Credit Union Law.
(i)Any security issued or guaranteed by any railroad, other common carrier, public utility, or public utility holding company which is (1) subject to the jurisdiction of the Interstate Commerce Commission or its successor or (2) a holding company registered with the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935 or a subsidiary of that company within the meaning of that act or (3) regulated in respect of the issuance or guarantee of the security by a governmental authority of the United States, of any state, of Canada or of any Canadian province; and the security is subject to registration with or authorization of issuance by that authority.
(j)Any security (except evidences of indebtedness, whether interest bearing or not) of an issuer (1) organized exclusively for educational, benevolent, fraternal, religious, charitable, social, or reformatory purposes and not for pecuniary profit, if no part of the net earnings of the issuer inures to the benefit of any private shareholder or individual, or (2) organized as a chamber of commerce or trade or professional association. The fact that amounts received from memberships or dues or both will or may be used to construct or otherwise acquire facilities for use by members of the nonprofit organization does not disqualify the organization for this exemption. This exemption does not apply to the securities of any nonprofit organization if any promoter thereof expects or intends to make a profit directly or indirectly from any business or activity associated with the organization or operation of that nonprofit organization or from remuneration received from that nonprofit organization.
(k)Any agreement, commonly known as a life income contract, of an issuer (1) organized exclusively for educational, benevolent, fraternal, religious, charitable, social, or reformatory purposes and not for pecuniary profit and (2) which the commissioner designates by rule or order, with a donor in consideration of a donation of property to that issuer and providing for the payment to the donor or persons designated by him or her of income or specified periodic payments from the donated property or other property for the life of the donor or those other persons.
(l)Any note, draft, bill of exchange, or bankers acceptance which is freely transferable and of prime quality, arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which evidences an obligation to pay cash within nine months of the date of issuance, exclusive of days of grace, or any renewal of that paper which is likewise limited, or any guarantee of that paper or of that renewal, provided that the paper is not offered to the public in amounts of less than twenty-five thousand dollars ($25,000) in the aggregate to any one purchaser. In addition, the commissioner may, by rule or order, exempt any issuer of any notes, drafts, bills of exchange or bankers acceptances from qualification of those securities when the commissioner finds that the qualification is not necessary or appropriate in the public interest or for the protection of investors.
(m)Any security issued by any corporation organized and existing under the provisions of Chapter 1 (commencing with Section 54001) of Division 20 of the Food and Agricultural Code.
(n)Any beneficial interest in an employees pension, profit-sharing, stock bonus, or similar benefit plan which meets the requirements for qualification under Section 401 of the federal Internal Revenue Code or any statute amendatory thereof or supplementary thereto. A determination letter from the Internal Revenue Service stating that an employees pension, profit-sharing, stock bonus, or similar benefit plan meets those requirements shall be conclusive evidence that the plan is an employees pension, profit-sharing, stock bonus, or similar benefit plan within the meaning of the first sentence of this subdivision until the date the determination letter is revoked in writing by the Internal Revenue Service, regardless of whether or not the revocation is retroactive.
(o)Any security listed or approved for listing upon notice of issuance on a national securities exchange, if the exchange has been certified by rule or order of the commissioner and any warrant or right to purchase or subscribe to the security. The exemption afforded by this subdivision does not apply to securities listed or approved for listing upon notice of issuance on a national securities exchange, in a rollup transaction unless the rollup transaction is an eligible rollup transaction as defined in Section 25014.7.
That certification of any exchange shall be made by the commissioner upon the written request of the exchange if the commissioner finds that the exchange, in acting on applications for listing of common stock, substantially applies the minimum standards set forth in either subparagraph (A) or (B) of paragraph (1), and, in considering suspension or removal from listing, substantially applies each of the criteria set forth in paragraph (2).
(1)Listing standards:
(A)(i)Shareholders equity of at least four million dollars ($4,000,000).
(ii)Pretax income of at least seven hundred fifty thousand dollars ($750,000) in the issuers last fiscal year or in two of its last three fiscal years.
(iii)Minimum public distribution of 500,000 shares (exclusive of the holdings of officers, directors, controlling shareholders, and other concentrated or family holdings), together with a minimum of 800 public holders or minimum public distribution of 1,000,000 shares together with a minimum of 400 public holders. The exchange may also consider the listing of a companys securities if the company has a minimum of 500,000 shares publicly held, a minimum of 400 shareholders and daily trading volume in the issue has been approximately 2,000 shares or more for the six months preceding the date of application. In evaluating the suitability of an issue for listing under this trading provision, the exchange shall review the nature and frequency of that activity and any other factors as it may determine to be relevant in ascertaining whether the issue is suitable for trading. A security that trades infrequently shall not be considered for listing under this paragraph even though average daily volume amounts to 2,000 shares per day or more.
Companies whose securities are concentrated in a limited geographical area, or whose securities are largely held in block by institutional investors, normally may not be considered eligible for listing unless the public distribution appreciably exceeds 500,000 shares.
(iv)Minimum price of three dollars ($3) per share for a reasonable period of time prior to the filing of a listing application; provided, however, in certain instances an exchange may favorably consider listing an issue selling for less than three dollars ($3) per share after considering all pertinent factors, including market conditions in general, whether historically the issue has sold above three dollars ($3) per share, the applicants capitalization, and the number of outstanding and publicly held shares of the issue.
(v)An aggregate market value for publicly held shares of at least three million dollars ($3,000,000).
(B)(i)Shareholders equity of at least four million dollars ($4,000,000).
(ii)Minimum public distribution set forth in clause (iii) of subparagraph (A) of paragraph (1).
(iii)Operating history of at least three years.
(iv)An aggregate market value for publicly held shares of at least fifteen million dollars ($15,000,000).
(2)Criteria for consideration of suspension or removal from listing:
(i)
(A)If a company that (A) has shareholders equity of less than one million dollars ($1,000,000) has sustained net losses in each of its two most recent fiscal years, or (B) has net tangible assets of less than three million dollars ($3,000,000) and has sustained net losses in three of its four most recent fiscal years.(ii)
(B)If the number of shares publicly held (excluding the holdings of officers, directors, controlling shareholders shareholders, and other concentrated or family holdings) is less than 150,000.(iii)
(C)If the total number of shareholders is less than 400 or if the number of shareholders of lots of 100 shares or more is less than 300.(iv)
(D)If the aggregate market value of shares publicly held is less than seven hundred fifty thousand dollars ($750,000).(v)
(E)If shares of common stock sell at a price of less than three dollars ($3) per share for a substantial period of time and the issuer shall fail to effectuate a reverse stock split of the shares within a reasonable period of time after being requested by the exchange to take that action.A national securities exchange, certified by rule or order of the commissioner under this subdivision, shall file annual reports when requested to do so by the commissioner. The annual reports shall contain, by issuer: the variances granted to an exchanges listing standards, including variances from corporate governance and voting rights standards, for any security of that issuer; the reasons for the variances; a discussion of the review procedure instituted by the exchange to determine the effect of the variances on investors and whether the variances should be continued; and any other information that the commissioner deems relevant. The purpose of these reports is to assist the commissioner in determining whether the quantitative and qualitative requirements of this subdivision are substantially being met by the exchange in general or with regard to any particular security.
The commissioner after appropriate notice and opportunity for hearing in accordance with the provisions of the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, may, in his or her discretion, by rule or order, decertify any exchange previously certified that ceases substantially to apply the minimum standards or criteria as set forth in paragraphs (1) and (2).
A rule or order of certification shall conclusively establish that any security listed or approved for listing upon notice of issuance on any exchange named in a rule or order of certification, and any warrant or right to purchase or subscribe to that security, is exempt under this subdivision until the adoption by the commissioner of any rule or order decertifying the exchange.
(p)A promissory note secured by a lien on real property, which is neither one of a series of notes of equal priority secured by interests in the same real property nor a note in which beneficial interests are sold to more than one person or entity.
(q)Any unincorporated interindemnity or reciprocal or interinsurance contract, that qualifies under the provisions of Section 1280.7 of the Insurance Code, between members of a cooperative corporation, organized and operating under Part 2 (commencing with Section 12200) of Division 3 of Title 1, and whose members consist only of physicians and surgeons licensed in California, which contracts indemnify solely in respect to medical malpractice claims against the members, and which do not collect in advance of loss any moneys other than contributions by each member to a collective reserve trust fund or for necessary expenses of administration.
(1)Whenever it appears to the commissioner that any person has engaged or is about to engage in any act or practice constituting a violation of any provision of Section 1280.7 of the Insurance Code, the commissioner may, in the commissioners discretion, bring an action in the name of the people of the State of California in the superior court to enjoin the acts or practices or to enforce compliance with Section 1280.7 of the Insurance Code. Upon a proper showing a permanent or preliminary injunction, a restraining order, or a writ of mandate shall be granted and a receiver or conservator may be appointed for the defendant or the defendants assets.
(2)The commissioner may, in the commissioners discretion, (A) make public or private investigations within or outside of this state as the commissioner deems necessary to determine whether any person has violated or is about to violate any provision of Section 1280.7 of the Insurance Code or to aid in the enforcement of Section 1280.7, and (B) publish information concerning the violation of Section 1280.7.
(3)For the purpose of any investigation or proceeding under this section, the commissioner or any officer designated by the commissioner may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, agreements, or other documents or records which the commissioner deems relevant or material to the inquiry.
(4)In case of contumacy by, or refusal to obey a subpoena issued to, any person, the superior court, upon application by the commissioner, may issue to the person an order requiring the person to appear before the commissioner, or the officer designated by the commissioner, to produce documentary evidence, if so ordered, or to give evidence touching the matter under investigation or in question. Failure to obey the order of the court may be punished by the court as a contempt.
(5)No person is excused from attending or testifying or from producing any document or record before the commissioner or in obedience to the subpoena of the commissioner or any officer designated by the commissioner, or in any proceeding instituted by the commissioner, on the ground that the testimony or evidence (documentary or otherwise), required of the person may tend to incriminate the person or subject the person to a penalty or forfeiture, but no individual may be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which the person is compelled, after validly claiming the privilege against self-incrimination, to testify or produce evidence (documentary or otherwise), except that the individual testifying is not exempt from prosecution and punishment for perjury or contempt committed in testifying.
(6)The cost of any review, examination, audit, or investigation made by the commissioner under Section 1280.7 of the Insurance Code shall be paid to the commissioner by the person subject to the review, examination, audit, or investigation, and the commissioner may maintain an action for the recovery of these costs in any court of competent jurisdiction. In determining the cost, the commissioner may use the actual amount of the salary or other compensation paid to the persons making the review, examination, audit, or investigation plus the actual amount of expenses including overhead reasonably incurred in the performance of the work.
The recoverable cost of each review, examination, audit, or investigation made by the commissioner under Section 1280.7 of the Insurance Code shall not exceed twenty-five thousand dollars ($25,000), except that costs exceeding twenty-five thousand dollars ($25,000) shall be recoverable if the costs are necessary to prevent a violation of any provision of Section 1280.7 of the Insurance Code.
(r)Any shares or memberships issued by any corporation organized and existing pursuant to the provisions of Part 2 (commencing with Section 12200) of Division 3 of Title 1, provided the aggregate investment of any shareholder or member in shares or memberships sold pursuant to this subdivision does not exceed one thousand dollars ($1,000). This exemption does not apply to the shares or memberships of that corporation if any promoter thereof expects or intends to make a profit directly or indirectly from any business or activity associated with the corporation or the operation of the corporation or from remuneration, other than reasonable salary, received from the corporation. This exemption does not apply to nonvoting shares or memberships of that corporation issued to any person who does not possess, and who will not acquire in connection with the issuance of nonvoting shares or memberships, voting power (Section 12253) in the corporation. This exemption also does not apply to shares or memberships issued by a nonprofit cooperative corporation organized to facilitate the creation of an unincorporated interindemnity arrangement that provides indemnification for medical malpractice to its physician and surgeon members as set forth in subdivision (q).
(s)Any security consisting of or representing an interest in a pool of mortgage loans that meets each of the following requirements:
(1)The pool consists of whole mortgage loans or participation interests in those loans, which loans were originated or acquired in the ordinary course of business by a national bank or federal savings association or federal savings bank having its principal office in this state, by a bank incorporated under the laws of this state or by a savings association as defined in subdivision (a) of Section 5102 of the Financial Code and which is subject to the supervision and regulation of the Commissioner of Financial Institutions, and each of which at the time of transfer to the pool is an authorized investment for the originating or acquiring institution.
(2)The pool of mortgage loans is held in trust by a trustee which is a financial institution specified in paragraph (1) as trustee or otherwise.
(3)The loans are serviced by a financial institution specified in paragraph (1).
(4)The security is not offered in amounts of less than twenty-five thousand dollars ($25,000) in the aggregate to any one purchaser.
(5)The security is offered pursuant to a registration under the Securities Act of 1933, or pursuant to an exemption under Regulation A under that act, or in the opinion of counsel for the issuer, is offered pursuant to an exemption under Section 4(2) of that act.
(t)(1)Any security issued or guaranteed by and representing an interest in or a direct obligation of an industrial loan company incorporated under the laws of the state and authorized by the Commissioner of Financial Institutions to engage in industrial loan business.
(2)Any investment certificate in or issued by any industrial loan company that is organized under the laws of a state of the United States other than this state, that is insured by the Federal Deposit Insurance Corporation, and that maintains a branch office in this state.
The Legislature finds and declares all of the following:
(a)A worker cooperative has the purpose of creating and maintaining sustainable jobs and generating wealth in order to improve the quality of life of its worker-members, dignify human work, allow workers democratic self-management, and promote community and local development. development in this state.
(b)The purpose of this act is to amend the Consumer Cooperative Corporation Law to clarify that the law applies to cooperatives in general, not just consumer cooperatives, and to create more visibility for worker cooperatives. This act is intended to provide a definition of worker cooperative for purposes of this act, and not for purposes of other laws.
SEC. 2.The heading of Part 2 (commencing with Section 12200) of Division 3 of Title 1 of the Corporations Code is amended to read:2.GENERAL COOPERATIVE CORPORATIONSSEC. 3.Section 12200 of the Corporations Code is amended to read:12200.This part shall be known as the General Cooperative Corporation Law. This part is intended primarily to apply to the organization and operation of cooperatives, including, but not limited to, consumer cooperatives, worker cooperatives, and cooperatives formed for the purpose of recycling or treating hazardous waste that elect to incorporate under its provisions.
SEC. 4.Section 12201.5 is added to the Corporations Code, to read:12201.5.(a)Notwithstanding Section 12201, the net earnings and losses of a worker cooperative shall be apportioned and distributed at the time and in the manner specified in the articles of incorporation or bylaws.
(b)Net earnings declared as patronage distributions with respect to a period of time, and paid to a creditor or member, shall be apportioned among the members in accordance with the ratio that each members patronage during the period bears to total patronage by all members during the period.
(c)The apportionment, distribution, and payment of net earnings required by subdivision (a) may be paid in cash, credits, written notices of allocation, or capital stock issued by the worker cooperative.
SEC. 5.Section 12228.3 is added to the Corporations Code, to read:12228.3.Capital account cooperative is a worker cooperative in which the entire net book value is reflected in member capital accounts, one for each member, and an unallocated capital account, if any.
SEC. 6.Section 12230.5 is added to the Corporations Code, to read:12230.5.Collective board worker cooperative means a worker cooperative in which there is only one class of members consisting of worker-members, all of whom are members of the board.
SEC. 7.Section 12238 of the Corporations Code is amended to read:12238.(a)Member means any person who, pursuant to a specific provision of a corporations articles or bylaws, has the right to vote for the election of a director or directors, or possesses proprietary interests in the corporation.
(b)The articles or bylaws may confer some or all of the rights of a member, set forth in this part, upon any person or persons who do not have any of the voting rights referred to in subdivision (a).
(c)Where a member of a corporation is not a natural person, such member may authorize in writing one or more natural persons to vote on its behalf on any or all matters which may require a vote of the members.
(d)A person is not a member by virtue of any of the following:
(1)Any rights such person has as a delegate.
(2)Any rights such person has to designate or select a director or directors.
(3)Any rights such person has as a director.
(e)Worker-member means a member who is a natural person and also a patron of a worker cooperative, as defined in subdivision (b) of Section 12243. cooperative.
(f)Non-worker-member Nonworker-member means a member of a worker cooperative who is not a worker member.
(g)Worker means a natural person contributing labor or services. A worker who is being considered for membership, as defined in the corporations articles or bylaws, shall be referred to as a candidate.
SEC. 8.Section 12243 of the Corporations Code is amended to read:12243.(a)(1)If the corporation is organized to provide goods or services to its members, the corporations patrons are those who purchase those types of goods from, or use those types of services of, the corporation. If the corporation is organized to market, process or otherwise handle its members products or services, the corporations patrons are those persons whose products or services are so marketed, processed, or handled by the corporation.
(2)Patronage of a patron is measured by the volume or value, or both, of a patrons purchases of products from, and use of services furnished by, the corporation, and by products and services provided by the patron to the corporation for marketing.
(b)(1)If the corporation is organized as a worker cooperative, the corporations patrons are its worker-members.
(2)If the corporation is organized as a worker cooperative, patronage may be measured by work performed or personal services contributed, including wages earned, number of hours worked, number of jobs created, or some combination of these measures.
SEC. 9.Section 12253 of the Corporations Code is amended to read:12253.(a)Voting power means the power to vote for the election of directors at the time any determination of voting power is made and does not include the right to vote upon the happening of some condition or event that has not yet occurred.
(b)If different classes of memberships are entitled to vote as separate classes for different members of the board, the determination of percentage of voting power shall be made on the basis of the percentage of the total number of authorized directors that the memberships in question (whether of one or more classes) have the power to elect in an election at which all memberships then entitled to vote for the election of any directors are voted.
(c)Non-worker-member Nonworker-member voting power in a worker cooperative shall be provided in the articles or bylaws, and is limited to approval rights only over a merger, sale of major assets, reorganization, or dissolution. Approval rights shall not include the right to propose any action.
SEC. 10.Section 12253.5 is added to the Corporations Code, to read:12253.5.Worker cooperative or employment cooperative means a corporation formed under this part that includes a class of worker-members who are natural persons whose patronage consists of labor contributed to, personal services performed for, or other work performed for the corporation. Election to be organized as a worker cooperative or an employment cooperative does not create a presumption that workers are employees of the corporation for any purposes. At least 51 percent of the workers shall be worker-members, or eligible candidates for membership within two years of becoming a worker.
SEC. 11.Section 12310 of the Corporations Code is amended to read:12310.The articles of incorporation of a corporation formed under this part shall set forth:
(a)The name of the corporation.
(b)The following statement:
This corporation is a cooperative corporation organized under the General Cooperative Corporation Law. The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the law.
[The articles may include a further description of the corporations purpose.]
(c)The name and street address in this state of the corporations initial agent for service of process in accordance with subdivision (b) of Section 12570.
(d)The initial street address of the corporation.
(e)The initial mailing address of the corporation, if different from the initial street address.
(f)Whether the voting power or the proprietary interests of the members are equal or unequal. If the voting power or proprietary interests of the members are unequal, the articles shall state either (i) the general rule or rules by which the voting power and proprietary interests of the members shall be determined or (ii) that such rule or rules shall be prescribed in the corporations bylaws. Equal voting power means voting power apportioned on the basis of one vote for each member. Equal proprietary rights means property rights apportioned on the basis of one proprietary unit for each member.
(g)Pursuant to Section 12310.5, the articles of incorporation may state whether the cooperative has elected to be governed as a worker cooperative.
SEC. 12.Section 12310.5 is added to the Corporations Code, to read:12310.5.(a)A corporation organized under this part may elect to be governed as a worker cooperative by making the following statement in its articles of incorporation or its amended articles of incorporation:
This corporation is a worker cooperative corporation organized under the General Cooperative Corporation Law.
(b)A corporation that makes the election to be governed as a worker cooperative, unless expressly exempted, shall be governed by all the provisions of this part.
SEC. 13.Section 12317 is added to the Corporations Code, to read:12317.(a)A worker cooperative may, in its articles or bylaws, establish itself as a capital account cooperative.
(b)The articles or bylaws of a capital account cooperative may authorize assignment of a portion of retained net earnings and net losses to an unallocated capital account. The unallocated capital account in a capital account cooperative shall reflect any paid-in capital, net losses, and retained net earnings not allocated to individual members. Earnings assigned to the unallocated capital account may be used for any and all corporate purposes, as determined by the board of directors.
(c)The system of member and unallocated capital accounts may be used to determine the redemption price of member shares, capital stock, and written notices of allocation. The articles or bylaws may provide for the capital account cooperative worker cooperative to pay or credit interest on the balance in each members capital account.
(d)The articles or bylaws of a capital account cooperative may permit the periodic redemption of written notices of allocation and capital stock and shall provide for recall and redemption of membership shares upon termination of membership in the cooperative. However, no redemption may occur that would result in the liability of any director or officer pursuant to Article 2 (commencing with Section 12370) of Chapter 2.
(e)As used in this section, written notice of allocation has the same meaning as defined in Section 1388 (b) of the Internal Revenue Code.
SEC. 14.Section 12404 of the Corporations Code is amended to read:12404.Except as permitted in Sections 12314 and 12404.5, the voting power of members having voting rights shall be equal.
SEC. 15.Section 12404.5 is added to the Corporations Code, to read:12404.5.(a)The worker-members of a worker cooperative shall have voting power as provided in subdivision (a) of Section 12253.
(b)Non-worker-member Nonworker-members have voting power only as provided in subdivision (c) of Section 12253.
SEC. 16.Section 12420 of the Corporations Code is amended to read:12420.(a)Except as provided in subdivision (b), a corporation may issue memberships having different rights, privileges, preferences, restrictions, or conditions, as provided in its articles or bylaws. If the articles or bylaws authorize at least one class of voting memberships, a corporation may also authorize and issue additional classes of memberships, preferred or otherwise, that are divisible into a series or are nonvoting or both.
(b)All worker-members shall have the rights, privileges, preferences, restrictions, or conditions as provided in the articles or bylaws. This membership shall be indivisible.
(c)A worker cooperative shall only make patronage distributions to the worker-member class.
SEC. 17.Section 12431 of the Corporations Code is amended to read:12431.(a)No member may be expelled or suspended, and no membership or memberships may be terminated or suspended, except according to procedures satisfying the requirements of this section. An expulsion, termination, or suspension not in accord with this section shall be void and without effect.
(b)Any expulsion, suspension, or termination must be done in good faith and in a fair and reasonable manner. Any procedure that conforms to the requirements of subdivision (c) or (d) is fair and reasonable, but a court may also find other procedures to be fair and reasonable when the full circumstances of the suspension, termination, or expulsion are considered.
(c)A procedure is fair and reasonable when:
(1)The provisions of the procedure have been set forth in the articles or bylaws, or copies of such provisions are sent annually to all the members as required by the articles or bylaws;
(2)It provides the giving of 15 days prior notice of the expulsion, suspension, or termination and the reasons therefor; and
(3)It provides an opportunity for the member to be heard, orally or in writing, not less than five days before the effective date of the expulsion, suspension, or termination by a person or body authorized to decide that the proposed expulsion, termination, or suspension not take place.
(d)Notwithstanding subdivision (a), in the case of a worker cooperative, the articles of incorporation or bylaws may provide for suspension of a worker-member without prior notice if the worker-member is given notice and the opportunity to be heard or to provide a written response within five days after the effective date of the suspension.
(e)
(d)Any notice required under this section may be given by any method reasonably calculated to provide actual notice. Any notice given by mail must be given by first-class or registered mail sent to the last address of the members shown on the corporations records.
(f)
(e)Any action challenging an expulsion, suspension or termination of membership, including any claim alleging defective notice, must be commenced within one year after the date of the expulsion, suspension or termination. In the event such an action is successful the court may order any relief, including reinstatement, it finds equitable under the circumstances, but no vote of the members or of the board may be set aside solely because a person was at the time of the vote wrongfully excluded by virtue of the challenged expulsion, suspension or termination, unless the court finds further that the wrongful expulsion, suspension or termination was in bad faith and for the purpose, and with the effect, of wrongfully excluding the member from the vote or from the meeting at which the vote took place, so as to affect the outcome of the vote.
(g)
(f)This section governs only the procedures for expulsion, suspension or termination and not the substantive grounds therefor. An expulsion, suspension or termination based upon substantive grounds which violate contractual or other rights of the member or are otherwise unlawful is not made valid by compliance with this section.
(h)
(g)A member who is expelled or suspended or whose membership is terminated shall be liable for any charges incurred, services or benefits actually rendered, dues, assessments or fees incurred before expulsion, suspension or termination or arising from contract or otherwise.
SEC. 18.Section 12454.5 is added to the Corporations Code, to read:12454.5.(a)A worker cooperative may create an indivisible reserves account that shall not be distributed to members.
(b)Funds in the indivisible reserves account shall, in a manner provided in the articles or bylaws, or by the board, be used as capital for the cooperative.
SEC. 19.Section 12460 of the Corporations Code is amended to read:12460.(a)Meetings of members may be held at a place within or without this state that is stated in or fixed in accordance with the bylaws. If no other place is so stated or fixed, meetings of members shall be held at the principal executive office of the corporation. Unless prohibited by the bylaws of the corporation, if authorized by the board of directors in its sole discretion, and subject to the requirement of consent in clause (b) of Section 20 and those guidelines and procedures as the board of directors may adopt, members not physically present in person at a meeting of members may, by electronic transmission by and to the corporation (Sections 20 and 21) or by electronic video screen communication, participate in a meeting of members, be deemed present in person, and vote at a meeting of members whether that meeting is to be held at a designated place or in whole or in part by means of electronic transmission by and to the corporation or by electronic video screen communication, in accordance with subdivision (f).
(b)Except as provided in Section 12460.5, a regular meeting of members shall be held annually. In any year in which directors are elected, the election shall be held at the regular meeting unless the directors are chosen in some other manner authorized by law. Any other proper business may be transacted at the meeting.
(c)If a corporation fails to hold the regular meeting for a period of 60 days after the date designated therefor or, if no date has been designated, for a period of 15 months after the formation of the corporation or after its last regular meeting, or if the corporation fails to hold a written ballot for a period of 60 days after the date designated therefor, then the superior court of the proper county may summarily order the meeting to be held or the ballot to be conducted upon the application of a member, after notice to the corporation giving it an opportunity to be heard.
(d)The votes represented at a meeting called or by written ballot ordered pursuant to subdivision (c) and entitled to be cast on the business to be transacted shall constitute a quorum, notwithstanding any provision of the articles or bylaws or provision in this part to the contrary. The court may issue such orders as may be appropriate including, without limitation, orders designating the time and place of the meeting, the record date for determination of members entitled to vote, and the form of notice of the meeting.
(e)Special meetings of members for any lawful purpose may be called by the board, the chairman of the board, the president, or other persons, if any, as are specified in the bylaws. In addition, special meetings of members for any lawful purpose may be called by 5 percent or more of the members, however, a special meeting of a worker cooperative may be called only by 20 percent or more of the worker-members. in a worker cooperative with more than four worker-members, a special meeting may only be called by the greater of three worker-members or 5 percent of the worker-members. In a worker cooperative with fewer than four worker-members, special meetings may be called by 5 percent of the worker-members.
(f)A meeting of the members may be conducted, in whole or in part, by electronic transmission by and to the corporation or by electronic video screen communication (1) if the corporation implements reasonable measures to provide members 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 concurrently with those proceedings, and (2) if any member votes or takes other action at the meeting by means of electronic transmission to the corporation or electronic video screen communication, a record of that vote or action is maintained by the corporation. Any request by a corporation to a member pursuant to clause (b) of Section 20 for consent to conduct a meeting of members by electronic transmission by and to the corporation, shall include a notice that absent consent of the member pursuant to clause (b) of Section 20, the meeting shall be held at a physical location in accordance with subdivision (a).
SEC. 20.Section 12460.5 is added to the Corporations Code, to read:12460.5.Notwithstanding Section 12460, a collective board worker cooperative shall not be required to hold an annual meeting of members.
SEC. 21.Section 12461 of the Corporations Code is amended to read:12461.(a)Whenever members are required or permitted to take any action at a meeting, a written notice of the meeting shall be given not less than 10 nor more than 90 days before the date of the meeting to each member who, on the record date for notice of the meeting, is entitled to vote thereat; provided, however, that if notice is given by mail, and the notice is not mailed by first-class, registered, or certified mail, that notice shall be given not less than 20 days before the meeting. A worker cooperative shall provide notice of the meeting not less than 48 hours before the meeting if the meeting involves is a meeting of only worker members. worker-members, provided that the notice is delivered personally. Subject to subdivision (f), and subdivision (b) of Section 12462, that notice shall state the place, date and time of the meeting, the means of electronic transmission by and to the corporation (Sections 20 and 21) or electronic video screen communication, if any, by which members may participate in that meeting, and (1) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted, or (2) in the case of the regular meeting, those matters which the board, at the time the notice is given, intends to present for action by the members, but, except as provided in subdivision (b) of Section 12462, any proper matter may be presented at the meeting for such action. The notice of any meeting at which directors are to be elected shall include the names of all those who are nominees at the time the notice is given to members.
(b)Notice of a members meeting or any report shall be given personally, by electronic transmission by the corporation, or by mail or other means of written communication, addressed to a member at the address of such member appearing on the books of the corporation or given by the member to the corporation for purpose of notice; or if no such address appears or is given, at the place where the principal office of the corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal office is located. An affidavit of giving of any notice or report in accordance with the provisions of this part, executed by the secretary, assistant secretary or any transfer agent, shall be prima facie evidence of the giving of the notice or report.
If any notice or report addressed to the member at the address of such member appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate the United States Postal Service is unable to deliver the notice or report to the member at such address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available for the member upon written demand of the member at the principal office of the corporation for a period of one year from the date of the giving of the notice or report to all other members.
Notice given by electronic transmission by the corporation under this subdivision shall be valid only if it complies with Section 20. Notwithstanding the foregoing, notice shall not be given by electronic transmission by the corporation under this subdivision after either of the following:
(1)The corporation is unable to deliver two consecutive notices to the member by that means.
(2)The inability to so deliver the notices to the member becomes known to the secretary, any assistant secretary, the transfer agent, or other person responsible for the giving of the notice.
(c)Upon request in writing to the corporation addressed to the attention of the chairman of the board, president, vice president or secretary by any person (other than the board) entitled to call a special meeting of members, the officer forthwith shall cause notice to be given to the members entitled to vote that a meeting will be held at a time fixed by the board not less than 35 nor more than 90 days after the receipt of the request. If the notice is not given within 20 days after receipt of the request, the persons entitled to call the meeting may give the notice or the superior court of the proper county shall summarily order the giving of the notice, after notice to the corporation giving it an opportunity to be heard. The court may issue such orders as may be appropriate, including, without limitation, orders designating the time and place of the meeting, the record date for determination of members entitled to vote and the form of notice.
(d)When a members meeting is adjourned to another time or place, unless the bylaws otherwise require and except as provided in this subdivision, notice need not be given of the adjourned meeting if the time and place thereof (or the means of electronic transmission by and to the corporation or electronic video screen communication, if any, by which members may participate) are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each member of record entitled to vote at the meeting.
(e)The transactions of any meeting of members however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present, and if, either before or after the meeting, each of the persons entitled to vote, not present in person, provides a waiver of notice or consent to the holding of the meeting or an approval of the minutes thereof in writing. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of and presence at such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required by this part to be included in the notice but not so included, if such objection is expressly made at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of members need be specified in any written waiver of notice, consent to the holding of the meeting or approval of the minutes thereof, unless otherwise provided in the articles or bylaws, except as provided in subdivision (f).
(f)Any approval of the members required under Section 12362, 12364, 12373, 12502 or 12658 other than unanimous approval by those entitled to vote, shall be valid only if the general nature of the proposal so approved was stated in the notice of meeting or in any written waiver of notice.
(g)A court may find that notice not given in conformity with this section is still valid, if it was given in a fair and reasonable manner.
(h)Subject to the provisions of subdivision (i), and unless prohibited by the articles or bylaws, prior to any regular or special meeting of members, the board may authorize distribution of a written ballot to every member entitled to vote at the meeting. Such ballot shall set forth the action proposed to be taken at the meeting, shall provide an opportunity to specify approval or disapproval of the proposed action, and shall state that unless revoked by the member voting in person at the meeting, the ballot will be counted if received by the corporation on or before the time of the meeting with respect to which it was sent. If ballots are so distributed with respect to a meeting, the number of members voting at the meeting by unrevoked written ballots shall be deemed present at the meeting for purposes of determining the existence of a quorum pursuant to subdivision (a) of Section 12462 but only with respect to the proposed action referred to in the ballots. These ballots shall be distributed in a manner consistent with the requirements of subdivision (b) and Section 12464.
(i)Unless prohibited by the articles or bylaws, written ballots may be distributed in a manner contemplated by subdivision (h) with respect to the election of directors, except that no ballots may be so distributed with respect to the election of directors if cumulative voting is permitted pursuant to Section 12484.
SEC. 22.Section 12530 of the Corporations Code is amended to read:12530.Except as provided in Section 12530.5, any corporation may merge with another domestic corporation, foreign corporation, or other business entity. However, a merger with a nonprofit public benefit corporation or a nonprofit religious corporation must have the prior written consent of the Attorney General.
SEC. 23.Section 12530.5 is added to the Corporations Code, to read:12530.5.Notwithstanding Section 12530, a worker cooperative that has not revoked its election to be governed as a worker cooperative under Section 12310.5 shall not consolidate or merge with another corporation other than another worker cooperative. Two or more worker cooperatives may merge or consolidate in a manner consistent with this chapter.
SEC. 24.Section 12653 of the Corporations Code is amended to read:12653.(a)After determining that all the known debts and liabilities of a corporation in the process of winding up have been paid or adequately provided for, the board shall distribute all the remaining corporate assets in the manner provided in Sections 12655, 12656, and 12656.5.
(b)If the winding up is by court proceeding or subject to court supervision, the distribution shall not be made until after the expiration of any period for the presentation of claims that has been prescribed by order of the court.
(c)Anything to the contrary notwithstanding, assets, if any, that are not subject to attachment, execution or sale for the corporations debts and liabilities may be distributed pursuant to Sections 12655, 12656, and 12656.5 even though all debts and liabilities have not been paid or adequately provided for.
SEC. 25.Section 12656.5 is added to the Corporations Code, to read:12656.5.(a)After complying with the provisions of Section 12653, and except as otherwise provided in Section 12655, upon dissolution of a worker cooperative the majority of the unallocated capital account shall be distributed to members on the basis of the following:
(1)Patronage.
(2)Capital contributions.
(3)A combination of patronage and capital contributions.
(b)A worker cooperative is authorized to include patronage provided by past and current members in its distribution of the unallocated capital account.
(c)Subdivision (a) shall not apply to any amounts in the indivisible reserve account. Any amounts amount in the indivisible reserve account shall, upon dissolution, be allocated to an International Cooperative Alliance approved national federation or a regional body in this state a cooperative development organization designated in the articles of incorporation or the bylaws.
SEC. 26.Section 25017 of the Corporations Code is amended to read:25017.(a)Sale or sell includes every contract of sale of, contract to sell, or disposition of, a security or interest in a security for value. Sale or sell includes any exchange of securities and any change in the rights, preferences, privileges, or restrictions of or on outstanding securities.
(b)Offer or offer to sell includes every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security for value.
(c)Any security given or delivered with, or as a bonus on account of, any purchase of securities or any other thing constitutes a part of the subject of the purchase and is considered to have been offered and sold for value.
(d)A purported gift of assessable stock involves an offer and sale.
(e)Every sale or offer of a warrant or right to purchase or subscribe to another security of the same or another issuer, as well as every sale or offer of a security which gives the holder a present or future right or privilege to convert the security into another security of the same or another issuer, includes an offer and sale of the other security only at the time of the offer or sale of the warrant or right or convertible security; but neither the exercise of the right to purchase or subscribe or to convert nor the issuance of securities pursuant thereto is an offer or sale.
(f)The terms defined in this section do not include: (1) any bona fide secured transaction in or loan of outstanding securities; (2) any stock dividend payable with respect to common stock of a corporation solely (except for any cash or scrip paid for fractional shares) in shares of such common stock, if the corporation has no other class of voting stock outstanding; provided, that shares issued in any such dividend shall be subject to any conditions previously imposed by the commissioner applicable to the shares with respect to which they are issued; (3) any act incident to a transaction or reorganization approved by a state or federal court in which securities are issued and exchanged for one or more outstanding securities, claims, or property interests, or partly in that exchange and partly for cash, and nothing in this division shall be construed to prohibit a court from applying the protections described in Section 25014.7 or 25140 and the regulations adopted thereunder when approving any transaction involving a rollup participant; or (4) any written notice of allocation, as defined in Section 1388(b) of the Internal Revenue Code, issued by an organization described in Section 1381(a) of the Internal Revenue Code.
SEC. 27.Section 25019 of the Corporations Code is amended to read:25019.Security means any note; stock; treasury stock; membership in an incorporated or unincorporated association; bond; debenture; evidence of indebtedness; certificate of interest or participation in any profit-sharing agreement; collateral trust certificate; preorganization certificate or subscription; transferable share; investment contract; viatical settlement contract or a fractionalized or pooled interest therein; life settlement contract or a fractionalized or pooled interest therein; voting trust certificate; certificate of deposit for a security; interest in a limited liability company and any class or series of those interests (including any fractional or other interest in that interest), except a membership interest in a limited liability company in which the person claiming this exception can prove that all of the members are actively engaged in the management of the limited liability company; provided that evidence that members vote or have the right to vote, or the right to information concerning the business and affairs of the limited liability company, or the right to participate in management, shall not establish, without more, that all members are actively engaged in the management of the limited liability company; certificate of interest or participation in an oil, gas, or mining title or lease or in payments out of production under that title or lease; put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof); or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency; any beneficial interest or other security issued in connection with a funded employees pension, profit sharing, stock bonus, or similar benefit plan; or, in general, any interest or instrument commonly known as a security; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. All of the foregoing are securities whether or not evidenced by a written document. Security does not include: (1) any beneficial interest in any voluntary inter vivos trust which is not created for the purpose of carrying on any business or solely for the purpose of voting, or (2) any beneficial interest in any testamentary trust, (3) any insurance or endowment policy or annuity contract under which an insurance company admitted in this state promises to pay a sum of money (whether or not based upon the investment performance of a segregated fund) either in a lump sum or periodically for life or some other specified period, (4) any franchise subject to registration under the Franchise Investment Law (Division 5 (commencing with Section 31000)), or exempted from registration by Section 31100 or 31101, or (5) a membership or share interest in a collective board worker cooperative, as defined in Section 12230.5.
SEC. 28. SEC. 26.Section 25100 of the Corporations Code is amended to read:25100.The following securities are exempted from Sections 25110, 25120, and 25130:(a)Any security (including a revenue obligation) issued or guaranteed by the United States, any state, any city, county, city and county, public district, public authority, public corporation, public entity, or political subdivision of a state or any agency or corporate or other instrumentality of any one or more of the foregoing; or any certificate of deposit for any of the foregoing.(b)Any security issued or guaranteed by Canada, any Canadian province, any political subdivision or municipality of that province, or by any other foreign government with which the United States currently maintains diplomatic relations, if the security is recognized as a valid obligation by the issuer or guarantor; or any certificate of deposit for any of the foregoing.(c)Any security issued or guaranteed by and representing an interest in or a direct obligation of a national bank or a bank or trust company incorporated under the laws of this state, and any security issued by a bank to one or more other banks and representing an interest in an asset of the issuing bank.(d)Any security issued or guaranteed by a federal savings association or federal savings bank or federal land bank or joint land bank or national farm loan association or by any savings association, as defined in subdivision (a) of Section 5102 of the Financial Code, which is subject to the supervision and regulation of the Commissioner of Financial Institutions Business Oversight of this state.(e)Any security (other than an interest in all or portions of a parcel or parcels of real property which are subdivided land or a subdivision or in a real estate development), the issuance of which is subject to authorization by the Insurance Commissioner, the Public Utilities Commission, or the Real Estate Commissioner of this state.(f)Any security consisting of any interest in all or portions of a parcel or parcels of real property which that are subdivided lands or a subdivision or in a real estate development; provided that the exemption in this subdivision shall not be applicable to: (1) any investment contract sold or offered for sale with, or as part of, that interest, or (2) any person engaged in the business of selling, distributing, or supplying water for irrigation purposes or domestic use that is not a public utility except that the exemption is applicable to any security of a mutual water company (other than an investment contract as described in paragraph (1)) offered or sold in connection with subdivided lands pursuant to Chapter 2 (commencing with Section 14310) of Part 7 of Division 3 of Title 1.(g)Any mutual capital certificates or savings accounts, as defined in the Savings Association Law, issued by a savings association, as defined by subdivision (a) of Section 5102 of the Financial Code, and holding a license or certificate of authority then in force from the Commissioner of Financial Institutions Business Oversight of this state.(h)Any security issued or guaranteed by any federal credit union, or by any credit union organized and supervised, or regulated, under the Credit Union Law.(i)Any security issued or guaranteed by any railroad, other common carrier, public utility, or public utility holding company which is (1) subject to the jurisdiction of the Interstate Commerce Commission or its successor or (2) a holding company registered with the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935 or a subsidiary of that company within the meaning of that act or (3) regulated in respect of the issuance or guarantee of the security by a governmental authority of the United States, of any state, of Canada or of any Canadian province; and the security is subject to registration with or authorization of issuance by that authority.(j)Any security (except evidences of indebtedness, whether interest bearing or not) of an issuer (1) organized exclusively for educational, benevolent, fraternal, religious, charitable, social, or reformatory purposes and not for pecuniary profit, if no part of the net earnings of the issuer inures to the benefit of any private shareholder or individual, or (2) organized as a chamber of commerce or trade or professional association. The fact that amounts received from memberships or dues or both will or may be used to construct or otherwise acquire facilities for use by members of the nonprofit organization does not disqualify the organization for this exemption. This exemption does not apply to the securities of any nonprofit organization if any promoter thereof expects or intends to make a profit directly or indirectly from any business or activity associated with the organization or operation of that nonprofit organization or from remuneration received from that nonprofit organization.(k)Any agreement, commonly known as a life income contract, of an issuer (1) organized exclusively for educational, benevolent, fraternal, religious, charitable, social, or reformatory purposes and not for pecuniary profit and (2) which the commissioner designates by rule or order, with a donor in consideration of a donation of property to that issuer and providing for the payment to the donor or persons designated by him or her of income or specified periodic payments from the donated property or other property for the life of the donor or those other persons.(l)Any note, draft, bill of exchange, or bankers acceptance which is freely transferable and of prime quality, arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which evidences an obligation to pay cash within nine months of the date of issuance, exclusive of days of grace, or any renewal of that paper which is likewise limited, or any guarantee of that paper or of that renewal, provided that the paper is not offered to the public in amounts of less than twenty-five thousand dollars ($25,000) in the aggregate to any one purchaser. In addition, the commissioner may, by rule or order, exempt any issuer of any notes, drafts, bills of exchange or bankers acceptances from qualification of those securities when the commissioner finds that the qualification is not necessary or appropriate in the public interest or for the protection of investors.(m)Any security issued by any corporation organized and existing under the provisions of Chapter 1 (commencing with Section 54001) of Division 20 of the Food and Agricultural Code.(n)Any beneficial interest in an employees pension, profit-sharing, stock bonus, or similar benefit plan which meets the requirements for qualification under Section 401 of the federal Internal Revenue Code or any statute amendatory thereof or supplementary thereto. A determination letter from the Internal Revenue Service stating that an employees pension, profit-sharing, stock bonus, or similar benefit plan meets those requirements shall be conclusive evidence that the plan is an employees pension, profit-sharing, stock bonus, or similar benefit plan within the meaning of the first sentence of this subdivision until the date the determination letter is revoked in writing by the Internal Revenue Service, regardless of whether or not the revocation is retroactive.(o)Any security listed or approved for listing upon notice of issuance on a national securities exchange, if the exchange has been certified by rule or order of the commissioner and any warrant or right to purchase or subscribe to the security. The exemption afforded by this subdivision does not apply to securities listed or approved for listing upon notice of issuance on a national securities exchange, in a rollup transaction unless the rollup transaction is an eligible rollup transaction as defined in Section 25014.7.That certification of any exchange shall be made by the commissioner upon the written request of the exchange if the commissioner finds that the exchange, in acting on applications for listing of common stock, substantially applies the minimum standards set forth in either subparagraph (A) or (B) of paragraph (1), and, in considering suspension or removal from listing, substantially applies each of the criteria set forth in paragraph (2).(1)Listing standards:(A)(i)Shareholders equity of at least four million dollars ($4,000,000).(ii)Pretax income of at least seven hundred fifty thousand dollars ($750,000) in the issuers last fiscal year or in two of its last three fiscal years.(iii)Minimum public distribution of 500,000 shares (exclusive of the holdings of officers, directors, controlling shareholders, and other concentrated or family holdings), together with a minimum of 800 public holders or minimum public distribution of 1,000,000 shares together with a minimum of 400 public holders. The exchange may also consider the listing of a companys securities if the company has a minimum of 500,000 shares publicly held, a minimum of 400 shareholders and daily trading volume in the issue has been approximately 2,000 shares or more for the six months preceding the date of application. In evaluating the suitability of an issue for listing under this trading provision, the exchange shall review the nature and frequency of that activity and any other factors as it may determine to be relevant in ascertaining whether the issue is suitable for trading. A security that trades infrequently shall not be considered for listing under this paragraph even though average daily volume amounts to 2,000 shares per day or more.Companies whose securities are concentrated in a limited geographical area, or whose securities are largely held in block by institutional investors, normally may not be considered eligible for listing unless the public distribution appreciably exceeds 500,000 shares.(iv)Minimum price of three dollars ($3) per share for a reasonable period of time prior to the filing of a listing application; provided, however, in certain instances an exchange may favorably consider listing an issue selling for less than three dollars ($3) per share after considering all pertinent factors, including market conditions in general, whether historically the issue has sold above three dollars ($3) per share, the applicants capitalization, and the number of outstanding and publicly held shares of the issue.(v)An aggregate market value for publicly held shares of at least three million dollars ($3,000,000).(B)(i)Shareholders equity of at least four million dollars ($4,000,000).(ii)Minimum public distribution set forth in clause (iii) of subparagraph (A) of paragraph (1).(iii)Operating history of at least three years.(iv)An aggregate market value for publicly held shares of at least fifteen million dollars ($15,000,000).(2)Criteria for consideration of suspension or removal from listing:(i)If a company that (A) has shareholders equity of less than one million dollars ($1,000,000) has sustained net losses in each of its two most recent fiscal years, or (B) has net tangible assets of less than three million dollars ($3,000,000) and has sustained net losses in three of its four most recent fiscal years.(ii)If the number of shares publicly held (excluding the holdings of officers, directors, controlling shareholders and other concentrated or family holdings) is less than 150,000.(iii)If the total number of shareholders is less than 400 or if the number of shareholders of lots of 100 shares or more is less than 300.(iv)If the aggregate market value of shares publicly held is less than seven hundred fifty thousand dollars ($750,000).(v)If shares of common stock sell at a price of less than three dollars ($3) per share for a substantial period of time and the issuer shall fail to effectuate a reverse stock split of the shares within a reasonable period of time after being requested by the exchange to take that action.A national securities exchange, certified by rule or order of the commissioner under this subdivision, shall file annual reports when requested to do so by the commissioner. The annual reports shall contain, by issuer: the variances granted to an exchanges listing standards, including variances from corporate governance and voting rights standards, for any security of that issuer; the reasons for the variances; a discussion of the review procedure instituted by the exchange to determine the effect of the variances on investors and whether the variances should be continued; and any other information that the commissioner deems relevant. The purpose of these reports is to assist the commissioner in determining whether the quantitative and qualitative requirements of this subdivision are substantially being met by the exchange in general or with regard to any particular security.The commissioner after appropriate notice and opportunity for hearing in accordance with the provisions of the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, may, in his or her discretion, by rule or order, decertify any exchange previously certified that ceases substantially to apply the minimum standards or criteria as set forth in paragraphs (1) and (2).A rule or order of certification shall conclusively establish that any security listed or approved for listing upon notice of issuance on any exchange named in a rule or order of certification, and any warrant or right to purchase or subscribe to that security, is exempt under this subdivision until the adoption by the commissioner of any rule or order decertifying the exchange.(p)A promissory note secured by a lien on real property, which is neither one of a series of notes of equal priority secured by interests in the same real property nor a note in which beneficial interests are sold to more than one person or entity.(q)Any unincorporated interindemnity or reciprocal or interinsurance contract, that qualifies under the provisions of Section 1280.7 of the Insurance Code, between members of a cooperative corporation, organized and operating under Part 2 (commencing with Section 12200) of Division 3 of Title 1, and whose members consist only of physicians and surgeons licensed in California, which contracts indemnify solely in respect to medical malpractice claims against the members, and which do not collect in advance of loss any moneys other than contributions by each member to a collective reserve trust fund or for necessary expenses of administration.(1)Whenever it appears to the commissioner that any person has engaged or is about to engage in any act or practice constituting a violation of any provision of Section 1280.7 of the Insurance Code, the commissioner may, in the commissioners discretion, bring an action in the name of the people of the State of California in the superior court to enjoin the acts or practices or to enforce compliance with Section 1280.7 of the Insurance Code. Upon a proper showing a permanent or preliminary injunction, a restraining order, or a writ of mandate shall be granted and a receiver or conservator may be appointed for the defendant or the defendants assets.(2)The commissioner may, in the commissioners discretion, (A) make public or private investigations within or outside of this state as the commissioner deems necessary to determine whether any person has violated or is about to violate any provision of Section 1280.7 of the Insurance Code or to aid in the enforcement of Section 1280.7, and (B) publish information concerning the violation of Section 1280.7.(3)For the purpose of any investigation or proceeding under this section, the commissioner or any officer designated by the commissioner may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, agreements, or other documents or records which the commissioner deems relevant or material to the inquiry.(4)In case of contumacy by, or refusal to obey a subpoena issued to, any person, the superior court, upon application by the commissioner, may issue to the person an order requiring the person to appear before the commissioner, or the officer designated by the commissioner, to produce documentary evidence, if so ordered, or to give evidence touching the matter under investigation or in question. Failure to obey the order of the court may be punished by the court as a contempt.(5)No person is excused from attending or testifying or from producing any document or record before the commissioner or in obedience to the subpoena of the commissioner or any officer designated by the commissioner, or in any proceeding instituted by the commissioner, on the ground that the testimony or evidence (documentary or otherwise), required of the person may tend to incriminate the person or subject the person to a penalty or forfeiture, but no individual may be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which the person is compelled, after validly claiming the privilege against self-incrimination, to testify or produce evidence (documentary or otherwise), except that the individual testifying is not exempt from prosecution and punishment for perjury or contempt committed in testifying.(6)The cost of any review, examination, audit, or investigation made by the commissioner under Section 1280.7 of the Insurance Code shall be paid to the commissioner by the person subject to the review, examination, audit, or investigation, and the commissioner may maintain an action for the recovery of these costs in any court of competent jurisdiction. In determining the cost, the commissioner may use the actual amount of the salary or other compensation paid to the persons making the review, examination, audit, or investigation plus the actual amount of expenses including overhead reasonably incurred in the performance of the work.The recoverable cost of each review, examination, audit, or investigation made by the commissioner under Section 1280.7 of the Insurance Code shall not exceed twenty-five thousand dollars ($25,000), except that costs exceeding twenty-five thousand dollars ($25,000) shall be recoverable if the costs are necessary to prevent a violation of any provision of Section 1280.7 of the Insurance Code.(r)Any shares or memberships issued by any corporation organized and existing pursuant to the provisions of Part 2 (commencing with Section 12200) of Division 3 of Title 1, provided the aggregate investment of any shareholder or member in shares or memberships sold pursuant to this subdivision does not exceed one thousand dollars ($1,000). In the case of a worker cooperative, the aggregate investment of any worker member in shares or memberships sold pursuant to this subdivision shall not exceed five thousand dollars ($5,000). This section does not create the presumption, if the aggregate investment of a worker-member exceeds five thousand dollars ($5,000), that the investment must be qualified or filed as a sale of securities under this title. This exemption does not apply to the shares or memberships of that corporation if any promoter thereof expects or intends to make a profit directly or indirectly from any business or activity associated with the corporation or the operation of the corporation or from remuneration, other than reasonable salary, received from the corporation. This exemption does not apply to nonvoting shares or memberships of that corporation issued to any person who does not possess, and who will not acquire in connection with the issuance of nonvoting shares or memberships, voting power (Section 12253) in the corporation. This exemption also does not apply to shares or memberships issued by a nonprofit cooperative corporation organized to facilitate the creation of an unincorporated interindemnity arrangement that provides indemnification for medical malpractice to its physician and surgeon members as set forth in subdivision (q).(s)Any security consisting of or representing an interest in a pool of mortgage loans that meets each of the following requirements:(1)The pool consists of whole mortgage loans or participation interests in those loans, which loans were originated or acquired in the ordinary course of business by a national bank or federal savings association or federal savings bank having its principal office in this state, by a bank incorporated under the laws of this state or by a savings association as defined in subdivision (a) of Section 5102 of the Financial Code and which is subject to the supervision and regulation of the Commissioner of Financial Institutions, and each of which at the time of transfer to the pool is an authorized investment for the originating or acquiring institution.(2)The pool of mortgage loans is held in trust by a trustee which is a financial institution specified in paragraph (1) as trustee or otherwise.(3)The loans are serviced by a financial institution specified in paragraph (1).(4)The security is not offered in amounts of less than twenty-five thousand dollars ($25,000) in the aggregate to any one purchaser.(5)The security is offered pursuant to a registration under the Securities Act of 1933, or pursuant to an exemption under Regulation A under that act, or in the opinion of counsel for the issuer, is offered pursuant to an exemption under Section 4(2) of that act.(t)(1)Any security issued or guaranteed by and representing an interest in or a direct obligation of an industrial loan company incorporated under the laws of the state and authorized by the Commissioner of Financial Institutions to engage in industrial loan business.(2)Any investment certificate in or issued by any industrial loan company that is organized under the laws of a state of the United States other than this state, that is insured by the Federal Deposit Insurance Corporation, and that maintains a branch office in this state.SEC. 29.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
The Legislature finds and declares all of the following:
(a)A worker cooperative has the purpose of creating and maintaining sustainable jobs and generating wealth in order to improve the quality of life of its worker-members, dignify human work, allow workers democratic self-management, and promote community and local development.
(b)The purpose of this act is to amend the Consumer Cooperative Corporation Law to clarify that the law applies to cooperatives in general, not just consumer cooperatives, and to create more visibility for worker cooperatives. This act is intended to provide a definition of worker cooperative for purposes of this act, and not for purposes of other laws.
SEC. 2.The heading of Part 2 (commencing with Section 12200) of Division 3 of Title 1 of the Corporations Code is amended to read:2.GENERAL COOPERATIVE CORPORATIONSSEC. 3.Section 12200 of the Corporations Code is amended to read:12200.This part shall be known as the General Cooperative Corporation Law. This part is intended primarily to apply to the organization and operation of cooperatives, including, but not limited to, consumer cooperatives, worker cooperatives, and cooperatives formed for the purpose of recycling or treating hazardous waste that elect to incorporate under its provisions.
SEC. 4.Section 12201.5 is added to the Corporations Code, to read:12201.5.(a)Notwithstanding Section 12201, the net earnings and losses of a worker cooperative shall be apportioned and distributed at the time and in the manner specified in the articles of incorporation or bylaws.
(b)Net earnings declared as patronage distributions with respect to a period of time, and paid to a creditor or member, shall be apportioned among the members in accordance with the ratio that each members patronage during the period bears to total patronage by all members during the period.
(c)The apportionment, distribution, and payment of net earnings required by subdivision (a) may be paid in cash, credits, written notices of allocation, or capital stock issued by the worker cooperative.
SEC. 5.Section 12228.3 is added to the Corporations Code, to read:12228.3.Capital account cooperative is a worker cooperative in which the entire net book value is reflected in member capital accounts, one for each member, and an unallocated capital account, if any.
SEC. 6.Section 12230.5 is added to the Corporations Code, to read:12230.5.Collective board worker cooperative means a worker cooperative in which there is only one class of members consisting of worker-members, all of whom are members of the board.
SEC. 7.Section 12238 of the Corporations Code is amended to read:12238.(a)Member means any person who, pursuant to a specific provision of a corporations articles or bylaws, has the right to vote for the election of a director or directors, or possesses proprietary interests in the corporation.
(b)The articles or bylaws may confer some or all of the rights of a member, set forth in this part, upon any person or persons who do not have any of the voting rights referred to in subdivision (a).
(c)Where a member of a corporation is not a natural person, such member may authorize in writing one or more natural persons to vote on its behalf on any or all matters which may require a vote of the members.
(d)A person is not a member by virtue of any of the following:
(1)Any rights such person has as a delegate.
(2)Any rights such person has to designate or select a director or directors.
(3)Any rights such person has as a director.
(e)Worker-member means a member who is a natural person and also a patron of a worker cooperative, as defined in subdivision (b) of Section 12243.
(f)Non-worker-member means a member of a worker cooperative who is not a worker member.
SEC. 7.SEC. 8.Section 12243 of the Corporations Code is amended to read:12243.(a)(1)If the corporation is organized to provide goods or services to its members, the corporations patrons are those who purchase those types of goods from, or use those types of service services of, the corporation. If the corporation is organized to market, process or otherwise handle its members products or services, the corporations patrons are those persons whose products or services are so marketed, processed, or handled by the corporation.
(2)Patronage of a patron is measured by the volume or value, or both, of a patrons purchases of products from, and use of services furnished by, the corporation, and by products and services provided by the patron to the corporation for marketing.
(b)(1)If the corporation is organized as a worker cooperative, the corporations patrons are its worker-members.
(2)If the corporation is organized as a worker cooperative, patronage may be measured by work performed or personal services contributed, including wages earned, number of hours worked, seniority in the cooperative, number of jobs created in the previous taxable year, created, or some combination of these measures.
SEC. 8.SEC. 9.Section 12253 of the Corporations Code is amended to read:12253.(a)Voting power means the power to vote for the election of directors at the time any determination of voting power is made and does not include the right to vote upon the happening of some condition or event that has not yet occurred.
(b)If different classes of memberships are entitled to vote as separate classes for different members of the board, the determination of percentage of voting power shall be made on the basis of the percentage of the total number of authorized directors that the memberships in question (whether of one or more classes) have the power to elect in an election at which all memberships then entitled to vote for the election of any directors are voted.
(c)Non-worker-member voting power in a worker cooperative shall be provided in the articles or bylaws, and is limited to approval rights only over a merger, sale of major assets, reorganization, or dissolution. Approval rights shall not include the right to propose any action.
SEC. 9.SEC. 10.Section 12253.5 is added to the Corporations Code, to read:12253.5.Worker cooperative or employment cooperative means a corporation formed under this part that includes a class of worker-members who are natural persons whose patronage consists of labor contributed to, personal services performed for, or other work performed for the corporation. Election to be organized as a worker cooperative or an employment cooperative does not create a presumption that workers are employees of the corporation for any purposes. At least 51 percent of the workers shall be worker-members, or eligible for membership within two years of becoming a worker.
SEC. 10.SEC. 11.Section 12310 of the Corporations Code is amended to read:12310.The articles of incorporation of a corporation formed under this part shall set forth:
(a)The name of the corporation.
(b)The following statement:
This corporation is a cooperative corporation organized under the General Cooperative Corporation Law. The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the law.
[The articles may include a further description of the corporations purpose.]
(c)The name and street address in this state of the corporations initial agent for service of process in accordance with subdivision (b) of Section 12570.
(d)The initial street address of the corporation.
(e)The initial mailing address of the corporation, if different from the initial street address.
(f)Whether the voting power or the proprietary interests of the members are equal or unequal. If the voting power or proprietary interests of the members are unequal, the articles shall state either (i) the general rule or rules by which the voting power and proprietary interests of the members shall be determined or (ii) that such rule or rules shall be prescribed in the corporations bylaws. Equal voting power means voting power apportioned on the basis of one vote for each member. Equal proprietary rights means property rights apportioned on the basis of one proprietary unit for each member.
(g)Pursuant to Section 12310.5, the articles of incorporation may state whether the cooperative has elected to be governed as a worker cooperative.
SEC. 11.SEC. 12.Section 12310.5 is added to the Corporations Code, to read:12310.5.(a)A corporation organized under this part may elect to be governed as a worker cooperative by making the following statement in its articles of incorporation or its amended articles of incorporation:
This corporation is a worker cooperative corporation organized under the General Cooperative Corporation Law. Law.
(b)A corporation that makes the election to be governed as a worker cooperative, unless expressly exempted, shall be governed by all the provisions of this part.
SEC. 12.SEC. 13.Section 12317 is added to the Corporations Code, to read:12317.(a)A worker cooperative may, in its articles or bylaws, establish itself as a capital account cooperative.
(b)In a capital account cooperative, each member shall have only one vote in any matter requiring a vote of the membership.
(c)
(b)The articles or bylaws of a capital account cooperative may authorize assignment of a portion of retained net earnings and net losses to an unallocated capital account. The unallocated capital account in a capital account cooperative shall reflect any paid-in capital, net losses, and retained net earnings not allocated to individual members. Earnings assigned to the unallocated capital account may be used for any and all corporate purposes, as determined by the board of directors.
(d)
(c)The system of member and unallocated capital accounts may be used to determine the redemption price of member shares, capital stock, and written notices of allocation. The articles or bylaws may provide for the capital account cooperative worker cooperative to pay or credit interest on the balance in each members capital account.
(e)
(d)The articles or bylaws of a capital account cooperative may permit the periodic redemption of written notices of allocation and capital stock and shall provide for recall and redemption of membership shares upon termination of membership in the cooperative. However, no redemption may occur that would result in the liability of any director or officer pursuant to Article 2 (commencing with Section 12370) of Chapter 2.
(f)
(e)As used in this section, written notice of allocation has the same meaning as defined in Section 1388 (b) of the Internal Revenue Code.
SEC. 13.SEC. 14.Section 12404 of the Corporations Code is amended to read:12404.Except as permitted in Section 12314, Sections 12314 and 12404.5, the voting power of members having voting rights, other than members of a worker cooperative, shall be equal.
SEC. 15.Section 12404.5 is added to the Corporations Code, to read:12404.5.(a)The worker-members of a worker cooperative shall have voting power as provided in subdivision (a) of Section 12253.
(b)Non-worker-member have voting power only as provided in subdivision (c) of Section 12253.
SEC. 14.SEC. 16.Section 12420 of the Corporations Code is amended to read:12420.(a)Except as provided in subdivision (b), a corporation may issue memberships having different rights, privileges, preferences, restrictions, or conditions, as provided in its articles or bylaws. If the articles or bylaws authorize at least one class of voting memberships, a corporation may also authorize and issue additional classes of memberships, preferred or otherwise, that are divisible into a series or are nonvoting or both.
(b)A worker cooperative may issue only one type of membership. All worker-members shall have the rights, privileges, preferences, restrictions restrictions, or conditions as provided in the articles or bylaws. This membership shall be indivisible.
(c)A worker cooperative shall only make patronage distributions to the worker-member class.
SEC. 17.Section 12431 of the Corporations Code is amended to read:12431.(a)No member may be expelled or suspended, and no membership or memberships may be terminated or suspended, except according to procedures satisfying the requirements of this section. An expulsion, termination, or suspension not in accord with this section shall be void and without effect.
(b)Any expulsion, suspension, or termination must be done in good faith and in a fair and reasonable manner. Any procedure which that conforms to the requirements of subdivision (c) or (d) is fair and reasonable, but a court may also find other procedures to be fair and reasonable when the full circumstances of the suspension, termination, or expulsion are considered.
(c)A procedure is fair and reasonable when:
(1)The provisions of the procedure have been set forth in the articles or bylaws, or copies of such provisions are sent annually to all the members as required by the articles or bylaws;
(2)It provides the giving of 15 days prior notice of the expulsion, suspension, or termination and the reasons therefor; and
(3)It provides an opportunity for the member to be heard, orally or in writing, not less than five days before the effective date of the expulsion, suspension, or termination by a person or body authorized to decide that the proposed expulsion, termination, or suspension not take place.
(d)Notwithstanding subdivision (a), in the case of a worker cooperative, the articles of incorporation or bylaws may provide for suspension of a worker-member without prior notice if the worker-member is given notice and the opportunity to be heard or to provide a written response within five days after the effective date of the suspension.
(d)
(e)Any notice required under this section may be given by any method reasonably calculated to provide actual notice. Any notice given by mail must be given by first-class or registered mail sent to the last address of the members shown on the corporations records.
(e)
(f)Any action challenging an expulsion, suspension or termination of membership, including any claim alleging defective notice, must be commenced within one year after the date of the expulsion, suspension or termination. In the event such an action is successful the court may order any relief, including reinstatement, it finds equitable under the circumstances, but no vote of the members or of the board may be set aside solely because a person was at the time of the vote wrongfully excluded by virtue of the challenged expulsion, suspension or termination, unless the court finds further that the wrongful expulsion, suspension or termination was in bad faith and for the purpose, and with the effect, of wrongfully excluding the member from the vote or from the meeting at which the vote took place, so as to affect the outcome of the vote.
(f)
(g)This section governs only the procedures for expulsion, suspension or termination and not the substantive grounds therefor. An expulsion, suspension or termination based upon substantive grounds which violate contractual or other rights of the member or are otherwise unlawful is not made valid by compliance with this section.
(g)
(h)A member who is expelled or suspended or whose membership is terminated shall be liable for any charges incurred, services or benefits actually rendered, dues, assessments or fees incurred before expulsion, suspension or termination or arising from contract or otherwise.
SEC. 15.SEC. 18.Section 12454.5 is added to the Corporations Code, to read:12454.5.(a)A worker cooperative is authorized to may create an indivisible reserves account that shall not be distributed to members.
(b)Funds in the indivisible reserves account shall, in a manner provided in the articles or bylaws, or by the board, be used as capital for the cooperative.
SEC. 16.SEC. 19.Section 12460 of the Corporations Code is amended to read:12460.(a)Meetings of members may be held at a place within or without this state that is stated in or fixed in accordance with the bylaws. If no other place is so stated or fixed, meetings of members shall be held at the principal executive office of the corporation. Unless prohibited by the bylaws of the corporation, if authorized by the board of directors in its sole discretion, and subject to the requirement of consent in clause (b) of Section 20 and those guidelines and procedures as the board of directors may adopt, members not physically present in person at a meeting of members may, by electronic transmission by and to the corporation (Sections 20 and 21) or by electronic video screen communication, participate in a meeting of members, be deemed present in person, and vote at a meeting of members whether that meeting is to be held at a designated place or in whole or in part by means of electronic transmission by and to the corporation or by electronic video screen communication, in accordance with subdivision (f).
(b)Except as provided in Section 12460.5, a regular meeting of members shall be held annually. In any year in which directors are elected, the election shall be held at the regular meeting unless the directors are chosen in some other manner authorized by law. Any other proper business may be transacted at the meeting.
(c)If a corporation fails to hold the regular meeting for a period of 60 days after the date designated therefor or, if no date has been designated, for a period of 15 months after the formation of the corporation or after its last regular meeting, or if the corporation fails to hold a written ballot for a period of 60 days after the date designated therefor, then the superior court of the proper county may summarily order the meeting to be held or the ballot to be conducted upon the application of a member, after notice to the corporation giving it an opportunity to be heard.
(d)The votes represented at a meeting called or by written ballot ordered pursuant to subdivision (c) and entitled to be cast on the business to be transacted shall constitute a quorum, notwithstanding any provision of the articles or bylaws or provision in this part to the contrary. The court may issue such orders as may be appropriate including, without limitation, orders designating the time and place of the meeting, the record date for determination of members entitled to vote, and the form of notice of the meeting.
(e)Special meetings of members for any lawful purpose may be called by the board, the chairman of the board, the president, or such other persons, if any, as are specified in the bylaws. In addition, special meetings of members for any lawful purpose may be called by 5 percent or more of the members. members, however, a special meeting of a worker cooperative may be called only by 20 percent or more of the worker-members.
(f)A meeting of the members may be conducted, in whole or in part, by electronic transmission by and to the corporation or by electronic video screen communication (1) if the corporation implements reasonable measures to provide members 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 concurrently with those proceedings, and (2) if any member votes or takes other action at the meeting by means of electronic transmission to the corporation or electronic video screen communication, a record of that vote or action is maintained by the corporation. Any request by a corporation to a member pursuant to clause (b) of Section 20 for consent to conduct a meeting of members by electronic transmission by and to the corporation, shall include a notice that absent consent of the member pursuant to clause (b) of Section 20, the meeting shall be held at a physical location in accordance with subdivision (a).
SEC. 17.SEC. 20.Section 12460.5 is added to the Corporations Code, to read:12460.5.Notwithstanding Section 12460, a collective board worker cooperative shall not be required to hold an annual meeting of members.
SEC. 21.Section 12461 of the Corporations Code is amended to read:12461.(a)Whenever members are required or permitted to take any action at a meeting, a written notice of the meeting shall be given not less than 10 nor more than 90 days before the date of the meeting to each member who, on the record date for notice of the meeting, is entitled to vote thereat; provided, however, that if notice is given by mail, and the notice is not mailed by first-class, registered, or certified mail, that notice shall be given not less than 20 days before the meeting. A worker cooperative shall provide notice of the meeting not less than 48 hours before the meeting if the meeting involves only worker members. Subject to subdivision (f), and subdivision (b) of Section 12462, that notice shall state the place, date and time of the meeting, the means of electronic transmission by and to the corporation (Sections 20 and 21) or electronic video screen communication, if any, by which members may participate in that meeting, and (1) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted, or (2) in the case of the regular meeting, those matters which the board, at the time the notice is given, intends to present for action by the members, but, except as provided in subdivision (b) of Section 12462, any proper matter may be presented at the meeting for such action. The notice of any meeting at which directors are to be elected shall include the names of all those who are nominees at the time the notice is given to members.
(b)Notice of a members meeting or any report shall be given personally, by electronic transmission by the corporation, or by mail or other means of written communication, addressed to a member at the address of such member appearing on the books of the corporation or given by the member to the corporation for purpose of notice; or if no such address appears or is given, at the place where the principal office of the corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal office is located. An affidavit of giving of any notice or report in accordance with the provisions of this part, executed by the secretary, assistant secretary or any transfer agent, shall be prima facie evidence of the giving of the notice or report.
If any notice or report addressed to the member at the address of such member appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate the United States Postal Service is unable to deliver the notice or report to the member at such address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available for the member upon written demand of the member at the principal office of the corporation for a period of one year from the date of the giving of the notice or report to all other members.
Notice given by electronic transmission by the corporation under this subdivision shall be valid only if it complies with Section 20. Notwithstanding the foregoing, notice shall not be given by electronic transmission by the corporation under this subdivision after either of the following:
(1)The corporation is unable to deliver two consecutive notices to the member by that means.
(2)The inability to so deliver the notices to the member becomes known to the secretary, any assistant secretary, the transfer agent, or other person responsible for the giving of the notice.
(c)Upon request in writing to the corporation addressed to the attention of the chairman of the board, president, vice president or secretary by any person (other than the board) entitled to call a special meeting of members, the officer forthwith shall cause notice to be given to the members entitled to vote that a meeting will be held at a time fixed by the board not less than 35 nor more than 90 days after the receipt of the request. If the notice is not given within 20 days after receipt of the request, the persons entitled to call the meeting may give the notice or the superior court of the proper county shall summarily order the giving of the notice, after notice to the corporation giving it an opportunity to be heard. The court may issue such orders as may be appropriate, including, without limitation, orders designating the time and place of the meeting, the record date for determination of members entitled to vote and the form of notice.
(d)When a members meeting is adjourned to another time or place, unless the bylaws otherwise require and except as provided in this subdivision, notice need not be given of the adjourned meeting if the time and place thereof (or the means of electronic transmission by and to the corporation or electronic video screen communication, if any, by which members may participate) are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each member of record entitled to vote at the meeting.
(e)The transactions of any meeting of members however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present, and if, either before or after the meeting, each of the persons entitled to vote, not present in person, provides a waiver of notice or consent to the holding of the meeting or an approval of the minutes thereof in writing. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of and presence at such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required by this part to be included in the notice but not so included, if such objection is expressly made at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of members need be specified in any written waiver of notice, consent to the holding of the meeting or approval of the minutes thereof, unless otherwise provided in the articles or bylaws, except as provided in subdivision (f).
(f)Any approval of the members required under Section 12362, 12364, 12373, 12502 or 12658 other than unanimous approval by those entitled to vote, shall be valid only if the general nature of the proposal so approved was stated in the notice of meeting or in any written waiver of notice.
(g)A court may find that notice not given in conformity with this section is still valid, if it was given in a fair and reasonable manner.
(h)Subject to the provisions of subdivision (i), and unless prohibited by the articles or bylaws, prior to any regular or special meeting of members, the board may authorize distribution of a written ballot to every member entitled to vote at the meeting. Such ballot shall set forth the action proposed to be taken at the meeting, shall provide an opportunity to specify approval or disapproval of the proposed action, and shall state that unless revoked by the member voting in person at the meeting, the ballot will be counted if received by the corporation on or before the time of the meeting with respect to which it was sent. If ballots are so distributed with respect to a meeting, the number of members voting at the meeting by unrevoked written ballots shall be deemed present at the meeting for purposes of determining the existence of a quorum pursuant to subdivision (a) of Section 12462 but only with respect to the proposed action referred to in the ballots. These ballots shall be distributed in a manner consistent with the requirements of subdivision (b) and Section 12464.
(i)Unless prohibited by the articles or bylaws, written ballots may be distributed in a manner contemplated by subdivision (h) with respect to the election of directors, except that no ballots may be so distributed with respect to the election of directors if cumulative voting is permitted pursuant to Section 12484.
SEC. 18.SEC. 22.Section 12530 of the Corporations Code is amended to read:12530.Except as provided in Section 12530.5, any corporation may merge with another domestic corporation, foreign corporation, or other business entity. However, a merger with a nonprofit public benefit corporation or a nonprofit religious corporation must have the prior written consent of the Attorney General.
SEC. 19.SEC. 23.Section 12530.5 is added to the Corporations Code, to read:12530.5.Notwithstanding Section 12530, a worker cooperative that has not revoked its election to be governed as a worker cooperative under Section 12310.5 shall not consolidate or merge with another corporation other than another worker cooperative. Two or more worker cooperatives may merge or consolidate in a manner consistent with this chapter.
SEC. 20.SEC. 24.Section 12653 of the Corporations Code is amended to read:12653.(a)After determining that all the known debts and liabilities of a corporation in the process of winding up have been paid or adequately provided for, the board shall distribute all the remaining corporate assets in the manner provided in Sections 12655, 12656, and 12656.5.
(b)If the winding up is by court proceeding or subject to court supervision, the distribution shall not be made until after the expiration of any period for the presentation of claims that has been prescribed by order of the court.
(c)Anything to the contrary notwithstanding, assets, if any, that are not subject to attachment, execution or sale for the corporations debts and liabilities may be distributed pursuant to Sections 12655, 12656, and 12656.5 even though all debts and liabilities have not been paid or adequately provided for.
SEC. 21.SEC. 25.Section 12656.5 is added to the Corporations Code, to read:12656.5.(a)After complying with the provisions of Section 12653, and except as otherwise provided in Section 12655, upon dissolution of a worker cooperative the majority of the unallocated capital account shall be distributed to members on the basis of the following:
(1)Patronage, Patronage.
(2)Capital contributions, or contributions.
(3)A combination of patronage and capital contributions.
(b)A worker cooperative is authorized to include patronage provided by past and current members in its distribution of the unallocated capital account.
(c)Subdivision (a) shall not apply to any amounts in the indivisible reserve account. Any amounts in the indivisible reserve account shall, upon dissolution, be allocated to an International Cooperative Alliance approved national federation or a regional body in this state designated in the articles of incorporation or the bylaws.
SEC. 22.SEC. 26.Section 25017 of the Corporations Code is amended to read:25017.(a)Sale or sell includes every contract of sale of, contract to sell, or disposition of, a security or interest in a security for value. Sale or sell includes any exchange of securities and any change in the rights, preferences, privileges, or restrictions of or on outstanding securities.
(b)Offer or offer to sell includes every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security for value.
(c)Any security given or delivered with, or as a bonus on account of, any purchase of securities or any other thing constitutes a part of the subject of the purchase and is considered to have been offered and sold for value.
(d)A purported gift of assessable stock involves an offer and sale.
(e)Every sale or offer of a warrant or right to purchase or subscribe to another security of the same or another issuer, as well as every sale or offer of a security which gives the holder a present or future right or privilege to convert the security into another security of the same or another issuer, includes an offer and sale of the other security only at the time of the offer or sale of the warrant or right or convertible security; but neither the exercise of the right to purchase or subscribe or to convert nor the issuance of securities pursuant thereto is an offer or sale.
(f)The terms defined in this section do not include: (1) any bona fide secured transaction in or loan of outstanding securities; (2) any stock dividend payable with respect to common stock of a corporation solely (except for any cash or scrip paid for fractional shares) in shares of such common stock, if the corporation has no other class of voting stock outstanding; provided, that shares issued in any such dividend shall be subject to any conditions previously imposed by the commissioner applicable to the shares with respect to which they are issued; (3) any act incident to a transaction or reorganization approved by a state or federal court in which securities are issued and exchanged for one or more outstanding securities, claims, or property interests, or partly in that exchange and partly for cash, and nothing in this division shall be construed to prohibit a court from applying the protections described in Section 25014.7 or 25140 and the regulations adopted thereunder when approving any transaction involving a rollup participant; or (4) any written notice of allocation, as defined in Section 1388(b) of the Internal Revenue Code, issued by an organization described in Section 1381(a) of the Internal Revenue Code.
SEC. 23.SEC. 27.Section 25019 of the Corporations Code is amended to read:25019.Security means any note; stock; treasury stock; membership in an incorporated or unincorporated association; bond; debenture; evidence of indebtedness; certificate of interest or participation in any profit-sharing agreement; collateral trust certificate; preorganization certificate or subscription; transferable share; investment contract; viatical settlement contract or a fractionalized or pooled interest therein; life settlement contract or a fractionalized or pooled interest therein; voting trust certificate; certificate of deposit for a security; interest in a limited liability company and any class or series of those interests (including any fractional or other interest in that interest), except a membership interest in a limited liability company in which the person claiming this exception can prove that all of the members are actively engaged in the management of the limited liability company; provided that evidence that members vote or have the right to vote, or the right to information concerning the business and affairs of the limited liability company, or the right to participate in management, shall not establish, without more, that all members are actively engaged in the management of the limited liability company; certificate of interest or participation in an oil, gas gas, or mining title or lease or in payments out of production under that title or lease; put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof); or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency; any beneficial interest or other security issued in connection with a funded employees pension, profit sharing, stock bonus, or similar benefit plan; or, in general, any interest or instrument commonly known as a security; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. All of the foregoing are securities whether or not evidenced by a written document. Security does not include: (1) any beneficial interest in any voluntary inter vivos trust which is not created for the purpose of carrying on any business or solely for the purpose of voting, or (2) any beneficial interest in any testamentary trust, (3) any insurance or endowment policy or annuity contract under which an insurance company admitted in this state promises to pay a sum of money (whether or not based upon the investment performance of a segregated fund) either in a lump sum or periodically for life or some other specified period, (4) any franchise subject to registration under the Franchise Investment Law (Division 5 (commencing with Section 31000)), or exempted from registration by Section 31100 or 31101, or (5) a membership or share interest in a collective board worker cooperative, as defined in Section 12230.5.
SEC. 24.SEC. 28.Section 25100 of the Corporations Code is amended to read:25100.The following securities are exempted from Sections 25110, 25120, and 25130:
(a)Any security (including a revenue obligation) issued or guaranteed by the United States, any state, any city, county, city and county, public district, public authority, public corporation, public entity, or political subdivision of a state or any agency or corporate or other instrumentality of any one or more of the foregoing; or any certificate of deposit for any of the foregoing.
(b)Any security issued or guaranteed by Canada, any Canadian province, any political subdivision or municipality of that province, or by any other foreign government with which the United States currently maintains diplomatic relations, if the security is recognized as a valid obligation by the issuer or guarantor; or any certificate of deposit for any of the foregoing.
(c)Any security issued or guaranteed by and representing an interest in or a direct obligation of a national bank or a bank or trust company incorporated under the laws of this state, and any security issued by a bank to one or more other banks and representing an interest in an asset of the issuing bank.
(d)Any security issued or guaranteed by a federal savings association or federal savings bank or federal land bank or joint land bank or national farm loan association or by any savings association, as defined in subdivision (a) of Section 5102 of the Financial Code, which is subject to the supervision and regulation of the Commissioner of Financial Institutions of this state.
(e)Any security (other than an interest in all or portions of a parcel or parcels of real property which are subdivided land or a subdivision or in a real estate development), the issuance of which is subject to authorization by the Insurance Commissioner, the Public Utilities Commission, or the Real Estate Commissioner of this state.
(f)Any security consisting of any interest in all or portions of a parcel or parcels of real property which are subdivided lands or a subdivision or in a real estate development; provided that the exemption in this subdivision shall not be applicable to: (1) any investment contract sold or offered for sale with, or as part of, that interest, or (2) any person engaged in the business of selling, distributing, or supplying water for irrigation purposes or domestic use that is not a public utility except that the exemption is applicable to any security of a mutual water company (other than an investment contract as described in paragraph (1)) offered or sold in connection with subdivided lands pursuant to Chapter 2 (commencing with Section 14310) of Part 7 of Division 3 of Title 1.
(g)Any mutual capital certificates or savings accounts, as defined in the Savings Association Law, issued by a savings association, as defined by subdivision (a) of Section 5102 of the Financial Code, and holding a license or certificate of authority then in force from the Commissioner of Financial Institutions of this state.
(h)Any security issued or guaranteed by any federal credit union, or by any credit union organized and supervised, or regulated, under the Credit Union Law.
(i)Any security issued or guaranteed by any railroad, other common carrier, public utility, or public utility holding company which is (1) subject to the jurisdiction of the Interstate Commerce Commission or its successor or (2) a holding company registered with the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935 or a subsidiary of that company within the meaning of that act or (3) regulated in respect of the issuance or guarantee of the security by a governmental authority of the United States, of any state, of Canada or of any Canadian province; and the security is subject to registration with or authorization of issuance by that authority.
(j)Any security (except evidences of indebtedness, whether interest bearing or not) of an issuer (1) organized exclusively for educational, benevolent, fraternal, religious, charitable, social, or reformatory purposes and not for pecuniary profit, if no part of the net earnings of the issuer inures to the benefit of any private shareholder or individual, or (2) organized as a chamber of commerce or trade or professional association. The fact that amounts received from memberships or dues or both will or may be used to construct or otherwise acquire facilities for use by members of the nonprofit organization does not disqualify the organization for this exemption. This exemption does not apply to the securities of any nonprofit organization if any promoter thereof expects or intends to make a profit directly or indirectly from any business or activity associated with the organization or operation of that nonprofit organization or from remuneration received from that nonprofit organization.
(k)Any agreement, commonly known as a life income contract, of an issuer (1) organized exclusively for educational, benevolent, fraternal, religious, charitable, social, or reformatory purposes and not for pecuniary profit and (2) which the commissioner designates by rule or order, with a donor in consideration of a donation of property to that issuer and providing for the payment to the donor or persons designated by him or her of income or specified periodic payments from the donated property or other property for the life of the donor or those other persons.
(l)Any note, draft, bill of exchange, or bankers acceptance which is freely transferable and of prime quality, arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which evidences an obligation to pay cash within nine months of the date of issuance, exclusive of days of grace, or any renewal of that paper which is likewise limited, or any guarantee of that paper or of that renewal, provided that the paper is not offered to the public in amounts of less than twenty-five thousand dollars ($25,000) in the aggregate to any one purchaser. In addition, the commissioner may, by rule or order, exempt any issuer of any notes, drafts, bills of exchange or bankers acceptances from qualification of those securities when the commissioner finds that the qualification is not necessary or appropriate in the public interest or for the protection of investors.
(m)Any security issued by any corporation organized and existing under the provisions of Chapter 1 (commencing with Section 54001) of Division 20 of the Food and Agricultural Code.
(n)Any beneficial interest in an employees pension, profit-sharing, stock bonus stock bonus, or similar benefit plan which meets the requirements for qualification under Section 401 of the federal Internal Revenue Code or any statute amendatory thereof or supplementary thereto. A determination letter from the Internal Revenue Service stating that an employees pension, profit-sharing, stock bonus stock bonus, or similar benefit plan meets those requirements shall be conclusive evidence that the plan is an employees pension, profit-sharing, stock bonus stock bonus, or similar benefit plan within the meaning of the first sentence of this subdivision until the date the determination letter is revoked in writing by the Internal Revenue Service, regardless of whether or not the revocation is retroactive.
(o)Any security listed or approved for listing upon notice of issuance on a national securities exchange, if the exchange has been certified by rule or order of the commissioner and any warrant or right to purchase or subscribe to the security. The exemption afforded by this subdivision does not apply to securities listed or approved for listing upon notice of issuance on a national securities exchange, in a rollup transaction unless the rollup transaction is an eligible rollup transaction as defined in Section 25014.7.
That certification of any exchange shall be made by the commissioner upon the written request of the exchange if the commissioner finds that the exchange, in acting on applications for listing of common stock, substantially applies the minimum standards set forth in either subparagraph (A) or (B) of paragraph (1), and, in considering suspension or removal from listing, substantially applies each of the criteria set forth in paragraph (2).
(1)Listing standards:
(A)(i)Shareholders equity of at least four million dollars ($4,000,000).
(ii)Pretax income of at least seven hundred fifty thousand dollars ($750,000) in the issuers last fiscal year or in two of its last three fiscal years.
(iii)Minimum public distribution of 500,000 shares (exclusive of the holdings of officers, directors, controlling shareholders, and other concentrated or family holdings), together with a minimum of 800 public holders or minimum public distribution of 1,000,000 shares together with a minimum of 400 public holders. The exchange may also consider the listing of a companys securities if the company has a minimum of 500,000 shares publicly held, a minimum of 400 shareholders and daily trading volume in the issue has been approximately 2,000 shares or more for the six months preceding the date of application. In evaluating the suitability of an issue for listing under this trading provision, the exchange shall review the nature and frequency of that activity and any other factors as it may determine to be relevant in ascertaining whether the issue is suitable for trading. A security that trades infrequently shall not be considered for listing under this paragraph even though average daily volume amounts to 2,000 shares per day or more.
Companies whose securities are concentrated in a limited geographical area, or whose securities are largely held in block by institutional investors, normally may not be considered eligible for listing unless the public distribution appreciably exceeds 500,000 shares.
(iv)Minimum price of three dollars ($3) per share for a reasonable period of time prior to the filing of a listing application; provided, however, in certain instances an exchange may favorably consider listing an issue selling for less than three dollars ($3) per share after considering all pertinent factors, including market conditions in general, whether historically the issue has sold above three dollars ($3) per share, the applicants capitalization, and the number of outstanding and publicly held shares of the issue.
(v)An aggregate market value for publicly held shares of at least three million dollars ($3,000,000).
(B)(i)Shareholders equity of at least four million dollars ($4,000,000).
(ii)Minimum public distribution set forth in clause (iii) of subparagraph (A) of paragraph (1).
(iii)Operating history of at least three years.
(iv)An aggregate market value for publicly held shares of at least fifteen million dollars ($15,000,000).
(2)Criteria for consideration of suspension or removal from listing:
(i)If a company that (A) has shareholders equity of less than one million dollars ($1,000,000) has sustained net losses in each of its two most recent fiscal years, or (B) has net tangible assets of less than three million dollars ($3,000,000) and has sustained net losses in three of its four most recent fiscal years.
(ii)If the number of shares publicly held (excluding the holdings of officers, directors, controlling shareholders and other concentrated or family holdings) is less than 150,000.
(iii)If the total number of shareholders is less than 400 or if the number of shareholders of lots of 100 shares or more is less than 300.
(iv)If the aggregate market value of shares publicly held is less than seven hundred fifty thousand dollars ($750,000).
(v)If shares of common stock sell at a price of less than three dollars ($3) per share for a substantial period of time and the issuer shall fail to effectuate a reverse stock split of the shares within a reasonable period of time after being requested by the exchange to take that action.
A national securities exchange, certified by rule or order of the commissioner under this subdivision, shall file annual reports when requested to do so by the commissioner. The annual reports shall contain, by issuer: the variances granted to an exchanges listing standards, including variances from corporate governance and voting rights standards, for any security of that issuer; the reasons for the variances; a discussion of the review procedure instituted by the exchange to determine the effect of the variances on investors and whether the variances should be continued; and any other information that the commissioner deems relevant. The purpose of these reports is to assist the commissioner in determining whether the quantitative and qualitative requirements of this subdivision are substantially being met by the exchange in general or with regard to any particular security.
The commissioner after appropriate notice and opportunity for hearing in accordance with the provisions of the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, may, in his or her discretion, by rule or order, decertify any exchange previously certified that ceases substantially to apply the minimum standards or criteria as set forth in paragraphs (1) and (2).
A rule or order of certification shall conclusively establish that any security listed or approved for listing upon notice of issuance on any exchange named in a rule or order of certification, and any warrant or right to purchase or subscribe to that security, is exempt under this subdivision until the adoption by the commissioner of any rule or order decertifying the exchange.
(p)A promissory note secured by a lien on real property, which is neither one of a series of notes of equal priority secured by interests in the same real property nor a note in which beneficial interests are sold to more than one person or entity.
(q)Any unincorporated interindemnity or reciprocal or interinsurance contract, that qualifies under the provisions of Section 1280.7 of the Insurance Code, between members of a cooperative corporation, organized and operating under Part 2 (commencing with Section 12200) of Division 3 of Title 1, and whose members consist only of physicians and surgeons licensed in California, which contracts indemnify solely in respect to medical malpractice claims against the members, and which do not collect in advance of loss any moneys other than contributions by each member to a collective reserve trust fund or for necessary expenses of administration.
(1)Whenever it appears to the commissioner that any person has engaged or is about to engage in any act or practice constituting a violation of any provision of Section 1280.7 of the Insurance Code, the commissioner may, in the commissioners discretion, bring an action in the name of the people of the State of California in the superior court to enjoin the acts or practices or to enforce compliance with Section 1280.7 of the Insurance Code. Upon a proper showing a permanent or preliminary injunction, a restraining order, or a writ of mandate shall be granted and a receiver or conservator may be appointed for the defendant or the defendants assets.
(2)The commissioner may, in the commissioners discretion, (A) make public or private investigations within or outside of this state as the commissioner deems necessary to determine whether any person has violated or is about to violate any provision of Section 1280.7 of the Insurance Code or to aid in the enforcement of Section 1280.7, and (B) publish information concerning the violation of Section 1280.7.
(3)For the purpose of any investigation or proceeding under this section, the commissioner or any officer designated by the commissioner may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, agreements, or other documents or records which the commissioner deems relevant or material to the inquiry.
(4)In case of contumacy by, or refusal to obey a subpoena issued to, any person, the superior court, upon application by the commissioner, may issue to the person an order requiring the person to appear before the commissioner, or the officer designated by the commissioner, to produce documentary evidence, if so ordered, or to give evidence touching the matter under investigation or in question. Failure to obey the order of the court may be punished by the court as a contempt.
(5)No person is excused from attending or testifying or from producing any document or record before the commissioner or in obedience to the subpoena of the commissioner or any officer designated by the commissioner, or in any proceeding instituted by the commissioner, on the ground that the testimony or evidence (documentary or otherwise), required of the person may tend to incriminate the person or subject the person to a penalty or forfeiture, but no individual may be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which the person is compelled, after validly claiming the privilege against self-incrimination, to testify or produce evidence (documentary or otherwise), except that the individual testifying is not exempt from prosecution and punishment for perjury or contempt committed in testifying.
(6)The cost of any review, examination, audit, or investigation made by the commissioner under Section 1280.7 of the Insurance Code shall be paid to the commissioner by the person subject to the review, examination, audit, or investigation, and the commissioner may maintain an action for the recovery of these costs in any court of competent jurisdiction. In determining the cost, the commissioner may use the actual amount of the salary or other compensation paid to the persons making the review, examination, audit, or investigation plus the actual amount of expenses including overhead reasonably incurred in the performance of the work.
The recoverable cost of each review, examination, audit, or investigation made by the commissioner under Section 1280.7 of the Insurance Code shall not exceed twenty-five thousand dollars ($25,000), except that costs exceeding twenty-five thousand dollars ($25,000) shall be recoverable if the costs are necessary to prevent a violation of any provision of Section 1280.7 of the Insurance Code.
(r)Any shares or memberships issued by any corporation organized and existing pursuant to the provisions of Part 2 (commencing with Section 12200) of Division 3 of Title 1, provided the aggregate investment of any shareholder or member in shares or memberships sold pursuant to this subdivision does not exceed one thousand dollars ($1,000). In the case of a worker cooperative, the aggregate investment of any worker member in shares or memberships sold pursuant to this subdivision shall not exceed five thousand dollars ($5,000). This section does not create the presumption, if the aggregate investment of a worker-member exceeds five thousand dollars ($5,000), that the investment must be qualified or filed as a sale of securities under this title. This exemption does not apply to the shares or memberships of that corporation if any promoter thereof expects or intends to make a profit directly or indirectly from any business or activity associated with the corporation or the operation of the corporation or from remuneration, other than reasonable salary, received from the corporation. This exemption does not apply to nonvoting shares or memberships of that corporation issued to any person who does not possess, and who will not acquire in connection with the issuance of nonvoting shares or memberships, voting power (Section 12253) in the corporation. This exemption also does not apply to shares or memberships issued by a nonprofit cooperative corporation organized to facilitate the creation of an unincorporated interindemnity arrangement that provides indemnification for medical malpractice to its physician and surgeon members as set forth in subdivision (q).
(s)Any security consisting of or representing an interest in a pool of mortgage loans that meets each of the following requirements:
(1)The pool consists of whole mortgage loans or participation interests in those loans, which loans were originated or acquired in the ordinary course of business by a national bank or federal savings association or federal savings bank having its principal office in this state, by a bank incorporated under the laws of this state or by a savings association as defined in subdivision (a) of Section 5102 of the Financial Code and which is subject to the supervision and regulation of the Commissioner of Financial Institutions, and each of which at the time of transfer to the pool is an authorized investment for the originating or acquiring institution.
(2)The pool of mortgage loans is held in trust by a trustee which is a financial institution specified in paragraph (1) as trustee or otherwise.
(3)The loans are serviced by a financial institution specified in paragraph (1).
(4)The security is not offered in amounts of less than twenty-five thousand dollars ($25,000) in the aggregate to any one purchaser.
(5)The security is offered pursuant to a registration under the Securities Act of 1933, or pursuant to an exemption under Regulation A under that act, or in the opinion of counsel for the issuer, is offered pursuant to an exemption under Section 4(2) of that act.
(t)(1)Any security issued or guaranteed by and representing an interest in or a direct obligation of an industrial loan company incorporated under the laws of the state and authorized by the Commissioner of Financial Institutions to engage in industrial loan business.
(2)Any investment certificate in or issued by any industrial loan company that is organized under the laws of a state of the United States other than this state, that is insured by the Federal Deposit Insurance Corporation, and that maintains a branch office in this state.
SEC. 25.SEC. 29.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
The Legislature finds and declares all of the following:
(a)A worker cooperative has the purpose of creating and maintaining sustainable jobs and generating wealth in order to improve the quality of life of its worker-members, dignify human work, allow workers democratic self-management, and promote community and local development.
(b)The purpose of this act is to amend the Consumer Cooperative Corporation Law to clarify that the law applies to cooperatives in general, not just consumer cooperatives, and to create more visibility for worker cooperatives. This act is intended to provide a definition of worker cooperative for purposes of this act, and not for purposes of other laws.
SEC. 2.The heading of Part 2 (commencing with Section 12200) of Division 3 of Title 1 of the Corporations Code is amended to read:2.CONSUMER GENERAL COOPERATIVE CORPORATIONSSEC. 3.Section 12200 of the Corporations Code is amended to read:12200.This part shall be known as the Consumer General Cooperative Corporation Law. This part is intended primarily to apply to the organization and operation of consumer cooperatives. It is also applicable to other cooperatives, including, but not limited to, cooperatives formed for the purpose of recycling or treating hazardous wastes, which elect to incorporate under it. cooperatives, including, but not limited to, consumer cooperatives, worker cooperatives, and cooperatives formed for the purpose of recycling or treating hazardous waste that elect to incorporate under its provisions.
SEC. 4.Section 12201.5 is added to the Corporations Code, to read:12201.5.(a)Notwithstanding Section 12201, the net earnings and losses of a worker cooperative shall be apportioned and distributed at the time and in the manner specified in the articles of incorporation or bylaws.
(b)Net earnings declared as patronage distributions with respect to a period of time, and paid to a creditor or member, shall be apportioned among the members in accordance with the ratio that each members patronage during the period bears to total patronage by all members during the period.
(c)The apportionment, distribution, and payment of net earnings required by subdivision (a) may be paid in cash, credits, written notices of allocation, or capital stock issued by the worker cooperative.
SEC. 5.Section 12228.3 is added to the Corporations Code, to read:12228.3.Capital account cooperative is a worker cooperative in which the entire net book value is reflected in member capital accounts, one for each member, and an unallocated capital account, if any.
SEC. 6.Section 12230.5 is added to the Corporations Code, to read:12230.5.Collective board worker cooperative means a worker cooperative in which there is only one class of members consisting of worker-members, all of whom are members of the board.
SEC. 7.Section 12243 of the Corporations Code is amended to read:12243.(a)(1)If the corporation is organized to provide goods or services to its members, the corporations patrons are those who purchase those types of goods from, or use those types of service of, the corporation. If the corporation is organized to market, process or otherwise handle its members products or services, the corporations patrons are those persons whose products or services are so marketed, processed, or handled by the corporation.
Patronage
(2)Patronage of a patron is measured by the volume or value, or both, of a patrons purchases of such products from, and use of such services furnished by, the corporation, and by such products and services provided by the patron to the corporation for marketing.
(b)(1)If the corporation is organized as a worker cooperative, the corporations patrons are its worker-members.
(2)If the corporation is organized as a worker cooperative, patronage may be measured by work performed or personal services contributed, including wages earned, number of hours worked, seniority in the cooperative, number of jobs created in the previous taxable year, or some combination of these measures.
SEC. 8.Section 12253 of the Corporations Code is amended to read:12253.(a)Voting power means the power to vote for the election of directors at the time any determination of voting power is made and does not include the right to vote upon the happening of some condition or event which that has not yet occurred. In any case where
(b)If different classes of memberships are entitled to vote as separate classes for different members of the board, the determination of percentage of voting power shall be made on the basis of the percentage of the total number of authorized directors which that the memberships in question (whether of one or more classes) have the power to elect in an election at which all memberships then entitled to vote for the election of any directors are voted.
SEC. 9.Section 12253.5 is added to the Corporations Code, to read:12253.5.Worker cooperative means a corporation formed under this part that includes a class of worker-members who are natural persons whose patronage consists of labor contributed to, personal services performed for, or other work performed for the corporation.
SEC. 10.Section 12310 of the Corporations Code is amended to read:12310.The articles of incorporation of a corporation formed under this part shall set forth:
(a)The name of the corporation.
(b)The following statement:
This corporation is a cooperative corporation organized under the Consumer General Cooperative Corporation Law. The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under such the law.
[The articles may include a further description of the corporations purpose.]
(c)The name and street address in this state of the corporations initial agent for service of process in accordance with subdivision (b) of Section 12570.
(d)The initial street address of the corporation.
(e)The initial mailing address of the corporation, if different from the initial street address.
(f)Whether the voting power or the proprietary interests of the members are equal or unequal. If the voting power or proprietary interests of the members are unequal, the articles shall state either (i) the general rule or rules by which the voting power and proprietary interests of the members shall be determined or (ii) that such rule or rules shall be prescribed in the corporations bylaws. Equal voting power means voting power apportioned on the basis of one vote for each member. Equal proprietary rights means property rights apportioned on the basis of one proprietary unit for each member.
(g)Pursuant to Section 12310.5, the articles of incorporation may state whether the cooperative has elected to be governed as worker cooperative.
SEC. 11.Section 12310.5 is added to the Corporations Code, to read:12310.5.(a)A corporation organized under this part may elect to be governed as a worker cooperative by making the following statement in its articles of incorporation or its amended articles of incorporation:
This corporation is a worker cooperative corporation organized under the General Cooperative Corporation Law.
(b)A corporation that makes the election to be governed as a worker cooperative, unless expressly exempted, shall be governed by all the provisions of this part.
SEC. 12.Section 12317 is added to the Corporations Code, to read:12317.(a)A worker cooperative may, in its articles or bylaws, establish itself as a capital account cooperative.
(b)In a capital account cooperative, each member shall have only one vote in any matter requiring a vote of the membership.
(c)The articles or bylaws of a capital account cooperative may authorize assignment of a portion of retained net earnings and net losses to an unallocated capital account. The unallocated capital account in a capital account cooperative shall reflect any paid-in capital, net losses, and retained net earnings not allocated to individual members. Earnings assigned to the unallocated capital account may be used for any and all corporate purposes, as determined by the board of directors.
(d)The system of member and unallocated capital accounts may be used to determine the redemption price of member shares, capital stock, and written notices of allocation. The articles or bylaws may provide for the capital account cooperative worker cooperative to pay or credit interest on the balance in each members capital account.
(e)The articles or bylaws of a capital account cooperative may permit the periodic redemption of written notices of allocation and capital stock and shall provide for recall and redemption of membership shares upon termination of membership in the cooperative. However, no redemption may occur that would result in the liability of any director or officer pursuant to Article 2 (commencing with Section 12370) of Chapter 2.
(f)As used in this section, written notice of allocation has the same meaning as defined in Section 1388 (b) of the Internal Revenue Code.
SEC. 13.Section 12404 of the Corporations Code is amended to read:12404.Except as permitted in Section 12314, the voting power of members having voting rights, other than members of a worker cooperative, shall be equal.
SEC. 14.Section 12420 of the Corporations Code is amended to read:12420.A (a)Except as provided in subdivision (b), a corporation may issue memberships having different rights, privileges, preferences, restrictions, or conditions, as provided in its articles or bylaws. If the articles or bylaws authorize at least one class of voting memberships, a corporation may also authorize and issue additional classes of memberships, preferred or otherwise, that are divisible into a series or are nonvoting or both.
(b)A worker cooperative may issue only one type of membership. All worker-members shall have the rights, privileges, preferences, restrictions or conditions as provided in the articles or bylaws. This membership shall be indivisible.
SEC. 15.Section 12454.5 is added to the Corporations Code, to read:12454.5.(a)A worker cooperative is authorized to create an indivisible reserves account that shall not be distributed to members.
(b)Funds in the indivisible reserves account shall, in a manner provided in the articles or bylaws, or by the board, be used as capital for the cooperative.
SEC. 16.Section 12460 of the Corporations Code is amended to read:12460.(a)Meetings of members may be held at a place within or without this state that is stated in or fixed in accordance with the bylaws. If no other place is so stated or fixed, meetings of members shall be held at the principal executive office of the corporation. Unless prohibited by the bylaws of the corporation, if authorized by the board of directors in its sole discretion, and subject to the requirement of consent in clause (b) of Section 20 and those guidelines and procedures as the board of directors may adopt, members not physically present in person at a meeting of members may, by electronic transmission by and to the corporation (Sections 20 and 21) or by electronic video screen communication, participate in a meeting of members, be deemed present in person, and vote at a meeting of members whether that meeting is to be held at a designated place or in whole or in part by means of electronic transmission by and to the corporation or by electronic video screen communication, in accordance with subdivision (f).
(b)A Except as provided in Section 12460.5, a regular meeting of members shall be held annually. In any year in which directors are elected, the election shall be held at the regular meeting unless the directors are chosen in some other manner authorized by law. Any other proper business may be transacted at the meeting.
(c)If a corporation fails to hold the regular meeting for a period of 60 days after the date designated therefor or, if no date has been designated, for a period of 15 months after the formation of the corporation or after its last regular meeting, or if the corporation fails to hold a written ballot for a period of 60 days after the date designated therefor, then the superior court of the proper county may summarily order the meeting to be held or the ballot to be conducted upon the application of a member, after notice to the corporation giving it an opportunity to be heard.
(d)The votes represented at a meeting called or by written ballot ordered pursuant to subdivision (c) and entitled to be cast on the business to be transacted shall constitute a quorum, notwithstanding any provision of the articles or bylaws or in this part to the contrary. The court may issue such orders as may be appropriate including, without limitation, orders designating the time and place of the meeting, the record date for determination of members entitled to vote, and the form of notice of the meeting.
(e)Special meetings of members for any lawful purpose may be called by the board, the chairman of the board, the president, or such other persons, if any, as are specified in the bylaws. In addition, special meetings of members for any lawful purpose may be called by 5 percent or more of the members.
(f)A meeting of the members may be conducted, in whole or in part, by electronic transmission by and to the corporation or by electronic video screen communication (1) if the corporation implements reasonable measures to provide members 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 concurrently with those proceedings, and (2) if any member votes or takes other action at the meeting by means of electronic transmission to the corporation or electronic video screen communication, a record of that vote or action is maintained by the corporation. Any request by a corporation to a member pursuant to clause (b) of Section 20 for consent to conduct a meeting of members by electronic transmission by and to the corporation, shall include a notice that absent consent of the member pursuant to clause (b) of Section 20, the meeting shall be held at a physical location in accordance with subdivision (a).
SEC. 17.Section 12460.5 is added to the Corporations Code, to read:12460.5.Notwithstanding Section 12460, a collective board worker cooperative shall not be required to hold an annual meeting of members.
SEC. 18.Section 12530 of the Corporations Code is amended to read:12530.Any Except as provided in Section 12530.5, any corporation may merge with another domestic corporation, foreign corporation, or other business entity (Section 12242.5). However, a merger with a nonprofit public benefit corporation or a nonprofit religious corporation must have the prior written consent of the Attorney General.
SEC. 19.Section 12530.5 is added to the Corporations Code, to read:12530.5.Notwithstanding Section 12530, a worker cooperative that has not revoked its election to be governed as a worker cooperative under Section 12310.5 shall not consolidate or merge with another corporation other than another worker cooperative. Two or more worker cooperatives may merge or consolidate in a manner consistent with this chapter.
SEC. 20.Section 12653 of the Corporations Code is amended to read:12653.(a)After determining that all the known debts and liabilities of a corporation in the process of winding up have been paid or adequately provided for, the board shall distribute all the remaining corporate assets in the manner provided in Sections 12655 and 12656. 12655, 12656, and 12656.5.
(b)If the winding up is by court proceeding or subject to court supervision, the distribution shall not be made until after the expiration of any period for the presentation of claims that has been prescribed by order of the court.
(c)Anything to the contrary notwithstanding, assets, if any, which that are not subject to attachment, execution or sale for the corporations debts and liabilities may be distributed pursuant to Sections 12655 and 12656 12655, 12656, and 12656.5 even though all debts and liabilities have not been paid or adequately provided for.
SEC. 21.Section 12656.5 is added to the Corporations Code, to read:12656.5.(a)After complying with the provisions of Section 12653, and except as otherwise provided in Section 12655, upon dissolution of a worker cooperative the majority of the unallocated capital account shall be distributed to members on the basis of the following:
(1)Patronage,
(2)Capital contributions, or
(3)A combination of patronage and capital contributions.
(b)A worker cooperative is authorized to include patronage provided by past and current members in its distribution of the unallocated capital account.
(c)Subdivision (a) shall not apply to any amounts in the indivisible reserve account. Any amounts in the indivisible reserve account shall, upon dissolution, be allocated to an International Cooperative Alliance approved national federation or a regional body in this state designated in the articles of incorporation or the bylaws.
SEC. 22.Section 25017 of the Corporations Code is amended to read:25017.(a)Sale or sell includes every contract of sale of, contract to sell, or disposition of, a security or interest in a security for value. Sale or sell includes any exchange of securities and any change in the rights, preferences, privileges, or restrictions of or on outstanding securities.
(b)Offer or offer to sell includes every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security for value.
(c)Any security given or delivered with, or as a bonus on account of, any purchase of securities or any other thing constitutes a part of the subject of the purchase and is considered to have been offered and sold for value.
(d)A purported gift of assessable stock involves an offer and sale.
(e)Every sale or offer of a warrant or right to purchase or subscribe to another security of the same or another issuer, as well as every sale or offer of a security which gives the holder a present or future right or privilege to convert the security into another security of the same or another issuer, includes an offer and sale of the other security only at the time of the offer or sale of the warrant or right or convertible security; but neither the exercise of the right to purchase or subscribe or to convert nor the issuance of securities pursuant thereto is an offer or sale.
(f)The terms defined in this section do not include: (1) any bona fide secured transaction in or loan of outstanding securities; (2) any stock dividend payable with respect to common stock of a corporation solely (except for any cash or scrip paid for fractional shares) in shares of such common stock, if the corporation has no other class of voting stock outstanding; provided, that shares issued in any such dividend shall be subject to any conditions previously imposed by the commissioner applicable to the shares with respect to which they are issued; or (3) any act incident to a transaction or reorganization approved by a state or federal court in which securities are issued and exchanged for one or more outstanding securities, claims, or property interests, or partly in that exchange and partly for cash, and nothing in this division shall be construed to prohibit a court from applying the protections described in Section 25014.7 or 25140 and the regulations adopted thereunder when approving any transaction involving a rollup participant. participant; or (4) any written notice of allocation, as defined in Section 1388(b) of the Internal Revenue Code, issued by an organization described in Section 1381(a) of the Internal Revenue Code.
SEC. 23.Section 25019 of the Corporations Code is amended to read:25019.Security means any note; stock; treasury stock; membership in an incorporated or unincorporated association; bond; debenture; evidence of indebtedness; certificate of interest or participation in any profit-sharing agreement; collateral trust certificate; preorganization certificate or subscription; transferable share; investment contract; viatical settlement contract or a fractionalized or pooled interest therein; life settlement contract or a fractionalized or pooled interest therein; voting trust certificate; certificate of deposit for a security; interest in a limited liability company and any class or series of those interests (including any fractional or other interest in that interest), except a membership interest in a limited liability company in which the person claiming this exception can prove that all of the members are actively engaged in the management of the limited liability company; provided that evidence that members vote or have the right to vote, or the right to information concerning the business and affairs of the limited liability company, or the right to participate in management, shall not establish, without more, that all members are actively engaged in the management of the limited liability company; certificate of interest or participation in an oil, gas or mining title or lease or in payments out of production under that title or lease; put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof); or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency; any beneficial interest or other security issued in connection with a funded employees pension, profit sharing, stock bonus, or similar benefit plan; or, in general, any interest or instrument commonly known as a security; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. All of the foregoing are securities whether or not evidenced by a written document. Security does not include: (1) any beneficial interest in any voluntary inter vivos trust which is not created for the purpose of carrying on any business or solely for the purpose of voting, or (2) any beneficial interest in any testamentary trust, or (3) any insurance or endowment policy or annuity contract under which an insurance company admitted in this state promises to pay a sum of money (whether or not based upon the investment performance of a segregated fund) either in a lump sum or periodically for life or some other specified period, or (4) any franchise subject to registration under the Franchise Investment Law (Division 5 (commencing with Section 31000)), or exempted from registration by Section 31100 or 31101. 31101, or (5) a membership or share interest in a collective board worker cooperative, as defined in Section 12230.5.
SEC. 24.Section 25100 of the Corporations Code is amended to read:25100.The following securities are exempted from Sections 25110, 25120, and 25130:
(a)Any security (including a revenue obligation) issued or guaranteed by the United States, any state, any city, county, city and county, public district, public authority, public corporation, public entity, or political subdivision of a state or any agency or corporate or other instrumentality of any one or more of the foregoing; or any certificate of deposit for any of the foregoing.
(b)Any security issued or guaranteed by Canada, any Canadian province, any political subdivision or municipality of that province, or by any other foreign government with which the United States currently maintains diplomatic relations, if the security is recognized as a valid obligation by the issuer or guarantor; or any certificate of deposit for any of the foregoing.
(c)Any security issued or guaranteed by and representing an interest in or a direct obligation of a national bank or a bank or trust company incorporated under the laws of this state, and any security issued by a bank to one or more other banks and representing an interest in an asset of the issuing bank.
(d)Any security issued or guaranteed by a federal savings association or federal savings bank or federal land bank or joint land bank or national farm loan association or by any savings association, as defined in subdivision (a) of Section 5102 of the Financial Code, which is subject to the supervision and regulation of the Commissioner of Financial Institutions of this state.
(e)Any security (other than an interest in all or portions of a parcel or parcels of real property which are subdivided land or a subdivision or in a real estate development), the issuance of which is subject to authorization by the Insurance Commissioner, the Public Utilities Commission, or the Real Estate Commissioner of this state.
(f)Any security consisting of any interest in all or portions of a parcel or parcels of real property which are subdivided lands or a subdivision or in a real estate development; provided that the exemption in this subdivision shall not be applicable to: (1) any investment contract sold or offered for sale with, or as part of, that interest, or (2) any person engaged in the business of selling, distributing, or supplying water for irrigation purposes or domestic use that is not a public utility except that the exemption is applicable to any security of a mutual water company (other than an investment contract as described in paragraph (1)) offered or sold in connection with subdivided lands pursuant to Chapter 2 (commencing with Section 14310) of Part 7 of Division 3 of Title 1.
(g)Any mutual capital certificates or savings accounts, as defined in the Savings Association Law, issued by a savings association, as defined by subdivision (a) of Section 5102 of the Financial Code, and holding a license or certificate of authority then in force from the Commissioner of Financial Institutions of this state.
(h)Any security issued or guaranteed by any federal credit union, or by any credit union organized and supervised, or regulated, under the Credit Union Law.
(i)Any security issued or guaranteed by any railroad, other common carrier, public utility, or public utility holding company which is (1) subject to the jurisdiction of the Interstate Commerce Commission or its successor or (2) a holding company registered with the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935 or a subsidiary of that company within the meaning of that act or (3) regulated in respect of the issuance or guarantee of the security by a governmental authority of the United States, of any state, of Canada or of any Canadian province; and the security is subject to registration with or authorization of issuance by that authority.
(j)Any security (except evidences of indebtedness, whether interest bearing or not) of an issuer (1) organized exclusively for educational, benevolent, fraternal, religious, charitable, social, or reformatory purposes and not for pecuniary profit, if no part of the net earnings of the issuer inures to the benefit of any private shareholder or individual, or (2) organized as a chamber of commerce or trade or professional association. The fact that amounts received from memberships or dues or both will or may be used to construct or otherwise acquire facilities for use by members of the nonprofit organization does not disqualify the organization for this exemption. This exemption does not apply to the securities of any nonprofit organization if any promoter thereof expects or intends to make a profit directly or indirectly from any business or activity associated with the organization or operation of that nonprofit organization or from remuneration received from that nonprofit organization.
(k)Any agreement, commonly known as a life income contract, of an issuer (1) organized exclusively for educational, benevolent, fraternal, religious, charitable, social, or reformatory purposes and not for pecuniary profit and (2) which the commissioner designates by rule or order, with a donor in consideration of a donation of property to that issuer and providing for the payment to the donor or persons designated by him or her of income or specified periodic payments from the donated property or other property for the life of the donor or those other persons.
(l)Any note, draft, bill of exchange, or bankers acceptance which is freely transferable and of prime quality, arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which evidences an obligation to pay cash within nine months of the date of issuance, exclusive of days of grace, or any renewal of that paper which is likewise limited, or any guarantee of that paper or of that renewal, provided that the paper is not offered to the public in amounts of less than twenty-five thousand dollars ($25,000) in the aggregate to any one purchaser. In addition, the commissioner may, by rule or order, exempt any issuer of any notes, drafts, bills of exchange or bankers acceptances from qualification of those securities when the commissioner finds that the qualification is not necessary or appropriate in the public interest or for the protection of investors.
(m)Any security issued by any corporation organized and existing under the provisions of Chapter 1 (commencing with Section 54001) of Division 20 of the Food and Agricultural Code.
(n)Any beneficial interest in an employees pension, profit-sharing, stock bonus or similar benefit plan which meets the requirements for qualification under Section 401 of the federal Internal Revenue Code or any statute amendatory thereof or supplementary thereto. A determination letter from the Internal Revenue Service stating that an employees pension, profit-sharing, stock bonus or similar benefit plan meets those requirements shall be conclusive evidence that the plan is an employees pension, profit-sharing, stock bonus or similar benefit plan within the meaning of the first sentence of this subdivision until the date the determination letter is revoked in writing by the Internal Revenue Service, regardless of whether or not the revocation is retroactive.
(o)Any security listed or approved for listing upon notice of issuance on a national securities exchange, if the exchange has been certified by rule or order of the commissioner and any warrant or right to purchase or subscribe to the security. The exemption afforded by this subdivision does not apply to securities listed or approved for listing upon notice of issuance on a national securities exchange, in a rollup transaction unless the rollup transaction is an eligible rollup transaction as defined in Section 25014.7.
That certification of any exchange shall be made by the commissioner upon the written request of the exchange if the commissioner finds that the exchange, in acting on applications for listing of common stock, substantially applies the minimum standards set forth in either subparagraph (A) or (B) of paragraph (1), and, in considering suspension or removal from listing, substantially applies each of the criteria set forth in paragraph (2).
(1)Listing standards:
(A)(i)Shareholders equity of at least four million dollars ($4,000,000).
(ii)Pretax income of at least seven hundred fifty thousand dollars ($750,000) in the issuers last fiscal year or in two of its last three fiscal years.
(iii)Minimum public distribution of 500,000 shares (exclusive of the holdings of officers, directors, controlling shareholders, and other concentrated or family holdings), together with a minimum of 800 public holders or minimum public distribution of 1,000,000 shares together with a minimum of 400 public holders. The exchange may also consider the listing of a companys securities if the company has a minimum of 500,000 shares publicly held, a minimum of 400 shareholders and daily trading volume in the issue has been approximately 2,000 shares or more for the six months preceding the date of application. In evaluating the suitability of an issue for listing under this trading provision, the exchange shall review the nature and frequency of that activity and any other factors as it may determine to be relevant in ascertaining whether the issue is suitable for trading. A security that trades infrequently shall not be considered for listing under this paragraph even though average daily volume amounts to 2,000 shares per day or more.
Companies whose securities are concentrated in a limited geographical area, or whose securities are largely held in block by institutional investors, normally may not be considered eligible for listing unless the public distribution appreciably exceeds 500,000 shares.
(iv)Minimum price of three dollars ($3) per share for a reasonable period of time prior to the filing of a listing application; provided, however, in certain instances an exchange may favorably consider listing an issue selling for less than three dollars ($3) per share after considering all pertinent factors, including market conditions in general, whether historically the issue has sold above three dollars ($3) per share, the applicants capitalization, and the number of outstanding and publicly held shares of the issue.
(v)An aggregate market value for publicly held shares of at least three million dollars ($3,000,000).
(B)(i)Shareholders equity of at least four million dollars ($4,000,000).
(ii)Minimum public distribution set forth in clause (iii) of subparagraph (A) of paragraph (1).
(iii)Operating history of at least three years.
(iv)An aggregate market value for publicly held shares of at least fifteen million dollars ($15,000,000).
(2)Criteria for consideration of suspension or removal from listing:
(i)If a company that (A) has shareholders equity of less than one million dollars ($1,000,000) has sustained net losses in each of its two most recent fiscal years, or (B) has net tangible assets of less than three million dollars ($3,000,000) and has sustained net losses in three of its four most recent fiscal years.
(ii)If the number of shares publicly held (excluding the holdings of officers, directors, controlling shareholders and other concentrated or family holdings) is less than 150,000.
(iii)If the total number of shareholders is less than 400 or if the number of shareholders of lots of 100 shares or more is less than 300.
(iv)If the aggregate market value of shares publicly held is less than seven hundred fifty thousand dollars ($750,000).
(v)If shares of common stock sell at a price of less than three dollars ($3) per share for a substantial period of time and the issuer shall fail to effectuate a reverse stock split of the shares within a reasonable period of time after being requested by the exchange to take that action.
A national securities exchange, certified by rule or order of the commissioner under this subdivision, shall file annual reports when requested to do so by the commissioner. The annual reports shall contain, by issuer: the variances granted to an exchanges listing standards, including variances from corporate governance and voting rights standards, for any security of that issuer; the reasons for the variances; a discussion of the review procedure instituted by the exchange to determine the effect of the variances on investors and whether the variances should be continued; and any other information that the commissioner deems relevant. The purpose of these reports is to assist the commissioner in determining whether the quantitative and qualitative requirements of this subdivision are substantially being met by the exchange in general or with regard to any particular security.
The commissioner after appropriate notice and opportunity for hearing in accordance with the provisions of the Administrative Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, may, in his or her discretion, by rule or order, decertify any exchange previously certified that ceases substantially to apply the minimum standards or criteria as set forth in paragraphs (1) and (2).
A rule or order of certification shall conclusively establish that any security listed or approved for listing upon notice of issuance on any exchange named in a rule or order of certification, and any warrant or right to purchase or subscribe to that security, is exempt under this subdivision until the adoption by the commissioner of any rule or order decertifying the exchange.
(p)A promissory note secured by a lien on real property, which is neither one of a series of notes of equal priority secured by interests in the same real property nor a note in which beneficial interests are sold to more than one person or entity.
(q)Any unincorporated interindemnity or reciprocal or interinsurance contract, that qualifies under the provisions of Section 1280.7 of the Insurance Code, between members of a cooperative corporation, organized and operating under Part 2 (commencing with Section 12200) of Division 3 of Title 1, and whose members consist only of physicians and surgeons licensed in California, which contracts indemnify solely in respect to medical malpractice claims against the members, and which do not collect in advance of loss any moneys other than contributions by each member to a collective reserve trust fund or for necessary expenses of administration.
(1)Whenever it appears to the commissioner that any person has engaged or is about to engage in any act or practice constituting a violation of any provision of Section 1280.7 of the Insurance Code, the commissioner may, in the commissioners discretion, bring an action in the name of the people of the State of California in the superior court to enjoin the acts or practices or to enforce compliance with Section 1280.7 of the Insurance Code. Upon a proper showing a permanent or preliminary injunction, a restraining order, or a writ of mandate shall be granted and a receiver or conservator may be appointed for the defendant or the defendants assets.
(2)The commissioner may, in the commissioners discretion, (A) make public or private investigations within or outside of this state as the commissioner deems necessary to determine whether any person has violated or is about to violate any provision of Section 1280.7 of the Insurance Code or to aid in the enforcement of Section 1280.7, and (B) publish information concerning the violation of Section 1280.7.
(3)For the purpose of any investigation or proceeding under this section, the commissioner or any officer designated by the commissioner may administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, agreements, or other documents or records which the commissioner deems relevant or material to the inquiry.
(4)In case of contumacy by, or refusal to obey a subpoena issued to, any person, the superior court, upon application by the commissioner, may issue to the person an order requiring the person to appear before the commissioner, or the officer designated by the commissioner, to produce documentary evidence, if so ordered, or to give evidence touching the matter under investigation or in question. Failure to obey the order of the court may be punished by the court as a contempt.
(5)No person is excused from attending or testifying or from producing any document or record before the commissioner or in obedience to the subpoena of the commissioner or any officer designated by the commissioner, or in any proceeding instituted by the commissioner, on the ground that the testimony or evidence (documentary or otherwise), required of the person may tend to incriminate the person or subject the person to a penalty or forfeiture, but no individual may be prosecuted or subjected to any penalty or forfeiture for or on account of any transaction, matter, or thing concerning which the person is compelled, after validly claiming the privilege against self-incrimination, to testify or produce evidence (documentary or otherwise), except that the individual testifying is not exempt from prosecution and punishment for perjury or contempt committed in testifying.
(6)The cost of any review, examination, audit, or investigation made by the commissioner under Section 1280.7 of the Insurance Code shall be paid to the commissioner by the person subject to the review, examination, audit, or investigation, and the commissioner may maintain an action for the recovery of these costs in any court of competent jurisdiction. In determining the cost, the commissioner may use the actual amount of the salary or other compensation paid to the persons making the review, examination, audit, or investigation plus the actual amount of expenses including overhead reasonably incurred in the performance of the work.
The recoverable cost of each review, examination, audit, or investigation made by the commissioner under Section 1280.7 of the Insurance Code shall not exceed twenty-five thousand dollars ($25,000), except that costs exceeding twenty-five thousand dollars ($25,000) shall be recoverable if the costs are necessary to prevent a violation of any provision of Section 1280.7 of the Insurance Code.
(r)Any shares or memberships issued by any corporation organized and existing pursuant to the provisions of Part 2 (commencing with Section 12200) of Division 3 of Title 1, provided the aggregate investment of any shareholder or member in shares or memberships sold pursuant to this subdivision does not exceed three hundred dollars ($300). one thousand ($1,000). In the case of a worker cooperative, the aggregate investment of any worker member in shares or memberships sold pursuant to this subdivision shall not exceed five thousand dollars ($5,000). This exemption does not apply to the shares or memberships of that corporation if any promoter thereof expects or intends to make a profit directly or indirectly from any business or activity associated with the corporation or the operation of the corporation or from remuneration, other than reasonable salary, received from the corporation. This exemption does not apply to nonvoting shares or memberships of that corporation issued to any person who does not possess, and who will not acquire in connection with the issuance of nonvoting shares or memberships, voting power (Section 12253) in the corporation. This exemption also does not apply to shares or memberships issued by a nonprofit cooperative corporation organized to facilitate the creation of an unincorporated interindemnity arrangement that provides indemnification for medical malpractice to its physician and surgeon members as set forth in subdivision (q).
(s)Any security consisting of or representing an interest in a pool of mortgage loans that meets each of the following requirements:
(1)The pool consists of whole mortgage loans or participation interests in those loans, which loans were originated or acquired in the ordinary course of business by a national bank or federal savings association or federal savings bank having its principal office in this state, by a bank incorporated under the laws of this state or by a savings association as defined in subdivision (a) of Section 5102 of the Financial Code and which is subject to the supervision and regulation of the Commissioner of Financial Institutions, and each of which at the time of transfer to the pool is an authorized investment for the originating or acquiring institution.
(2)The pool of mortgage loans is held in trust by a trustee which is a financial institution specified in paragraph (1) as trustee or otherwise.
(3)The loans are serviced by a financial institution specified in paragraph (1).
(4)The security is not offered in amounts of less than twenty-five thousand dollars ($25,000) in the aggregate to any one purchaser.
(5)The security is offered pursuant to a registration under the Securities Act of 1933, or pursuant to an exemption under Regulation A under that act, or in the opinion of counsel for the issuer, is offered pursuant to an exemption under Section 4(2) of that act.
(t)(1)Any security issued or guaranteed by and representing an interest in or a direct obligation of an industrial loan company incorporated under the laws of the state and authorized by the Commissioner of Financial Institutions to engage in industrial loan business.
(2)Any investment certificate in or issued by any industrial loan company that is organized under the laws of a state of the United States other than this state, that is insured by the Federal Deposit Insurance Corporation, and that maintains a branch office in this state.
SEC. 25.No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.
|
Date
|
Status
|
|---|---|
| Jun 4, 2015 | Referred to Coms. on B. & F.I. and JUD. |
| Aug 12, 2015 | Chaptered by Secretary of State - Chapter 192, Statutes of 2015. |
| Aug 12, 2015 | Approved by the Governor. |
| Aug 3, 2015 | Enrolled and presented to the Governor at 3 p.m. |
| Jul 16, 2015 | Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 59. Noes 18. Page 2416.). |
| Jul 16, 2015 | Senate amendments concurred in. To Engrossing and Enrolling. |
| Jul 13, 2015 | Read third time. Passed. Ordered to the Assembly. (Ayes 39. Noes 0. Page 1906.). |
| Jul 13, 2015 | Read third time. Passed. Ordered to the Assembly. |
| Jul 13, 2015 | In Assembly. Concurrence in Senate amendments pending. May be considered on or after July 15 pursuant to Assembly Rule 77. |
| Jul 9, 2015 | Read second time. Ordered to third reading. |
| Jul 8, 2015 | Withdrawn from committee. |
| Jul 8, 2015 | Ordered to second reading. |
| Jul 6, 2015 | Read second time and amended. Re-referred to Com. on JUD. |
| Jul 2, 2015 | From committee: Amend, and do pass as amended and re-refer to Com. on JUD. (Ayes 7. Noes 0.) (July 1). |
| Jun 22, 2015 | From committee chair, with author's amendments: Amend, and re-refer to committee. Read second time, amended, and re-referred to Com. on B. & F.I. |
| Feb 26, 2015 | Read first time. To print. |
| May 22, 2015 | Read third time. Passed. Ordered to the Senate. (Ayes 55. Noes 17. Page 1551.) |
| May 22, 2015 | Read third time. Passed. Ordered to the Senate. |
| May 22, 2015 | In Senate. Read first time. To Com. on RLS. for assignment. |
| May 18, 2015 | Read second time. Ordered to third reading. |
| May 14, 2015 | Read second time and amended. Ordered returned to second reading. |
| May 13, 2015 | From committee: Amend, and do pass as amended. (Ayes 12. Noes 5.) (May 13). |
| May 4, 2015 | Re-referred to Com. on APPR. |
| Apr 30, 2015 | Read second time and amended. |
| Apr 29, 2015 | From committee: Amend, and do pass as amended and re-refer to Com. on APPR. (Ayes 9. Noes 3.) (April 27). |
| Apr 14, 2015 | Re-referred to Com. on B. & F. |
| Apr 13, 2015 | From committee chair, with author's amendments: Amend, and re-refer to Com. on B. & F. Read second time and amended. |
| Mar 12, 2015 | Referred to Com. on B. & F. |
| Feb 27, 2015 | From printer. May be heard in committee March 29. |
|
Date
|
Description
|
Location
|
Votes
|
|
|---|---|---|---|---|
| Jul 16, 2015 | AB 816 BONTA Concurrence in Senate Amendments | Assembly Floor |
Passed |
|
| Jul 13, 2015 | Assembly 3rd Reading AB816 Bonta By Hancock | Senate Floor |
Passed |
|
| Jul 1, 2015 | Do pass as amended, but first amend, and re-refer to the Committee on [Judiciary] | Senate Standing Committee on Banking and Financial Institutions |
Passed |
|
| May 22, 2015 | AB 816 BONTA Assembly Third Reading | Assembly Floor |
Passed |
|
| May 13, 2015 | Do pass as amended. | Assembly Standing Committee on Appropriations |
Passed |
|
| Apr 27, 2015 | Do pass as amended and be re-referred to the Committee on [Appropriations] | Assembly 1st Extraordinary Session on Finance |
Passed |
This list shows positions taken on this bill by organizations on the date displayed, which is linked to the original source.
Positions by individuals are not included.
|
Organization
|
Position
|
Date
|
|---|---|---|
| Arizmendi Association of Cooperatives | * Support | Jul 1, 2015 |
| California Center for Cooperative Development | ** Support | Jul 13, 2015 |
| Democracy at Work Institute | * Support | Jul 1, 2015 |
| Design Action Collective | ** Support | Jul 13, 2015 |
| DIG Cooperative | ** Support | Jul 13, 2015 |
| East Bay Community Law Center | ** Support | Jul 13, 2015 |
| Network of Bay Area Worker Cooperatives | ** Support | Jul 13, 2015 |
| New Hope Farms | ** Support | Jul 13, 2015 |
| Praxis Peace Institute | ** Support | Jul 13, 2015 |
| Prospera Community Development | ** Support | Jul 13, 2015 |
| Rainbow Grocery | ** Support | Jul 13, 2015 |
| Roots of Change | ** Support | Jul 13, 2015 |
| Sarana Community Acupuncture | ** Support | Jul 13, 2015 |
| Sustainable Economies Law Center | ** Support | Jul 13, 2015 |
| TeamWorks Development | ** Support | Jul 13, 2015 |
| Three Stone Hearth Community-Supported Kitchen | ** Support | Jul 13, 2015 |
AB 816
Page 5
CONCURRENCE IN SENATE AMENDMENTS
AB 816
(Bonta)
As Amended July 6, 2015
Majority vote
ASSEMBLY: |
55-17 |
(May 22, 2015) |
SENATE: |
39-0 |
(July 13, 2015) |
Original Committee Reference: B. & F.
SUMMARY: Renames the Consumer Cooperative Corporation Law to the Cooperative Corporation Law. Specifically, this bill:
Defines "worker cooperative" or "employment cooperative" as a corporation formed that includes a class of worker-members who are natural persons whose patronage consists of labor contributed to or other work performed for the corporation. Election to be organized as a worker cooperative or an employment cooperative does not create a presumption that workers are employees of the corporation for any purposes.
Requires at least 51% of the workers shall be worker-members or candidates.
Authorizes a worker cooperative to apportion and distribute its net earnings and losses at the time and in the manner specified in the articles of incorporation or bylaws.
Requires a worker cooperative to only make patronage distributions to the worker-member class.
Defines the patrons of a worker cooperative as worker-members and authorizes their patronage to be measured by work performed including wages earned, number of hours worked, number of jobs created, or some combinations of these measures.
Allows a worker cooperative to call a special meeting in a worker cooperative:
With more than four worker-members, a special meeting may only be called by the greater of three worker-members or 5% of the worker-members.
In a worker cooperative with fewer than four worker-members, special meetings may be called by one worker-member.
Defines a "capital account cooperative" as a worker cooperative in which the entire net book value is reflected in member capital accounts, one for each member and an unallocated capital account, if any.
Defines a "collective board worker cooperative" as a worker cooperative in which there is only one class of members consisting of worker-members, all of whom are members of the board.
The collective board worker cooperative is not required to hold an annual meeting of the members.
Defines "worker-member" as a member of a worker cooperative who is a natural person and also a patron of a worker cooperative.
Defines "community investor" who is not a worker-member and who holds a share or other proprietary interest in a worker cooperative.
Defines "candidate" as a worker who is being considered for membership in a worker cooperative, as defined in the corporation's articles or bylaws.
Defines "worker" as a natural person contributing labor or services to a worker cooperative.
Provides community investor voting power in a worker cooperative shall be provided in the articles or bylaws and is limited to approval rights only over a merger, sale of major assets, reorganization, or dissolution. Approval rights shall not include the right to propose any action.
Allows a worker cooperative to create an indivisible reserves account that shall not be distributed to members. Funds in the indivisible reserves account shall only derive from non-patronage-sourced income, in a manner provided in the articles or bylaws, or by the board, be used as capital for the cooperative.
Provides that a worker cooperative that has not revoked its election to be governed as a worker cooperative shall not consolidate or merge with another corporation other than another worker cooperative. Two or more worker cooperatives may merge or consolidate in a manner consistent with this chapter.
Requires a worker cooperative to provide notice of a meeting not less than 48 hours before the meeting if the meeting involves only worker-members and provided that the notice is delivered personally to every worker-member.
Increases the investment limitation for Consumer Cooperatives under California's Corporate Securities Law of 1968 exemption from qualification from $300 to $1,000.
Makes finding and declarations.
The Senate amendments:
Make clarifying changes to the definition of worker, worker-member and patronage.
Provide a work cooperative membership shall not be divided into partial memberships.
Clarify that funds in the indivisible reserves account shall only derive from non-patronage-sourced income.
Specify that in a worker cooperative with fewer than four worker-members special meetings may be called by one worker-member rather than 5% of the worker-members.
Make other technical and clarifying changes.
EXISTING LAW:
Establishes the Consumer Cooperative Cooperation Law which allows corporations to form as a cooperative corporation. (Corporations Code Section 12200 et seq.)
Provides that it is unlawful for any person to offer or sell any security in this state, unless such offering or sale has been qualified by the commissioner, as specified, or unless the offering or sale is covered by an express exemption. Caps the maximum aggregate investment that may be made by a shareholder in shares or by a member in memberships in a consumer cooperative corporation. As long as this cap is not exceeded, sales of those shares or memberships are exempt from state securities permitting laws. The cap of $300 was placed in California law, effective January 1, 1984. (Corporations Code Section 25110)
FISCAL EFFECT: According to the Assembly Appropriations Committee, minor and absorbable costs to the Secretary of State, though these costs could increase if the number of cooperative corporations increases significantly; minor and absorbable costs to the Department of Business Oversight.
COMMENTS: The findings and declarations in this bill states:
"A worker cooperative has the purpose of creating and maintaining sustainable jobs and generating wealth in order to improve the quality of life of its worker-members, dignify human work, allow workers' democratic self-management, and promote community and local development in this state.
"The purpose of this act is to amend the Consumer Cooperative Corporation Law to clarify that the law applies to cooperatives in general, not just consumer cooperatives, and to create more visibility for worker cooperatives. This act is intended to provide a definition of worker cooperative for purposes of this act, and not for purposes of other laws."
Cooperatives:
This bill makes substantive and historical changes to the California Consumer Cooperative Corporation Law. The Legislature, in 1982 created the Consumer Cooperative Law which provides a framework for establishing and operating cooperatives. California cooperatives can trace their history back to 1844, when a group of cotton mill weavers in England organized, called themselves the Rochdale Society. The Rochdale Society adopted several principles that have become the basis of most cooperatives. These principles include: open membership; one member, one vote; cash-only trading at market prices; patronage refunds proportional to each member's use of the cooperative's services; and limited return of interest on contributed capital.
Cooperatives are enterprises in which individuals or businesses organize to furnish themselves services that the members need. They seek to provide services more efficiently and at lower cost compared to paying third parties or to each member's performing the service individually. Unlike corporations, in cooperatives, ownership and control are equal among members. Cooperatives operate according to the democratic principle of one member, one vote. Unlike business corporations, cooperatives do not seek to generate profit but rather seek to save money for their members. Similarly, members do not seek or obtain increased capital value but rather cost savings and efficiency. In contrast to stock in a corporation, membership in a cooperative is not a saleable commodity. Cooperatives exist in many forms such as agricultural, financial institutions, housing, utility, consumer to name a few.
Cooperatives generally share the following principles:
Democratic Governance – Cooperatives generally have a one member, one vote rule. This is different from traditional business models, which often weight each owner's vote by the amount of that person's stake in the business. However, some cooperatives have an elected board of directors to oversee the day-to-day operations of the business, leaving strategic decisions to members as a whole.
Consensus Building – While each member has one vote, cooperatives encourage members to work with one another in their decision-making progress. If members want the cooperative to take a certain action, they must collaborate and gather most, if not, all members to agree.
Community-Centric – Most cooperatives have members from the same area. Because members live where they work, they are more likely to invest there. As cooperatives become a significant part of a community, they have less incentive to leave.
Member Satisfaction Superior to Capital – Cooperatives must earn a profit in order to survive as a business. However, member wellbeing is valued above earning more money. Many cooperatives have rules that keep the workplace fair, and preserve the workers' due process rights and safety.
Self-Determination – Members are more likely to invest their time and energy in the cooperative because they have input in its decisions and would share any wealth that comes from it. While traditional business models limit decision-making to its senior leadership, cooperatives give each member a stake in its future.
Training – Cooperatives usually have an apprenticeship program or other training that prepares new members to participate in the business. For cooperatives to survive, they must recruit, train, and continually develop their members.
Open Membership – Cooperatives generally allow any person to join regardless of gender, race, religion, political, or social status. To become a member, many cooperatives require an entry-level training program, an initial capital investment, and final approval by the membership.
Although worker cooperatives are currently regulated and created under the Consumer Cooperative Corporation Law, this bill attempts to create a new framework specific to worker cooperatives within the existing Consumer Cooperative Corporation Law.
Need for this bill:
According to the author, "California's existing cooperative law is the Consumer Cooperative Corporations statute. Although worker cooperatives may form under that statute, it contains no provisions specific to the formation and governance of worker cooperatives. The existing statute does not include labor in its definition of patronage, it does not provide for member capital accounts, and its lengthy notice requirement for member meetings does not suit worker cooperatives. Further, the current $300 securities exemption for members is too small to allow worker cooperatives to raise capital for their business."
Background: A worker cooperative is a business democratically owned and governed by its worker-owners. A worker cooperative is distinct from other kinds of cooperatives (consumer, producer, housing, financial, etc.) in that its members are its workers. Worker cooperatives are well established throughout Europe and Latin America but they are less common in the United States. The United States Federation of Worker Cooperatives estimates that there are currently about 350 worker cooperatives in the United States, employing over 5,000 people and account for $500 million in annual revenue. According to the United States Federation of Worker Cooperatives, California has approximately 50 established worker cooperatives.
The United States Federation of Worker Cooperatives determines whether a cooperative is a worker cooperative based on basic standards for worker cooperatives established in the World Declaration on Cooperative Worker Ownership (also known as the Oslo Declaration) at a meeting in Oslo, Norway in 2003 of the International Organization of Industrial, Artisanal and Service Producers' Cooperatives (CICOPA).
Almost any business can be organized as a worker cooperative. Examples include restaurants, bakeries and retail stores. Some well-known worker cooperatives are Equal Exchange headquartered in Massachusetts, a fair trade importer of chocolate and coffee and MONDRAGON Corporation located in Spain, one of the world’s largest worker cooperatives that employs over 80,000 workers.
Other States: Eleven other states have enacted worker cooperative specific statutes. These states include: Alabama, Connecticut, Delaware, Maine, Massachusetts, Oregon, Vermont, New York, Washington, Pennsylvania and Colorado.
Analysis Prepared by: Kathleen OMalley / B. & F. / (916) 319-3081 FN: 0001205
AB 816
Page 6
|
Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 |
THIRD READING
Bill No: AB 816
Amended: 7/6/15 in Senate
SENATE BANKING & F.I. COMMITTEE: 7-0, 7/1/15
AYES: Block, Vidak, Galgiani, Hall, Hueso, Lara, Morrell
ASSEMBLY FLOOR: 55-17, 5/22/15 - See last page for vote
SUBJECT: Cooperative corporations: worker cooperatives
SOURCE: East Bay Community Law Center
Sustainable Economies Law Center
DIGEST: This bill renames the Consumer Cooperative Corporation Law as the Cooperative Corporation Law; authorizes the creation of worker cooperatives, as specified; and increases, from $300 to $1000, the maximum aggregate investment that may be made by a shareholder in shares or a member in memberships of a cooperative corporation.
Existing law:
Establishes the Consumer Cooperative Corporation Law (Corporations Code Section 12200 et seq.), as specified.
Caps the maximum aggregate investment that may be made by a shareholder in shares or by a member in memberships of a cooperative corporation at $300 (Corporations Code Section 25100). As long as this cap is not exceeded, sales of those shares or memberships are exempt from state securities permitting laws.
This bill:
Increases, from $300 to $1,000, the maximum aggregate investment that may be made by a shareholder in shares or by a member in memberships of a cooperative corporation.
Renames the Consumer Cooperative Corporation Law as the Cooperative Corporation Law, and authorizes the creation of worker cooperatives under that law, as follows:
Defines a “worker cooperative” or “employment cooperative” as a corporation that includes a class of worker-members who are natural persons, whose patronage consists of labor contributed to or other work performed for the corporation.
Defines a “worker-member” as a member of a worker cooperative who is a natural person and also a patron of that worker cooperative, and provides that worker memberships cannot be divided into partial memberships.
Defines “community investor” as a person who is not a worker-member and who holds a share or other proprietary interest in a worker cooperative. Community investor voting power is limited to approval rights over a merger, sale of major assets, reorganization, or dissolution.
Provides that if a corporation is organized as a worker cooperative, the corporation’s patrons are its worker-members, and that patronage may be measured by work performed, including, but not limited to, wages earned, number of hours worked, number of jobs created, or some combination of those measures.
Authorizes a worker cooperative to establish itself as a capital account cooperative in its articles or bylaws. The articles or bylaws of a capital account cooperative may authorize assignment of a portion of retained earnings and net losses to an unallocated capital account. Earnings assigned to the unallocated capital account may be used for any and all corporate purposes, as determined by the cooperative’s board of directors. The articles or bylaws of a capital account cooperative may permit the periodic redemption of written notices of allocation and capital stock and provide for recall and redemption of membership shares upon termination of membership in the cooperative.
Provides that election to be organized as a worker cooperative or an employment cooperative does not create a presumption that workers are employees of the corporation. However, at least 51% of the workers must be worker-members or candidates.
Prohibits a worker cooperative from consolidating or merging with another corporation other than another worker cooperative.
Provides special notice rules for worker cooperatives that hold meetings to authorize actions of their cooperatives, when the meetings are meetings of only worker-members. In these cases, notice of the meeting must be made not less than 48 hours before the meeting, if the notice is delivered personally to every worker-member.
Background
Worker cooperatives are businesses that are owned by their workers and governed by their worker-owners. The United States Federation of Worker Cooperatives estimates that there are approximately 350 worker cooperatives in the United States, employing over 5,000 people and accounting for $500 million in annual revenue. Sixty percent of all worker cooperatives have formed since 2000, and 31% have formed since 2010, according to the Democracy at Work Institute.
Comments
Authority
to establish worker cooperatives. California’s existing
Consumer Cooperative Corporation Law does not prohibit the creation
of worker cooperatives, but does not contain any provisions specific
to the formation and governance of those cooperatives. The lack of
language specific to worker cooperatives is viewed as problematic by
this bill’s sponsors.
AB 816 authorizes the creation
of worker cooperatives and adds language to the Cooperative
Corporation Law specific to the formation and governance of worker
cooperatives. Among this bill’s key provisions: it adds labor to
the definition of patronage; limits worker cooperatives to a single
class of patron member called worker-members; allows worker
cooperatives to create a collective board of directors, on which each
worker-member sits; exempts collective board worker cooperatives from
having to hold meetings of their members; and defines capital account
cooperatives, whose entire net book value is reflected in their
member capital accounts. The sponsors believe that these are
important distinctions that better reflect the needs of worker
cooperatives than the existing Consumer Cooperative Corporation
Law.
To date, according to this bill’s sponsors, 11
other states have enacted statutes explicitly authorizing the
formation of worker cooperatives, including Alabama, Connecticut,
Delaware, Maine, Massachusetts, New York, Oregon, Vermont,
Washington, Pennsylvania, and Colorado.
Increase in
maximum dollar value of shares and memberships in consumer
cooperative corporations. Existing California law caps the
maximum aggregate investment that may be made by a shareholder in
shares or by a member in memberships in a consumer cooperative
corporation. As long as this cap is not exceeded, sales of those
shares or memberships are exempt from state securities permitting
laws. The cap of $300 was placed in California law, effective
January 1, 1984. It would equal $695 in inflation-adjusted dollars
today.
AB 816 increases the cap from $300 to $1,000, to
give cooperative corporations greater ability to raise funds from
their members, without running afoul of California’s securities
laws. By allowing cooperatives to solicit needed financing from
their own members, rather than from non-member, professional
investors who will want to control the direction of the co-operative,
the sponsors are seeking to give co-operatives greater ability to
raise capital in ways that align with their values and structures.
Prior/Related Legislation
AB 2525 (Bonta, 2014 ) would have established the Limited Liability Worker Cooperative Act to provide for the organization and operation of worker cooperative companies. The bill died in the Assembly Banking and Finance Committee.
AB
1161 (Skinner, 2011) would have renamed the Consumer Cooperative
Corporation Law as the Cooperative Corporation Law and authorized the
establishment of worker cooperatives. The bill died in the Assembly
Banking and Finance Committee.
FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No
East Bay Community Law Center (co-source)
Sustainable Economies Law Center (co-source)
California Center for Cooperative Development
Design Action Collective
DIG Cooperative
Network of Bay Area Worker Cooperatives
New Hope Farms
Praxis Peace Institute
Prospera Community Development
Rainbow Grocery
Roots of Change
Sarana Community Acupuncture
TeamWorks Development
Three Stone Hearth Community-Supported Kitchen
Four individuals
Two individuals
ARGUMENTS
IN SUPPORT: The Sustainable Economies Law Center and East Bay
Community Law Center assert that worker-owned businesses have unique
potential to grow local economies, because worker cooperatives
generate high-quality local jobs and prevent outsourcing, and because
worker-owners reinvest their wages and profits locally.
Participation in worker ownership builds business skills in
communities that are historically underrepresented in the business
community, and increases overall civic engagement. By distributing
business surpluses among workers rather than sending them to
corporate headquarters, worker cooperatives create jobs and promote
community stabilization. Finally, worker cooperatives can aid small-
and family-owned businesses with their succession strategies.
According to the sponsors, a California worker cooperative law will
facilitate the sale of businesses from retiring owners to their
workers, potentially saving thousands of jobs in the state over the
next decade.
Rainbow Grocery, DIG Cooperative, New Hope Farms, and the Design Action Collective are currently incorporated under the consumer cooperative corporation statute, because there was no way to legally form as worker cooperatives when they incorporated. The language of the existing statute does not accurately portray the organization and structure of a worker-owned cooperative. A worker cooperative specific statute would provide clarity and guidance for businesses wishing to operate as worker cooperatives.
ARGUMENTS
IN OPPOSITION: The opponents assert that AB 816 will undermine
worker cooperatives, because it contains language that is
non-conforming with existing worker cooperative statutes set by the
federal government and implemented in other states. In addition, the
cooperative idea is still in its infancy and needs time to
grow.
Opponents also believe that AB 816 undermines
workplace democracy by allowing a differential in voting power. This
removes the whole idea behind today’s worker cooperative of one
person, one vote. By destroying the one person, one vote structure,
AB 816 fails to conform with Internal Revenue Service tax statutes.
Differentials in voting will make every entity an Employee Stock
Option Plan for which incorporation laws exist; these entities will
be taxed differently than today’s worker cooperatives, which will
add a burden on worker owners.
Furthermore,
because some worker cooperatives, especially union cooperatives, may
seek to take over faltering businesses that may be of size,
prohibitions on employee owner contributions will make such
acquisitions almost impossible. AB 816 opens the public sale of
shares, which worker cooperatives do not do.
Finally, AB
816 obliterates worker owner guidelines on meetings, notifications,
terminations, relationships between and among different
decision-making structures, regardless of the size of the worker
cooperative.
ASSEMBLY FLOOR: 55-17, 5/22/15
AYES: Achadjian, Baker, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Roger Hernández, Holden, Irwin, Jones-Sawyer, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, McCarty, Medina, Mullin, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Williams, Wood, Atkins
NOES: Travis Allen, Bigelow, Chang, Chávez, Beth Gaines, Gallagher, Grove, Hadley, Harper, Jones, Kim, Mayes, Obernolte, Patterson, Steinorth, Wagner, Wilk
NO VOTE RECORDED: Alejo, Brough, Melendez, Nazarian, O'Donnell, Olsen, Waldron, Weber
Prepared by: Eileen Newhall / B. & F.I. / (916) 651-4102
7/10/15 15:55:32
**** END ****
AB 816 (Bonta) Page 8 of 8
SENATE COMMITTEE ON
BANKING AND FINANCIAL INSTITUTIONS
Senator Marty Block, Chair
2015 - 2016 Regular
Bill No: AB 816 Hearing Date: July 1, 2015
Author: |
Bonta |
||
Version: |
June 22, 2015 Amended |
||
Urgency: |
No |
Fiscal: |
No |
Consultant: |
Eileen Newhall |
||
Subject: Cooperative corporations: worker cooperatives.
SUMMARY
Renames the Consumer Cooperative Corporation Law as the Cooperative Corporation Law; authorizes the creation of worker cooperatives, as specified; and increases, from $300 to $1000, the maximum aggregate investment that may be made by a shareholder in shares or a member in memberships of a cooperative corporation.
DESCRIPTION
Increases, from $300 to $1,000, the maximum aggregate investment that may be made by a shareholder in shares or by a member in memberships of a cooperative corporation. As long as this cap is not exceeded, sales of those shares or memberships are exempt from state securities permitting laws.
Renames the Consumer Cooperative Corporation Law as the Cooperative Corporation Law, and authorizes the creation of worker cooperatives under that law, as follows:
Defines a “worker cooperative” or “employment cooperative” as a corporation that includes a class of worker-members who are natural persons, whose patronage consists of labor contributed to, personal services performed for, or other work performed for the corporation.
Defines a “worker” as a natural person contributing labor or services to a worker cooperative.
Defines a “candidate” as a worker who is being considered for membership in a worker cooperative.
Defines a “worker-member” as a member of a worker cooperative who is a natural person and also a patron of that worker cooperative, and provides that worker memberships cannot be divided into partial memberships.
Defines “community investor” as a person who is not a worker-member and who holds a share or other proprietary interest in a worker cooperative.
Defines “collective board worker cooperative” as a worker cooperative in which there is only one class of members consisting of worker-members, all of whom are members of the board. Exempts collective board worker cooperatives from the requirement to hold an annual meeting of their members.
Provides that if a corporation is organized as a worker cooperative, the corporation’s patrons are its worker-members, and that patronage may be measured by work performed, including wages earned, number of hours worked, number of jobs created, or some combination of those measures.
Provides that a worker cooperative may create an indivisible reserves account, which may only be derived from non-patronage-sourced income and that may not be distributed to members. Funds in the indivisible reserves account must be used as capital for the cooperative in a manner provided in the articles or bylaws, or by the board.
Authorizes a worker cooperative to establish itself as a capital account cooperative in its articles or bylaws. The articles or bylaws of a capital account cooperative may authorize assignment of a portion of retained earnings and net losses to an unallocated capital account. Earnings assigned to the unallocated capital account may be used for any and all corporate purposes, as determined by the cooperative’s board of directors. The articles or bylaws of a capital account cooperative may permit the periodic redemption of written notices of allocation and capital stock and provide for recall and redemption of membership shares upon termination of membership in the cooperative.
Provides that, upon dissolution of a worker cooperative, the majority of the unallocated capital account must be distributed to members on the basis of patronage, capital contributions, or a combination of the two. Amounts in the indivisible reserve account must be allocated to a cooperative development organization designated in the articles of incorporation or the bylaws.
Provides that community investor voting power in a worker cooperative shall be provided in the articles or bylaws of that cooperative, and is limited to approval rights over a merger, sale of major assets, reorganization, or dissolution.
Provides that election to be organized as a worker cooperative or an employment cooperative does not create a presumption that workers are employees of the corporation. However, at least 51% of the workers must be worker-members or candidates.
Prohibits a worker cooperative from consolidating or merging with another corporation other than another worker cooperative.
Provides special notice rules for worker cooperatives that hold meetings to authorize actions of their cooperatives, when the meetings are meetings of only worker-members. In these cases, notice of the meeting must be made not less than 48 hours before the meeting, if the notice is delivered personally to every worker-member.
EXISTING LAW
Establishes the Consumer Cooperative Corporation Law (Corporations Code Section 12200 et seq.). Provides, under that law, that:
A member is any person who, pursuant to a specific provision of a corporation’s articles or bylaws, has the right to vote for the election of a director or directors, or possesses proprietary interests in the corporation. The articles or bylaws may confer some or all of the rights of a member upon any person or persons who do not have voting rights (Corporations Code Section 12238).
If the corporation is organized to provide goods or services to its members, the corporation’s “patrons” are those who purchase those types of good from or use those types of services of the corporation (Corporations Code Section 12243).
If the corporation is organized to market, process, or otherwise handle its members’ products or services, the corporation’s “patrons” are those persons whose products or services are marketed, processed, or handled by the corporation (Corporations Code Section 12243).
The patronage of a patron is measured by the volume or value, or both, of a patron’s purchases of products from and use of services furnished by the corporation, and by products and services provided by the patron to the corporation for marketing (Corporations Code Section 12243).
Generally requires cooperatives to provide notice of meetings to their members not less than ten nor more than 90 days before the date of a meeting, as specified (Corporations Code Section 12461).
Generally allows any corporation to merge with another domestic corporation, foreign corporation, or other business entity (Corporations Code Section 12530)
COMMENTS
Purpose: AB 816 is co-sponsored by the East Bay Community Law Center and the Sustainable Economies Law Center to expressly recognize the existence of worker cooperatives in California law.
Background: According to this bill’s sponsors, worker cooperatives are businesses democratically owned and governed by their worker-owners. The United States Federation of Worker Cooperatives estimates that there are approximately 350 worker cooperatives in the United States, employing over 5,000 people and accounting for $500 million in annual revenue. Sixty percent of all worker cooperatives have formed since 2000, and 31% have formed since 2010, according to the Democracy at Work Institute.
This bill contains two different provisions: authority to establish worker cooperatives and an increase in the maximum dollar value of shares and memberships that may be sold by cooperatives without triggering a securities permitting requirement. Each provision is described separately below.
Authority to Establish Worker Cooperatives:
The Need for This Provision: California’s existing Consumer Cooperative Corporation Law does not prohibit the creation of worker cooperatives, but does not contain any provisions specific to the formation and governance of those cooperatives. The lack of language specific to worker cooperatives is viewed as problematic by this bill’s sponsors.
AB 816 would authorize (though not require) the creation of worker cooperatives and add language to the Cooperative Corporation Law specific to the formation and governance of worker cooperatives. Among the bill’s key provisions: it adds labor to the definition of patronage; limits worker cooperatives to a single class of patron member called worker-members; allows worker cooperatives to create a collective board of directors, on which each worker-member sits; exempts collective board worker cooperatives from having to hold meetings of their members; and defines capital account cooperatives, whose entire net book value is reflected in their member capital accounts. The sponsors believe that these are important distinctions that better reflect the needs of worker cooperatives than the existing Consumer Cooperative Corporation Law.
Other states: To date, according to this bill’s sponsors, eleven other states have enacted statutes explicitly authorizing the formation of worker cooperatives, including Alabama, Connecticut, Delaware, Maine, Massachusetts, New York, Oregon, Vermont, Washington, Pennsylvania, and Colorado.
Allocation of Money to Cooperative Development Organizations: One provision of this bill would authorize a worker cooperative to allocate money in its indivisible reserves account to a cooperative development organization upon the dissolution of the worker cooperative. According to this bill’s sponsor, cooperative development organizations are organizations such as the California Center for Cooperative Development, the Democracy At Work Institute, the U.S. Federation of Worker Cooperatives, and other organizations that exist to provide technical assistance to worker cooperatives or promote the development of worker cooperatives in other ways.
Under some European cooperative laws (e.g., Italy and France), cooperatives can benefit from tax incentives when they set aside funds in an indivisible reserves account. Some cooperative movement leaders believe that these policies are partially responsible for the large number of European worker cooperatives and their strong track records of job stability. The provisions of this bill that authorize the creation of an indivisible reserves account and that authorize the allocation of money in that reserves account to a cooperative development organization upon the dissolution of a worker cooperative are attempts on the sponsors’ part to plant the seed for future policies modeled off European laws that incentivize the establishment of these accounts.
Recognizing Worker Cooperatives Within California’s Cooperative Law Versus Creating a New, Stand-Alone Law Only for Worker Cooperatives: Several of the points raised in opposition to this bill reflect the author’s and sponsors’ decision to authorize worker cooperatives within California’s existing Cooperative Corporation Law instead of creating a new law specifically designed for worker cooperatives. When asked why they chose to work within existing law rather than create a new law specific to worker cooperatives, the sponsors responded that there are dozens of existing worker cooperatives formed under California’s Consumer Cooperative Corporation Law, who will be able to benefit from the bill as it is currently drafted.
Furthermore, a few years ago, when the sponsors began developing the concept that led to AB 816, they pursued a stand-alone law specifically for worker cooperatives. They encountered resistance from cooperative attorneys and accountants, who believed that a separate law would complicate efforts to establish worker cooperatives, not enhance them. Those attorneys and accountants favor the approach taken in AB 816.
Increase in Maximum Dollar Value of Shares and Memberships in Consumer Cooperative Corporations: Existing California law caps the maximum aggregate investment that may be made by a shareholder in shares or by a member in memberships in a consumer cooperative corporation. As long as this cap is not exceeded, sales of those shares or memberships are exempt from state securities permitting laws. The cap of $300 was placed in California law, effective January 1, 1984. This bill’s sponsors of this bill are seeking to increase the cap from $300 to $1,000, to give cooperative corporations greater ability to raise funds from their members, without running afoul of California’s securities laws. By allowing cooperatives to solicit needed financing from their own members, rather than from non-member, professional investors who will want to control the direction of the co-operative, the sponsors are seeking to give co-operatives greater ability to raise capital in ways that align with their values and structures. This bill’s sponsors also observe that the current $300 cap is too small to allow worker cooperatives to raise capital for their businesses.
Staff notes that if the $300 cap had been allowed to increase with inflation since 1984, it would equal $695 in 2015, lower than the proposed increase to $1,000.
Summary of Arguments in Support:
The sponsors assert that worker-owned businesses have unique potential to grow local economies, because worker cooperatives generate high-quality local jobs and prevent outsourcing, and because worker-owners reinvest their wages and profits locally. Participation in worker ownership builds business skills in communities that are historically underrepresented in the business community, and increases overall civic engagement. By distributing business surpluses among workers rather than sending them to corporate headquarters, worker cooperatives create jobs and promote community stabilization. Finally, worker cooperatives can aid small- and family-owned businesses with their succession strategies. According to the sponsors, a California worker cooperative law will facilitate the sale of businesses from retiring owners to their workers, potentially saving thousands of jobs in the state over the next decade.
Rainbow Grocery, DIG Cooperative, New Hope Farms, and the Design Action Collective are currently incorporated under the consumer cooperative corporation statute, because there was no way to legally form as worker cooperatives when they incorporated. The language of the existing statute does not accurately portray the organization and structure of a worker-owned cooperative. A worker cooperative specific statute would provide clarity and guidance for businesses wishing to operate as worker cooperatives.
Prospera Community Development has supported the launch of eight worker cooperatives. All were formed under the limited liability company statute, because the current Consumer Cooperative Corporation Law can create cumbersome barriers for worker cooperatives to effectively operate. AB 816 will strengthen the cooperative movement by providing businesses a framework to form worker cooperatives.
Summary of Arguments in Opposition:
Two private individuals submitted letters of opposition based on an earlier version of the bill. It is unclear whether they remain opposed to the current version of the bill. Among the concerns raised by the opponents:
AB 816 would undermine worker cooperatives, because it provides no clear guidance and begins to muddy the waters with language that is non-conforming with existing worker cooperative statutes set by the federal government and implemented in other states. In addition, the cooperative idea is still in its infancy and needs time to grow.
AB 816 undermines workplace democracy by allowing a differential in voting power. This removes the whole ideal behind today’s worker cooperative of one person, one vote. One person, one vote will enhance the equal voices of all employee owners in decision making and prohibit any one group from selling out without the consent of the other owners.
Furthermore, by destroying the one person, one vote structure, AB 816 would fail to conform with Internal Revenue Service tax statutes. Differentials in voting would make every entity an Employee Stock Option Plan for which incorporation laws exist, and would be taxed differently than today’s worker cooperatives. This will add a burden on worker owners.
Because some worker cooperatives, especially union cooperatives, may seek to take over faltering businesses that may be of size, prohibitions on employee owner contributions would make such acquisitions almost impossible. Such directions undermine workplace democracy.
AB 816 obliterates worker owner guidelines on meetings, notifications, terminations, relationships between and among different decision-making structures, regardless of the size of the worker cooperative.
AB 816 opens the public sale of shares, which worker cooperatives do not do. Currently, shares are not publicly traded, and are available only to those people who will become full worker owners. AB 816 creates a loophole of public access and undermines workers’ authority over their own workplace.
Amendments:
The author plans to offer the following clarifying amendments in Committee:
Page 5, line 32, after “including” add: , but not limited to,
Page 6, line 18, strike the comma and strike personal services performed for,
Prior and Related Legislation:
SB 577 (Hueso), 2015-16 Legislative Session: Among its provisions, SB 577 increases, from $300 to $1000, the maximum aggregate investment that may be made by a shareholder in shares or a member in memberships of a cooperative corporation. Passed the Senate Banking and Financial Institutions Committee; currently pending in the Senate Judiciary Committee.
AB 1161 (Skinner), 2011-12 Legislative Session: Would have renamed the Consumer Cooperative Corporation Law as the Cooperative Corporation Law and authorized the establishment of worker cooperatives. Never taken up by its author in the Assembly Banking and Finance Committee.
AB 2525 (Bonta), 2013-14 legislative Session: Would have established the Limited Liability Worker Cooperative Act to provide for the organization and operation of worker cooperative companies. Never taken up by its author in the Assembly Banking and Finance Committee.
LIST OF REGISTERED SUPPORT/OPPOSITION
Support
Sustainable Economies Law Center (co-sponsor)
East Bay Community Law Center (co-sponsor)
California Center for Cooperative Development
Design Action Collective
DIG Cooperative
Network of Bay Area Worker Cooperatives
New Hope Farms
Praxis Peace Institute
Prospera Community Development
Rainbow Grocery
Roots of Change
Sarana Community Acupuncture
TeamWorks Development
Three Stone Hearth Community-Supported Kitchen
Four private individuals
Opposition
Two private individuals
-- END --
AB 816
Page 5
ASSEMBLY THIRD READING
AB 816
(Bonta)
As Amended May 14, 2015
Majority vote
Committee |
Votes |
Ayes |
Noes |
Banking |
9-3 |
Dababneh, Achadjian, Brown, Chau, Gatto, Low, Perea, Ridley-Thomas, Mark Stone |
Travis Allen, Hadley, Kim |
Appropriations |
12-5 |
Gomez, Bloom, Bonta, Calderon, Daly, Eggman, Eduardo Garcia, Holden, Quirk, Rendon, Weber, Wood |
Bigelow, Chang, Gallagher, Jones, Wagner |
SUMMARY: Renames the Consumer Cooperative Corporation Law to the Cooperative Corporation Law. Specifically, this bill:
Defines "worker cooperative" or "employment cooperative" as a corporation formed that includes a class of worker-members who are natural persons whose patronage consists of labor contributed to, personal services performed for, or other work performed for the corporation. Election to be organized as a worker cooperative or an employment cooperative does not create a presumption that workers are employees of the corporation for any purposes.
Requires at least 51% of the workers shall be worker-members or candidates.
Authorizes a worker cooperative to apportion and distribute its net earnings and losses at the time and in the manner specified in the articles of incorporation or bylaws.
Requires a worker cooperative to only make patronage distributions to the worker-member class.
Defines the patrons of a worker cooperative as worker-members and authorizes their patronage to be measured by work performed or personal services contributed, including wages earned, number of hours worked, number of jobs created, or some combinations of these measures.
Allows a worker cooperative to call a special meeting in a worker cooperative:
With more than four worker-members, a special meeting may only be called by the greater of three worker-members or 5% of the worker-members.
In a worker cooperative with fewer than four worker-members, special meetings may be called by 5% of the worker-members.
Defines a "capital account cooperative" as a worker cooperative in which the entire net book value is reflected in member capital accounts, one for each member and an unallocated capital account, if any.
Defines a "collective board worker cooperative" as a worker cooperative in which there is only one class of members consisting of worker-members, all of whom are members of the board.
The collective board worker cooperative is not required to hold an annual meeting of the members.
Defines "worker-member" as a member who is a natural person and also a patron of a worker cooperative.
Defines "community investor" who is not a worker-member and who holds a share or other proprietary interest in a worker cooperative.
Defines "candidate" as a worker who is being considered for membership, as defined in the corporation's articles or bylaws.
Defines "worker" as a natural person contributing labor or services. A worker who is being considered for membership, as defined in the corporation’s articles or bylaws, shall be referred to as a "candidate."
Provides community investor voting power in a worker cooperative shall be provided in the articles or bylaws and is limited to approval rights only over a merger, sale of major assets, reorganization, or dissolution. Approval rights shall not include the right to propose any action.
Allows a worker cooperative to create an indivisible reserves account that shall not be distributed to members. Funds in the indivisible reserves account shall, in a manner provided in the articles or bylaws, or by the board, be used as capital for the cooperative.
Provides that a worker cooperative that has not revoked its election to be governed as a worker cooperative shall not consolidate or merge with another corporation other than another worker cooperative. Two or more worker cooperatives may merge or consolidate in a manner consistent with this chapter.
Requires a worker cooperative to provide notice of a meeting not less than 48 hours before the meeting if the meeting involves only worker-members and provided that the notice is delivered personally.
Increases the investment limitation for Consumer Cooperatives under California's Corporate Securities Law of 1968 exemption from qualification from $300 to $1,000.
Makes finding and declarations.
EXISTING LAW:
Establishes the Consumer Cooperative Cooperation Law which allows corporations to form as a cooperative corporation. (Corporations Code Section 12200 et seq.)
Provides that it is unlawful for any person to offer or sell any security in this state, unless such offering or sale has been qualified by the commissioner, as specified, or unless the offering or sale is covered by an express exemption. Caps the maximum aggregate investment that may be made by a shareholder in shares or by a member in memberships in a consumer cooperative corporation. As long as this cap is not exceeded, sales of those shares or memberships are exempt from state securities permitting laws. The cap of $300 was placed in California law, effective January 1, 1984. (Corporations Code Section 25110)
FISCAL EFFECT: According to the Assembly Appropriations Committee, minor and absorbable costs to the Secretary of State, though these costs could increase if the number of cooperative corporations increases significantly; minor and absorbable costs to the Department of Business Oversight.
COMMENTS: The findings and declarations in this bill state:
A worker cooperative has the purpose of creating and maintaining sustainable jobs and generating wealth in order to improve the quality of life of its worker-members, dignify human work, allow workers’ democratic self-management, and promote community and local development in this state.
The purpose of this act is to amend the Consumer Cooperative Corporation Law to clarify that the law applies to cooperatives in general, not just consumer cooperatives, and to create more visibility for worker cooperatives. This act is intended to provide a definition of worker cooperative for purposes of this act, and not for purposes of other laws.
Cooperatives:
This bill makes substantive and historical changes to the California Consumer Cooperative Corporation Law. The Legislature, in 1982 created the Consumer Cooperative Law which provides a framework for establishing and operating cooperatives. California cooperatives can trace their history back to 1844, when a group of cotton mill weavers in England organized, called themselves the Rochdale Society. The Rochdale Society adopted several principles that have become the basis of most cooperatives. These principles include: open membership; one member, one vote; cash-only trading at market prices; patronage refunds proportional to each member's use of the cooperative's services; and limited return of interest on contributed capital.
Cooperatives are enterprises in which individuals or businesses organize to furnish themselves services that the members need. They seek to provide services more efficiently and at lower cost compared to paying third parties or to each member's performing the service individually. Unlike corporations, in cooperatives, ownership and control are equal among members. Cooperatives operate according to the democratic principle of one member, one vote. Unlike business corporations, cooperatives do not seek to generate profit but rather seek to save money for their members. Similarly, members do not seek or obtain increased capital value but rather cost savings and efficiency. In contrast to stock in a corporation, membership in a cooperative is not a saleable commodity. Cooperatives exist in many forms such as agricultural, financial institutions, housing, utility, consumer to name a few.
Cooperatives generally share the following principles:
Democratic Governance - Cooperatives generally have a one member, one vote rule. This is different from traditional business models, which often weight each owner’s vote by the amount of that person’s stake in the business. However, some cooperatives have an elected board of directors to oversee the day-to-day operations of the business, leaving strategic decisions to members as a whole.
Consensus Building – While each member has one vote, cooperatives encourage members to work with one another in their decision-making progress. If members want the cooperative to take a certain action, they must collaborate and gather most, if not, all members to agree.
Community-Centric – Most cooperatives have members from the same area. Because members live where they work, they are more likely to invest there. As cooperatives become a significant part of a community, they have less incentive to leave.
Member Satisfaction Superior to Capital – Cooperatives must earn a profit in order to survive as a business. However, member wellbeing is valued above earning more money. Many cooperatives have rules that keep the workplace fair, and preserve the workers’ due process rights and safety.
Self-Determination - Members are more likely to invest their time and energy in the cooperative because they have input in its decisions and would share any wealth that comes from it. While traditional business models limit decision-making to its senior leadership, cooperatives give each member a stake in its future.
Training – Cooperatives usually have an apprenticeship program or other training that prepares new members to participate in the business. For cooperatives to survive, they must recruit, train, and continually develop their members.
Open Membership – Cooperatives generally allow any person to join regardless of gender, race, religion, political, or social status. To become a member, many cooperatives require an entry-level training program, an initial capital investment, and final approval by the membership.
Although worker cooperatives are currently regulated and created under the Consumer Cooperative Corporation Law, this bill attempts to create a new framework specific to worker cooperatives within the existing Consumer Cooperative Corporation Law.
Need for the bill:
According to the author:
California’s existing cooperative law is the Consumer Cooperative Corporations statute. Although worker cooperatives may form under that statute, it contains no provisions specific to the formation and governance of worker cooperatives. The existing statute does not include labor in its definition of patronage, it does not provide for member capital accounts, and its lengthy notice requirement for member meetings does not suit worker cooperatives. Further, the current $300 securities exemption for members is too small to allow worker cooperatives to raise capital for their business.
Background:
A worker cooperative is a business democratically owned and governed by its worker-owners. A worker cooperative is distinct from other kinds of cooperatives (consumer, producer, housing, financial, etc.) in that its members are its workers. Worker cooperatives are well established throughout Europe and Latin America but they are less common in the United States. The United States Federation of Worker Cooperatives estimates that there are currently about 350 worker cooperatives in the United States, employing over 5,000 people and account for $500 million in annual revenue. According to the United States Federation of Worker Cooperatives, California has approximately 50 established worker cooperatives.
The United States Federation of Worker Cooperatives determines whether a cooperative is a worker cooperative based on basic standards for worker cooperatives established in the World Declaration on Cooperative Worker Ownership (also known as the Oslo Declaration) at a meeting in Oslo, Norway in 2003 of the International Organization of Industrial, Artisanal and Service Producers’ Cooperatives.
Almost any business can be organized as a worker cooperative. Examples include restaurants, bakeries and retail stores. Some well-known worker cooperatives are Equal Exchange headquartered in Massachusetts, a fair trade importer of chocolate and coffee and MONDRAGON Corporation located in Spain, one of the world’s largest worker cooperatives, that employs over 80,000 workers.
Other States:
Eleven other states have enacted worker cooperative specific statutes. These states include: Alabama, Connecticut, Delaware, Maine, Massachusetts, Oregon, Vermont, New York, Washington, Pennsylvania and Colorado.
Analysis Prepared by: Kathleen OMalley / B. & F. / (916) 319-3081 FN: 0000398
AB 816
Page 2
Date of Hearing: May 13, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB 816
(Bonta) – As Amended April 30, 2015
Policy Committee: |
Banking and Finance |
Vote: |
9 - 3 |
Urgency: No State Mandated Local Program: No Reimbursable: No
SUMMARY:
This bill reforms and expands the consumer cooperative corporation law to allow general worker cooperatives, and establishes a regulatory framework for the formation and operation of cooperative corporations. In summary, this bill:
1) Requires at least 51% of cooperative corporation workers be worker-members or eligible for membership within 2 years of becoming a worker;
2) Authorizes a worker cooperative to apportion and distribute earnings and losses in the manner specified in its articles of incorporation or bylaws, but requires any patronage distributions (measured by work performed or personal services contributed) only be made to worker-members;
3) Authorizes a worker cooperative to create an indivisible reserves account that may not be distributed to the members, and may be used to fund capital projects for the company;
4) Prescribes certain rules of corporate governance and accounting for the various types of worker cooperatives;
5) Increases the aggregate single member investment limit that is exempt from qualification under state securities laws from $300 to $1,000; and
6) Defines relevant terms and makes various other technical changes.
FISCAL EFFECT:
Minor and absorbable costs to the Secretary of State, though these costs could increase if the number of cooperative corporations increases significantly; minor and absorbable costs to the Department of Business Oversight.
COMMENTS:
1) Purpose. According to the author, worker cooperatives create and maintain sustainable jobs, generate wealth to improve the quality of life of their worker-members, allow workers to democratically self-manage, and promote community and local development. The author believes California's worker cooperative law is outdated and lacks a framework applicable to general worker cooperatives. AB 816 is intended to amend the Consumer Cooperative Corporation Law to clarify the law applies to all worker cooperatives, not just consumer cooperatives, provide contours to the governance rules for worker cooperatives, and increase the maximum community investor amount from $300 to $1,000.
2) Worker Cooperatives. Worker cooperatives are businesses democratically owned and governed by their workers. Worker cooperatives are distinct from other kinds of cooperatives (such as consumer, housing, financial, and others) in that its members are its workers, and are common throughout Europe and Latin America. The US Federation of Worker Cooperatives estimates there are about 350 worker cooperatives in this country, employing approximately 5,000 people and collectively generating approximately $500 million in annual revenue.
Many types of businesses can be organized as cooperatives, ranging from very small businesses to very large multinational companies, in industries from agriculture to finance. Basic standards for worker cooperatives were established in the World Declaration on Cooperative Worker Ownership, adopted by the International Organization of Industrial, Artisanal and Service Producers' Cooperatives in Norway in 2003.
3) The Rochdale Society of Equitable Pioneers. One of most influential early cooperatives began as a response to industrialization in Lancashire, England in 1844, when a group of weavers and other tradesmen formed the Rochdale Society of Equitable Pioneers. Learning from the failures of previous cooperatives, the society developed the Rochdale Principles to govern their society. The core principles were voluntary and open membership; democratic member control (one member, one vote); distribution of surplus in proportion to trade; payment of limited interest on capital; political and religious neutrality; cash trading (and no credit); and promotion of education. Though they have been refined over the years, these principles still guide the worker cooperative movement, and were formally adopted by the International Co-operative Alliance in 1937 and amended in 1966 and 1995.
Analysis Prepared by: Joel Tashjian / APPR. / (916) 319-2081
AB 816
Page 9
Date of Hearing: April 27, 2015
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Matthew Dababneh, Chair
AB 816
(Bonta) – As Amended April 13, 2015
SUBJECT: Cooperative corporations: worker cooperatives
SUMMARY: Renames the Consumer Cooperative Corporation Law to the General Cooperative Corporation Law. Specifically, this bill:
Defines "worker cooperative" or "employment cooperative" as a corporation formed that includes a class of worker-members who are natural persons whose patronage consists of labor contributed to, personal services performed for, or other work performed for the corporation. Election to be organized as a worker cooperative or an employment cooperative does not create a presumption that workers are employees of the corporation for any purposes.
Requires at least 51% of the workers shall be worker-members or eligible for membership within 2 years of becoming a worker.
Authorizes a worker cooperative to suspend a worker-member without prior notice if the worker-member is given notice and the opportunity to be heard or to provide a written response within 5 days after the suspension.
Authorizes a worker cooperative to apportion and distribute its net earnings and losses at the time and in the manner specified in the articles of incorporation or bylaws.
Requires a worker cooperative to only make patronage distributions to the worker-member class.
Defines the patrons of a worker cooperative as worker-members and authorizes their patronage to be measured by work performed or personal services contributed, including wages earned, number of hours worked, number of jobs created, or some combinations of these measures.
Allows a worker cooperative to create an indivisible reserves account that shall not be distributed to the members.
Funds in the indivisible reserves account can be used as capital for the worker cooperative.
Allows a worker cooperative to call a special meeting with 20% or more of the worker-members.
Defines a "capital account cooperative" as a worker cooperative in which the entire net book value is reflected in member capital accounts, one for each member and an unallocated capital account, if any.
Defines a "collective board worker cooperative" as a worker cooperative in which there is only one class of members consisting of worker-members, all of whom are members of the board.
The collective board worker cooperative is not required to hold an annual meeting of the members.
Defines "worker-member" as a member who is a natural person and also a patron of a worker cooperative.
Defines "non-worker-member" as a member of a worker cooperative who is not a worker member.
Provides non-worker-member voting power in a worker cooperative shall be provided in the articles or bylaws and is limited to approval rights only over a merger, sale of major assets, reorganization, or dissolution. Approval rights shall not include the right to propose any action.
Allows a worker cooperative to create an indivisible reserves account that shall not be distributed to members. Funds in the indivisible reserves account shall, in a manner provided in the articles or bylaws, or by the board, be used as capital for the cooperative.
Provides that a worker cooperative that has not revoked its election to be governed as a worker cooperative shall not consolidate or merge with another corporation other than another worker cooperative. Two or more worker cooperatives may merge or consolidate in a manner consistent with this chapter.
Requires a worker cooperative to provide notice of a meeting not less than 48 hours before the meeting if the meeting involves only worker-members.
Exempts a membership or share interest in a collective board worker cooperative from the definition of security.
Increases the investment limitation for Consumer Cooperatives under California's Corporate Securities Law of 1968 exemption from qualification from $300 to $1,000.
Excludes shares or memberships issued by worker cooperative from qualification, provided that the aggregate investment of any shareholder or member does not exceed $5,000.
Makes finding and declarations.
EXISTING LAW:
Establishes the Consumer Cooperative Cooperation Law which allows corporations to form as a cooperative corporation. (Corporations Code, Section 12200 et seq.)
Provides that it is unlawful for any person to offer or sell any security in this state, unless such offering or sale has been qualified by the commissioner, as specified, or unless the offering or sale is covered by an express exemption. Caps the maximum aggregate investment that may be made by a shareholder in shares or by a member in memberships in a consumer cooperative corporation. As long as this cap is not exceeded, sales of those shares or memberships are exempt from state securities permitting laws. The cap of $300 was placed in California law, effective January 1, 1984. (Corporations Code, Section 25110)
FISCAL EFFECT: Unknown.
COMMENTS:
The findings and declarations in the bill states:
"A worker cooperative has the purpose of creating and maintaining sustainable jobs and generating wealth in order to improve the quality of life of its worker-members, dignify human work, allow workers’ democratic self-management, and promote community and local development.
The purpose of this act is to amend the Consumer Cooperative Corporation Law to clarify that the law applies to cooperatives in general, not just consumer cooperatives, and to create more visibility for worker cooperatives. This act is intended to provide a definition of worker cooperative for purposes of this act, and not for purposes of other laws."
Cooperatives:
AB 816 makes substantive and historical changes to the California Consumer Cooperative Corporation Law. The Legislature, in 1982 created the Consumer Cooperative Law which provides a framework for establishing and operating cooperatives. California cooperatives can trace their history back to 1844, when a group of cotton mill weavers in England organized, called themselves the Rochdale Society. The Rochdale Society adopted several principles that have become the basis of most cooperatives. These principles include: open membership; one member, one vote; cash-only trading at market prices; patronage refunds proportional to each member's use of the cooperative's services; and limited return of interest on contributed capital.
Cooperatives are enterprises in which individuals or businesses organize to furnish themselves services that the members need. They seek to provide services more efficiently and at lower cost compared to paying third parties or to each member's performing the service individually. Unlike corporations, in cooperatives, ownership and control are equal among members. Cooperatives operate according to the democratic principle of one member, one vote. Unlike business corporations, cooperatives do not seek to generate profit but rather seek to save money for their members. Similarly, members do not seek or obtain increased capital value but rather cost savings and efficiency. In contrast to stock in a corporation, membership in a cooperative is not a saleable commodity. Cooperatives exist in many forms such as agricultural, financial institutions, housing, utility, consumer to name a few.
Cooperatives generally share the following principles:
Democratic Governance - Cooperatives generally have a one member, one vote rule. This is different from traditional business models, which often weight each owner’s vote by the amount of that person’s stake in the business. However, some cooperatives have an elected board of directors to oversee the day-to-day operations of the business, leaving strategic decisions to members as a whole.
Consensus Building – While each member has one vote, cooperatives encourage members to work with one another in their decision-making progress. If members want the cooperative to take a certain action, they must collaborate and gather most, if not, all members to agree.
Community-Centric – Most cooperatives have members from the same area. Because members live where they work, they are more likely to invest there. As cooperatives become a significant part of a community, they have less incentive to leave.
Member Satisfaction Superior to Capital – Cooperatives must earn a profit in order to survive as a business. However, member wellbeing is valued above earning more money. Many cooperatives have rules that keep the workplace fair, and preserve the workers’ due process rights and safety.
Self-Determination - Members are more likely to invest their time and energy in the cooperative because they have input in its decisions and would share any wealth that comes from it. While traditional business models limit decision-making to its senior leadership, cooperatives give each member a stake in its future.
Training – Cooperatives usually have an apprenticeship program or other training that prepares new members to participate in the business. For cooperatives to survive, they must recruit, train, and continually develop their members.
Open Membership – Cooperatives generally allow any person to join regardless of gender, race, religion, political, or social status. To become a member, many cooperatives require an entry-level training program, an initial capital investment, and final approval by the membership.
Although worker cooperatives are currently regulated and created under the Consumer Cooperative Corporation Law, AB 816 attempts to create a new framework specific to worker cooperatives within the existing Consumer Cooperative Corporation Law.
The chart below lays out the differences between existing law and AB 816:
|
Existing CA Law |
AB 816 |
Name |
Consumer Cooperative Corporation Law |
General Cooperative Corporations Law |
Intentions |
This part is intended to primarily apply to the organization and operation of consumer cooperatives. It is also applicable to other cooperatives including but not limited to, cooperatives formed for the purpose of recycling or treating hazardous wastes, which elect to incorporate under it. |
This part is intended to apply to the organization and operation of cooperatives, including but not limited to consumer cooperatives, worker cooperatives and cooperatives formed for the purpose of recycling or treating hazardous wastes, which elect to incorporate under it. |
Securities Requirements |
Qualification requirements exempt the shares or memberships in a cooperative corporation if the investment does not exceed $300 |
Increases the exemption amount to $1,000. In addition, the investment of the worker member class in a worker cooperative are exempt from registration up to $5,000. |
Definition of worker-cooperative |
N/A |
A worker cooperative is a corporation formed under this part which includes a class of worker-members who are natural persons whose patronage consists of labor contributed to, personal services performed for, or other work performed for the corporation. Election to be organized as a worker cooperative or an employment cooperative does not create a presumption that workers are employees of this corporation for any purposes. Requires at least 51% of the workers shall be worker members or eligible for membership within 2 years of becoming a worker. |
Definition of worker-member |
N/A |
Worker member means a member who is a natural person and also a patron of a worker cooperative. |
Definition of non-worker member |
N/A |
Non-worker member means a member of a worker cooperative who is not a worker member. |
Articles of Incorporation |
N/A |
Corporation must state whether it is a worker cooperative |
Collective Board Worker Cooperative |
N/A |
Defined as only one class of members which is the worker member class and all worker members are on the board. While most cooperatives are required to meet on an annual basis- this requirement does not apply to a collective board worker cooperative. Provides an exclusion from definition of security for managing members. |
Patronage |
If a corporation is organized to provide goods or services to its member, the corporation's patrons are those who purchase those types of goods from, or use those type services of, the corporation. |
If the corporation is organized as a worker cooperative, the corporation's patrons are its worker-members. The corporation may be measured by work performed or personal services contributed, including wages earned, number of hours worked, number of jobs created, or some combination of these measures. |
Capital Account Cooperative |
N/A |
Defined as a worker cooperative whose entire net book value is reflected in member capital accounts, one for each member, and an unallocated capital account. Each member only has one vote in any matter requiring voting by a member. |
Voting Power |
Defined as the power to vote for the election of directors at the time any determination of voting power is made and does not include the right to vote upon the happening of some condition or event that has yet occurred. |
Provides non worker member voting power in a worker cooperative shall be provided in the articles or bylaw and is limited to approval rights only over a merger, sale of major assets, reorganization, or dissolution. Approval rights shall not include the right to propose any action. |
Member Meeting Notification |
Requires written notification at least 10 days in advance of a meeting |
Reduces the time-frame to at least 48 hours before the meeting if the meeting involves only worker members. |
Expelling or suspending members |
Requires 15 day prior notice of the expulsion, suspension or termination and the reasons and allows an opportunity for the member to respond at least 5 days prior to the expulsion, suspension, or termination. |
Allows a worker cooperative to suspend a worker member without prior notice if the worker member is given notice and the opportunity to be heard within 5 days after the suspension. |
Merger |
N/A |
Prohibits a worker cooperative from consolidate or merge with another corporation other than another worker cooperative. Two or more worker cooperatives may merge or consolidate. |
Indivisible Reserves Account |
N/A |
Allows a worker cooperative to create an indivisible reserves account that shall not be distributed to its members. Allows the account to be used as capital for the cooperative. |
Special Meetings |
Allows a special meeting to be called by the board if at least 5% or more of the members call it. |
A special meeting of a worker cooperative may be called only by 20% or more of the worker-members. |
Need for the bill:
According to the Author,
"California’s existing cooperative law is the Consumer Cooperative Corporations statute. Although worker cooperatives may form under that statute, it contains no provisions specific to the formation and governance of worker cooperatives. The existing statute does not include labor in its definition of patronage, it does not provide for member capital accounts, and its lengthy notice requirement for member meetings does not suit worker cooperatives. Further, the current $300 securities exemption for members is too small to allow worker cooperatives to raise capital for their business."
Background:
A worker cooperative is a business democratically owned and governed by its worker-owners. A worker cooperative is distinct from other kinds of cooperatives (consumer, producer, housing, financial, etc.) in that its members are its workers. Worker cooperatives are well established throughout Europe and Latin America but they are less common in the United States. The U.S. Federation of Worker Cooperatives estimates that there are currently about 350 worker cooperatives in the United States, employing over 5,000 people and account for $500 million in annual revenue. According to the U.S. Federation of Worker Cooperatives, California has approximately 50 established worker cooperatives.
The US Federation of Worker Cooperatives determines whether a cooperative is a worker cooperative based on basic standards for worker cooperatives established in the World Declaration on Cooperative Worker Ownership (also known as the Oslo Declaration) at a meeting in Oslo, Norway in 2003 of the International Organization of Industrial, Artisanal and Service Producers’ Cooperatives (CICOPA).
Almost any business can be organized as a worker cooperative. Examples include restaurants, bakeries and retail stores. Some well-known worker cooperatives are Equal Exchange headquartered in Massachusetts, a fair trade importer of chocolate and coffee and MONDRAGON Corporation located in Spain, one of the world’s largest worker cooperatives that employs over 80,000 workers.
Other States:
Eleven other states have enacted worker cooperative specific statutes. These states include: Alabama, Connecticut, Delaware, Maine, Massachusetts, Oregon, Vermont, New York, Washington, Pennsylvania and Colorado.
Related Legislation:
SB 577 (Hueso) Authorizes three new securities permitting exemptions, as specified, and increases, from $300 to $1,000, the maximum allowable aggregate investment of any shareholder in shares of a consumer cooperative corporation or member in memberships of a consumer cooperative corporation. Pending in Senate Judiciary Committee.
Previous Legislation:
AB 1161 (Skinner) 2011 Legislative Year. This measure would have renamed the Cooperative Corporation Law, as well as, make other significant changes. Died in the Assembly Banking and Finance Committee.
AB 2525 (Bonta) 2014 Legislation Year. This bill would have created a special purpose limited liability company. Died in the Assembly Banking and Finance Committee.
Amendments:
A number of amendments are recommended below in order to maintain some consistency through the cooperative law. Some of the amendments are technical while others provide clarification of the author's intent.
On page 3, line 7, add after development "in this state."
On page 5, line 20, insert "Worker" is a natural person contributing labor or services."
On page 5, line 20, insert, "Candidate" means a worker who is being considered for membership, as defined in the corporation's articles or bylaws.
On page 6, line 33, delete "eligible" and insert "candidates"
On page 10, delete lines 12-17
On page 12, delete lines 28 & 29 and insert "in a worker cooperative with more than four worker-members, a special meeting may only be called by the greater of 3 worker-members or 5% of the worker-members. For a worker cooperative with fewer than 4 members, special meetings may be called by 5% of the worker-members."
On page 13, on line 24, add after members, insert, "provided that such notice is delivered personally."
On page 18, delete lines 1-6 and insert, "Subdivision (a) shall not apply to any amounts in the indivisible reserve account. Any amount in the indivisible reserve account shall, upon dissolution, be allocated to a cooperative development organization designated in the articles of incorporation or the bylaws."
On page 21, line 9, delete "Financial Institutions" and insert "Business Oversight"
On page 21, line 17, delete "which" and insert "that"
On page 21, line 33, delete "Financial Institutions" and insert "Business Oversight"
Take out Sections 26 & 27 in the measure
On page 28, line 20, delete "In the case of a worker"
On page 28, delete lines 21-25
On page 28, line 26, delete "be qualified or filed as a sale of securities under this title."
REGISTERED SUPPORT / OPPOSITION:
Support
Ease Bay Community Law Center (Co-Sponsor)
Roots of Change
2 Individuals
Opposition
2 Individuals
Analysis Prepared by: Kathleen O'Malley / B. & F. / (916) 319-3081
Bill Author
