2017 -- H 6155 SUBSTITUTE A

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2017

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A N   A C T

RELATING TO CORPORATIONS, ASSOCIATIONS, AND PARTNERSHIPS -- WORKERS'

COOPERATIVES

     

     Introduced By: Representatives Maldonado, McKiernan, Craven, Keable, and
Blazejewski

     Date Introduced: April 27, 2017

     Referred To: House Corporations

     It is enacted by the General Assembly as follows:

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     SECTION 1. Title 7 of the General Laws entitled "CORPORATIONS,

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ASSOCIATIONS, AND PARTNERSHIPS" is hereby amended by adding thereto the following

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chapter:

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CHAPTER 6.2

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WORKERS' COOPERATIVES

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     7-6.2-1. Legislative purpose.

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     The purpose of this chapter is to promote the creation of workers' cooperatives by

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incentivizing workers to create enterprises that are democratically controlled and operated by

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their own workers.

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     7-6.2-2. Definitions.

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     As used in this chapter, the following words and terms have the following meaning:

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     (1) "Member" means a natural person who has been accepted in and owns a membership

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share issued by a workers' cooperative.

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     (2) "Paid-in capital" means money or other property contributed by a member to a

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workers' cooperative that is exclusive of any membership fee.

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     (3) "Patronage" means the amount of work performed as a member of a workers'

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cooperative that is measured in accordance with the certificate of incorporation and bylaws.

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     (4) "Person" means an individual, a partnership, a corporation, an association, or two (2)

 

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or more persons having a joint or common interest.

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     (5) "Workers' cooperative" means a corporation that has elected to be governed by the

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provisions of this chapter.

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     (6) "Written notice of allocation" means the amount of work performed as a member of a

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workers' cooperative that is measured in accordance with the certificate of incorporation and

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bylaws.

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     7-6.2-3. Corporations organized under general corporation law; election to be

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governed as workers' cooperative.

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     Any corporation organized under chapter 1.2 of title 7 may elect to be governed as a

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workers' cooperative under the provisions of this chapter, by so stating in its certificate of

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incorporation filed in accordance with §§7-1.2-201 and 7-1.2-202 of the Rhode Island business

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corporation act, or amendments to its certificate of incorporation filed in accordance with §§7-

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1.2-901 through 7-1.2-907.

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     7-6.2-4. Application of general corporation law.

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     (a) The provisions of chapter 1.2 of title 7 are applicable to workers' cooperatives.

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     (b) All workers' cooperatives shall enjoy the powers and privileges, and be subject to the

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duties, restrictions, and liabilities of other corporations organized under chapter 1.2 of title 7,

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except where inconsistent with the intent and purpose of this chapter.

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     (c) This chapter takes precedence in the event of a conflict with the provisions of chapter

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1.2 of title 7.

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     (d) All workers' cooperatives shall be subject to the provisions of chapter 11 of title 44

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dealing with the taxation of corporations.

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     7-6.2-5. Revocation of election.

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     A workers' cooperative may revoke its election under this chapter by a vote of two-thirds

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(2/3) of the members and through articles of amendment filed in accordance with §§7-1.2-901

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through 7-1.2- 907.

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     7-6.2-6. Members; membership shares; fees; rights and responsibilities.

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     (a) The certificate of incorporation or the bylaws shall establish qualifications and the

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method of acceptance and termination of members. Upon completion of their probationary period

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all regular full-time or part-time employees shall be offered membership in the workers'

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cooperative. Acceptance as a member in a workers' cooperative shall be evidenced by a

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membership share, which shall be issued for a fee, to be paid in such terms and conditions as are

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provided in the bylaws.

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     (b) A workers' cooperative shall issue a class of voting stock designated as "membership

 

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shares." Each member shall own only one membership share, and only members may own

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membership shares.

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     (c) Membership shares shall be issued for a fee as shall be determined from time to time

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by the directors. No certificate for a membership share shall be issued until its fee has been paid

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in full. Each member is entitled to a certificate for their membership share upon fulfilling the

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requirements in the cooperative's articles of incorporation and bylaws.

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     (d) Members of a workers' cooperative shall have all the rights and responsibilities of

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stockholders of a corporation organized under the provisions of chapter 1.2 of title 7, except as

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otherwise provided in this chapter.

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     7-6.2-7. Voting shares; bylaws; amendment of certificate of incorporation.

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     (a) No capital stock other than membership shares shall be given voting power in a

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workers' cooperative, except as otherwise provided in this chapter.

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     (b) Notwithstanding the provisions of §§7-1.2-201 and 7-1.2-202 and §§7-1.21-901

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through 7-1.2-907, the power to amend or repeal bylaws of a workers' cooperative shall be vested

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in the members only, except to the extent that directors are authorized to amend or repeal the

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bylaws in accordance with the certificate of incorporation.

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     (c) The provisions of §§7-1.2-901 through 7-1.2-907 shall be construed to limit voting on

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any amendment of the certificate of incorporation of a workers' cooperative to the members,

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except that nonmember stockholders shall participate in such voting in accordance with §7-1.2-

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903 where a proposed amendment would adversely affect the rights of such nonmember

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stockholders as provided in §7-1.2-904.

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     7-6.2-8. Net earnings or losses; apportionment, distribution, and payment.

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     (a) The net retained proceeds or losses of a workers' cooperative shall be apportioned and

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distributed at such times and in such manner as the certificate of incorporation or bylaws shall

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specify. Net retained proceeds declared as patronage allocations with respect to a period of time,

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and paid or credited to members, shall be apportioned among the members in accordance with the

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ratio which each member's patronage during the period involved bears to patronage by all

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members during that period. As used in this section, "patronage" means the amount of work

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performed as a member of a workers' cooperative, measured in accordance with the certificate of

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incorporation and bylaws.

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     (b) The apportionment, distribution, and payment of net retained proceeds required by

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subsection (a) of this section may be in cash credits, written notices of allocation, or capital stock

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issued by the workers' cooperative. If the distribution and payment of net-retained proceeds is

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made in cash credits, such distribution and payments shall be subject to pass-through withholding

 

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under §44-11-2.2.

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     7-6.2-9. Directors; officers.

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     (a) The bylaws of a workers' cooperative shall provide for the election, terms,

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classifications, if any, and removal of directors and officers in accordance with the provisions of

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this chapter or the provisions of chapter 1.2 of title 7.

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     (b) In the absence of any bylaw, provision, elections, terms, classifications, and removal

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procedures shall be governed by the provisions of chapter 1.2 of title 7.

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     (c) Nonmembers may serve as directors or officers of a workers' cooperative, but at no

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time shall there be a majority of nonmember directors.

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     (d) Vacancies in director positions resulting from death, resignation, or removal shall be

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filled by a vote of the member directors.

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     7-6.2-10. Application of payroll tax withholding laws and workers' compensation

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insurance requirement.

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     Nothing in this chapter creating workers' cooperatives shall prevent the application of

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payroll tax withholding laws, including, but not limited to, payroll taxes relating to temporary

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disability insurance and unemployment insurance, or the provisions relating to the requirements

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to obtain workers' compensation insurance.

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     7-6.2-11. Internal capital accounts; recall or redemption of shares; interest;

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collective reserve account.

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     (a) Any workers' cooperative may establish through its certificate of incorporation or

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bylaws a system of internal capital accounts, to reflect the book value and to determine the

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redemption price of membership shares, capital stock, and written notices of allocation. As used

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in this section, "written notice of allocation" means a written instrument which discloses to a

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member the stated dollar amount of the member's patronage allocation, and the terms for a

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payment amount by the workers' cooperative.

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     (b) The certificate of incorporation or bylaws of a worker cooperative may permit the

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periodic redemption of written notices of allocation and capital stock, and must provide for recall

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and redemption of the membership share upon termination of membership in the cooperative. No

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redemption shall be made if the redemption would result in the liability of any director or officer

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of the worker cooperative under §§7-1.2-801 through 7-1.2- 814.

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     (c) The certificate of incorporation or bylaws may authorize assignment of a portion of

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net retained proceeds and net losses to a collective reserve account. Net retained proceeds

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assigned to the collective reserve account may be used for any and all corporate purposes as

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determined by the board of directors.

 

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     7-6.2-12. Conversion of membership shares and internal capital accounts upon

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revocation of election; consolidation or merger.

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     When any workers' cooperative revokes its election in accordance with §7-6.2-5, an

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amendment of the certificate of incorporation shall provide for the conversion of membership

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shares and internal capital accounts, or their conversion to securities or other property in a manner

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consistent with the provisions of chapter 1.2 of title 7.

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     7-6.2-13. Severability.

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     If any provision of this chapter or any rule or regulation created under this chapter, or the

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application of any provision of this chapter to any person or circumstance shall be held invalid in

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any court of competent jurisdiction, the remainder of the chapter, rule, or regulation and the

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application of such provision to other persons or circumstances shall not be affected thereby. The

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invalidity of any section or sections of this chapter and to this end the provisions of the chapter

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are declared to be severable.

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     SECTION 2. This act shall take effect on January 1, 2018.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO CORPORATIONS, ASSOCIATIONS, AND PARTNERSHIPS -- WORKERS'

COOPERATIVES

***

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     This act would create a statutory vehicle for the creation and functioning of workers'

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cooperatives which are corporations that are owned and democratically governed by their

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members. The act would also allow any corporation to elect to become a workers' cooperative by

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so stating in its certificate of incorporation, or in its amendments to its certificate of

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incorporation.

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     This act would take effect on January 1, 2018.

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