Virginia Law

Article 1. Cooperative Associations Generally.

A. Any number of persons, not less than five, may, under the provisions of Article 3 (§ 13.1-618 et seq.) of Chapter 9 or Article 3 (§ 13.1-818 et seq.) of Chapter 10, associate themselves together as a cooperative association, society, company or exchange, for the purpose of (i) conducting any housing, agricultural, fishing, dairy, mercantile, merchandise, brokerage, water, sewer, manufacturing, service or mechanical business on the cooperative plan or (ii) representing or providing financing for cooperative associations, societies, companies, or exchanges organized pursuant to the laws of this Commonwealth or any other state, provided that the word "cooperative" shall be included as a part of the name. Except for a cooperative association organized to conduct business as a water or sewer company, no cooperative association organized under this article shall conduct any business in this Commonwealth as a public service company or exercise any privileges of such company.

B. The provisions of Chapter 9 (§ 13.1-601 et seq.) or 10 (§ 13.1-801 et seq.), as the case may be, shall apply to cooperative associations created under this section or subject to the provisions of this article, except so far as the same are in conflict with the following sections of this article which shall be applicable only to such cooperative associations, and except that no stock cooperative association shall issue stock without nominal or par value.

C. To the extent that the application of the provisions of this article to any worker cooperative established under Article 3 (§ 13.1-346 et seq.) conflicts with the provisions of Article 3, the provisions of Article 3 shall control.

Code 1950, § 13-238; 1952, c. 668; 1956, c. 428; 1986, c. 363; 1992, cc. 155, 653; 1994, c. 217; 2020, c. 673.

An association may amend its articles of incorporation by the affirmative vote of two-thirds of the members voting thereon at any regular meeting, or at a special meeting called for the purpose. Notice of the proposed amendment and of the time and place of holding such meetings shall be delivered to each member, or mailed to his last known address shown by the books of the association, at least ten days prior to any such meetings. No amendment affecting the priority or preferential rights of any outstanding nonvoting stock shall be adopted until the written consent of two-thirds of the holders of such outstanding nonvoting stock has been obtained. Triplicate originals of the articles of amendment duly signed and acknowledged together with the filing fee required to be paid shall be delivered to the Commission. If the Commission finds that the articles comply with the requirements of law and that all required fees have been paid, it shall by order issue a certificate of amendment, which shall be admitted to record in its office. Upon the issuance of such certificate, it shall become effective in accordance with its terms.

1958, c. 88.

The board of directors or members of the association, before commencing business, shall adopt bylaws not inconsistent with law or its articles of incorporation, and they may alter, amend and revise the same from time to time. The bylaws may be adopted, amended or revised by a majority vote of the board of directors, or by the vote of two-thirds of the members voting thereon at any regular or special meeting of the members or by the written assent of two-thirds of the members voting thereon by mail ballot, provided, that written notice of the proposed bylaw or bylaw amendments or revisions shall have been delivered to each member or mailed to his last known address as shown by the books of the association, at least ten days prior to any such meeting or the date on which the mail ballots must be returned to be counted. The bylaws made by the board of directors may be repealed or changed and new bylaws made by the members, and the members may prescribe that any bylaw made by them shall not be altered, amended or repealed by the directors. The bylaws may also provide for any or all of the following matters:

(a) The time, place and manner of calling and conducting meetings of the members, and the number of members (which may be less than a majority) that shall constitute a quorum;

(b) The manner of voting and the conditions upon which members may vote at general and special meetings by proxy and by mail or by delegates elected by district groups or other associations;

(c) Subject to any provision thereon in the articles of incorporation and in this article, the number, qualifications, compensation, duties and terms of office of directors and officers; the time of their election and the mode and manner of giving notice thereof;

(d) The time, place and manner for calling and holding meetings of the directors and executive committee, and the number that shall constitute a quorum;

(e) Rules consistent with law and the articles of incorporation for the management of the association, the establishment of election districts, the making of contracts, the issuance, retirement and transfer of stock, the relative rights, interests and preferences of members and stockholders, and the mode, manner and effect of the expulsion of a member;

(f) Penalties for violations of the bylaws.

1958, c. 88.

No holder of common stock in any stock cooperative association shall own shares of a greater par value than $1,000, except as hereinafter provided, or be entitled to more than one vote.

Code 1950, § 13-239; 1956, c. 428; 1994, c. 217.

At any regular meeting or any regularly called special meeting of a stock cooperative association at which at least a majority of all its stockholders shall be present or represented, any such association may by a majority vote of the stockholders present or represented subscribe for shares and invest its capital or reserve fund in the capital stock of any corporation or cooperative association; provided that it shall not so invest a total amount in excess of twenty-five percent of the amount of its capital stock.

Code 1950, § 13-240; 1956, c. 428; 1994, c. 217.

Whenever any stock cooperative association shall purchase the business of another association, person or persons, it may pay for the same in whole or in part by issuing to the selling association or person shares of its capital stock to an amount which at par value would equal the fair market value of the business so purchased, and in such case the transfer to the association of such business at such valuation shall be equivalent to payment in cash for the shares of stock so issued. In case the cash value of such purchased business exceeds $1,000 the directors of the association are authorized to hold the shares in excess of $1,000 in trust for the vendor and dispose of the same to such persons and within such time, as may be mutually satisfactory to the parties in interest, and to pay the proceeds thereof as currently received to the former owners of such business.

Code 1950, § 13-241; 1956, c. 428; 1994, c. 217.

Certificates of stock of a stock cooperative association shall not be issued to any subscriber until fully paid, but the bylaws of the association may allow subscribers to vote as stockholders provided part of the stock subscribed for has been paid in cash.

Code 1950, § 13-242; 1956, c. 428; 1994, c. 217.

The net earnings and profits of an association organized pursuant to § 13.1-301 shall be apportioned, distributed and applied as the association may at any general or special meeting direct. The association may in its bylaws prescribe the terms and conditions, rules and regulations under and by which the stockholders or employees, or cooperating nonstockholders may participate in the earnings of the association.

Unless and until otherwise ordered by the association at any general or special meeting the board of directors shall annually apportion the net earnings by first paying dividends on the paid-up capital stock not exceeding eight per centum per annum, and by then setting aside not less than ten per centum of the remaining net earnings for a reserve fund until an amount has accumulated in the reserve fund equal to thirty per centum of the paid-up capital stock, and five per centum of the then remaining net earnings for an educational fund to be used in teaching cooperation; and shall apportion the remainder of such net profits by uniform dividends to its stockholders upon the amount of purchases of such association from its stockholders, and sales by the association to its stockholders or for their account, and upon the wages and salaries of employees, and one-half of such uniform dividend to cooperating nonstockholders unless otherwise provided by the bylaws of such association as follows: If the association be engaged in the mercantile business, then to the extent the business is so conducted, dividends, except as hereinafter otherwise provided, shall be paid as above provided to cooperating nonstockholders only upon the amount of their purchases and not upon the purchases made by the association. If the association be engaged to any extent in the purchase and sale of products of farm or orchard or as selling agent of such products, or if the association be a productive association, such as a creamery, cannery or factory, and the like, dividends to such extent shall be paid as above provided to cooperating nonstockholders who furnish such products upon the amounts of such products so furnished and not upon sales by the association.

Code 1950, § 13-243; 1956, c. 428.

Any cooperative association may, either in its charter or by bylaws, provide and require that no membership or share of its stock shall be issued to or owned by any person not a member of a nonstock corporation or nonstock corporations named or designated in such charter or bylaws, or may in like manner provide that memberships or shares of its stock may be issued to or owned by persons not members of such designated nonstock corporation or nonstock corporations, but that when so owned such stock shall have no voting power. The provisions of this section shall not apply to any worker cooperative established under Article 3 (§ 13.1-346 et seq.).

Code 1950, § 13-244; 1956, c. 428; 1994, c. 217; 2020, c. 673.

A. No corporation or association organized or doing business for profit in this Commonwealth shall be entitled to use the term "cooperative" as part of its corporate or other business name or title, unless it has complied with the provisions of this article or of Article 2 (§ 13.1-312 et seq.) or 3 (§ 13.1-346 et seq.) of this chapter or of Chapter 9.1 (§ 56-231.15 et seq.) or 16 (§ 56-485 et seq.) of Title 56 or of any other statute providing for cooperative corporations or associations now existing or hereafter enacted; and any corporation or association violating the provisions of this section may be enjoined from doing business under such name at the instance of any stockholder or member of any corporation or association legally organized under any law giving it the right to use the word cooperative as a part of its corporate or business name.

B. Subsection A shall not apply to a corporation or association, domestic or foreign, whose purpose is to promote housing opportunities or to represent, coordinate and further the purposes of groups organized to construct, operate, or promote housing, and such corporation or association may use the term "cooperative" as part of its corporate or other business name or title.

Code 1950, § 13-245; 1950, c. 300; 1956, c. 428; 1993, c. 822; 2020, c. 673.

Any cooperative marketing association or corporation incorporated under Article 2 (§ 13.1-312 et seq.) of this chapter, or under the general corporation laws of this Commonwealth, may be brought under the provisions of this article, and be entitled to all the benefits thereof, and be subject to all provisions, restrictions and limitations thereof by amending its articles of association or incorporation in the same manner as set out in § 13.1-334, in cases of such associations and corporations existing under Article 2 of this chapter, either by original incorporation or by amendment, and in cases of such associations and corporations existing under the general corporation laws by amending such articles of association or incorporation according to the provisions of Article 11 (§ 13.1-705 et seq.) of Chapter 9 of this title or Article 10 (§ 13.1-884 et seq.) of Chapter 10 of this title, as the case may be; but when such amendment is had in the case of a corporation or association existing under the provisions of Article 2 of this chapter, all special privileges under such article shall be thereby surrendered.

Code 1950, § 13-246; 1956, c. 428; 1994, c. 217.

A foreign cooperative whose purpose shall include one or more of the purposes recognized for domestic cooperatives under this title or any other title of the Code of Virginia shall be authorized to do business under the provisions of this chapter by complying with the laws relating to foreign corporations doing business in the Commonwealth. The foreign cooperative shall deliver to the Commission the documents required by § 13.1-759 if a stock cooperative, or by § 13.1-921 if a nonstock cooperative along with a copy of the cooperative's bylaws. Upon such compliance, the foreign cooperative shall have all the rights and privileges of a domestic cooperative. No foreign cooperative association authorized to do business in this Commonwealth under the provisions of this article shall conduct any business in this Commonwealth as a public service company or exercise any privileges of such company.

1992, c. 653; 1994, c. 217.

Any cooperative association or corporation organized under the laws of this Commonwealth, or under the laws of the United States, or qualifying as a cooperative association under the laws of the United States, may give as security for any loan or loans obtained from any bank for cooperatives organized under any act of Congress a chattel mortgage or deed of trust covering stocks of goods or other things in bulk, but changing in specifics, in which case the lien of such mortgage or deed of trust shall be lost as to all articles disposed of by the mortgagor up to the time of foreclosure but shall attach to the articles purchased to supply their places; provided, however, no stock of goods shall be pledged by a cooperative association unless such stock has been fully paid for and is owned by the association without incumbrance at the time it is so pledged.

Code 1950, § 13-247; 1956, c. 428.

Every cooperative association, society, company and exchange created under the provisions of this article and every cooperative marketing association or corporation and every general corporation that may be brought under the provisions of this article, whether such association, society, company, exchange or corporation be organized or brought under this article prior or subsequent to the date of the approval of this section and whether chartered under the laws of this Commonwealth or otherwise chartered and doing business in this Commonwealth, and conducting a mercantile, merchandise or brokerage business on the cooperative plan shall be taxable as a merchant by the Commonwealth, and by the city or town within which such business is done. Nothing in this article shall exempt any such organization from any state or local merchant's license tax.

1950, c. 365; 1956, c. 428.

Those provisions of the Virginia Stock Corporation Act (§ 13.1-601 et seq.) and the Virginia Nonstock Corporation Act (§ 13.1-801 et seq.) relating, respectively, to the involuntary termination of domestic corporations and to the revocation of the certificates of authority to do business in this Commonwealth of foreign corporations shall apply to every association organized or doing business in this Commonwealth pursuant to the provisions of this chapter; but the provisions of this section shall not be construed as a limitation upon the application of the provisions of Chapters 9 (§ 13.1-601 et seq.) and 10 (§ 13.1-801 et seq.) of this title to such associations under § 13.1-343.

1958, c. 506; 1994, c. 217.