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Myself and several friends are planning on starting a for profit worker-owned cooperative business that will provide landscaping services in Washington state. We have decided to form our cooperative under the state's legal business structure for Cooperative Associations (RCW 23.86), and are currently in the process of drafting our Articles of Association and our Bylaws.

State regulations force Cooperative Associations to have a certain organizational structure similar to a C corporation, where you have a Board of Directors that governs the organization, and is voted in by the member-owners of the cooperative (RCW 23.86.080). Furthermore, the statutes require the Board to elect officers such as a President, Vice President, Treasurer, and Secretary (RCW 23.86.085).

However, we would like our organization to have a "flatter" organizational structure that does not have a Board of Directors making decisions in the name of the co-op's membership, but rather where all worker-members are Board members who have full, equal membership rights and each get one vote in all collective decisions. We also wish for the legally mandated "officer" positions to be essentially meaningless titles, that confer no priveleges/powers to the members who we arbitrarily select to fill them.

We have been trying to think of a way to satisfy the legal requirement to have a board, while creating no distinction between board members and "regular members". What we came up with for our Bylaws was the following:

Immediately upon being granted membership in the Co-op (through the process described in this section, below) a person is:

  • given one seat on the Co-op’s Board of Directors ; and
  • granted equal powers and privileges as all other Board members.

Thus all Co-op members are on the Board of Directors, and use of the words “member” or “members” will hereafter imply a person or persons who are Directors on the Co-op’s Board. The use of the term “collective” shall hereafter refer to all of the members of the cooperative together, with all of the powers, privileges, and responsibilities granted to the Board by law, and by the Co-op’s Articles of Assocation and Bylaws. From time to time, as required by RCW 23.86.085, the collective shall elect the following officers: a President, Vice President, Secretary, and Treasurer. None of these officers shall have any powers, rights, privileges that differ in any way from other members.

Does this satisfy the requirements in RCW 23.86? Is it legal to do this - i.e. to state that every member of an association is on the board and has equal powers/rights/responsibilities?

Are there any changes that should be made to this that would better describe what we are trying to do?

  • Just to clarify - we have other sections in the Bylaws that deal with powers of members, process for granting and terminating membership, meeting times, decision-making/voting processes, etc. This section is simply meant to clarify that there is only one class of members, all of whom are board members and all of whom have equal powers/privileges. My question is specifically about the legality of this clause, and not about all of the other things related to membership that also need to be covered in the Bylaws. – J. Taylor Aug 9 '16 at 17:12
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There is no statutory impediment to making "president", "vice president" and "treasurer" be an honorary title (those offices are mentioned only in the election law). RCW 23.86.087 allows the possibility of removing officers, and charges are to be filed with the secretary. The proposed bylaws (the "None of these officers" clause) would preclude that legally-required function, since there is no exception for functions required by law.

You didn't mention the (recently changed) registered agent requirement so I assume you've sorted that out.

  • Thank you. We have another section in the Bylaws that describes the process for granting / terminating membership (both voluntarily & via expulsion). Since the bylaws state that "member" is synonymous with "Board member", would that suffice? Also, as far as new registered agent requirements - are you referring to RCW 23.86.095 / RCW 24.06.050? If so, yes we have taken care of that in the Articles of Association. If not, could you clarify what you are referring to? – J. Taylor Aug 9 '16 at 17:04
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    A clause that appears to deny a special power (receipt of charges filed against an officer, statutorily assigned to the secretary) which is required by law could easily be seen to not conform with the law. The Sec'y of State might view consider "serves the same function" to be good enough – I don't know how much of a textualist she is, and it would not hurt to email the office. As for reg. agent, as long as you have one properly identified and checked the updated law. – user6726 Aug 9 '16 at 18:41
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You really need to consult a lawyer.

While on the face of it there is no maximum limit to the number of directors you may find that this structure has unintended consequences.

For example, if a person becomes ineligible to be a director for any reason, does that mean they must leave the co-op?

In addition, the government and other members of the public, will expect (and may be legally entitled to believe) that a person with the title of, say Treasurer, does have some special powers and privileges. When you set up an unconventional structure, you may find that your bank, insurers etc. may not be able to deal with you because their internal procedures assume that you will be conventionally structured.

There are more practical issues to consider: who has the power to sign cheques? open bank accounts? enter and terminate contracts? etc. If every one of 86 members is required to sign a cheque you are going to need some inconveniently large stationary; not to mention that your suppliers will be waiting six months for payment while you gather the signatures.

The reason that the law specifies this type of structure: officers answerable to a board that is answerable to the members is that, by and large, it works.

Right now, you may only have 4 or 5 members and what you are proposing may be workable but you should be setting up your business for growth, not stagnation.

  • Thanks for your concern, but it doesn't really address my question about the legality of the clause above. Many of the questions you asked are answered in other parts of the Bylaws (such as "who has the power to enter and terminate contracts" and "who has the power to sign contracts"). Some of the things you mentioned, don't seem like real issues (e.g. which bank would require 86 people to sign a check?). And as far as setting up for growth, the Bylaws make clear that we can change the structure of the bylaws at any time if they become inconvenient. – J. Taylor Aug 9 '16 at 14:27

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