Chap. 398.—An ACT to amend and re-enact Sections 1, 2, 3, 7, 9, 14, 19, 21 and 30 of
an Act entitled ‘‘An Act to encourage the cooperative marketing of farm products
in Virginia, to provide for and authorize the incorporation of cooperative market-
ing associations or exchanges and the licensing to do business in Virginia of
similar corporations created in other states under similar laws.”, approved
February 18, 1922, as heretofore amended, so as to further declare the policy of
the State as to such associations, to permit co-operative associations of producers
to become members of such associations, to provide how certificates of incorpora-
tion of such associations may be amended, to provide for certain dividends on
stock or membership capital and for the distribution of certain income of such
associations as patronage refunds, to authorize the issuance of certificates of
equity evidencing interest in such associations, to require reports and audits of
the affairs of such associations, to further limit the use of the word ‘‘co-operative”’
in this State, and to prescribe what taxes shall be paid by such associations and
from what taxes they shall be exempt. [S B 98]

Approved April 1, 1940

1. Beit enacted by the General Assembly of Virginia, that sec-
tions one, two, three, seven, nine, fourteen, nineteen, twenty-one, and
thirty of an act entitled ‘‘an act to encourage the co-operative market-
ing of farm products in Virginia, to provide for and authorize the in-
corporation of co-operative marketing associations or exchanges and
the licensing to do business in Virginia of similar corporations created
in other states under similar laws.”, approved February eighteen,
nineteen hundred and twenty-two, as heretofore amended, be amended
and re-enacted so that the said amended sections shall read as follows:

Section 1. Declaration of Policy.—It is the declared policy of this
State, as one means of improving the economic position of agriculture,
to encourage the organization of producers of agricultural products
into effective non-profit co-operative associations under the control of
such producers.

Section 2. Definitions.—As used in this act, unless the context or
subject matter requires otherwise:

(a) The term ‘Agricultural Products’’ shall include seeds, nuts,
groundstock, and horticultural, viticultural, forestry, dairy, livestock,
poultry, bee, and any other farm products.

(b) The term ‘‘Supplies” shall include any and all types of sup-
plies, machinery and equipment used by farmers as producers or used
by farmers as consumers.

(c) The term ‘‘Member” shall include the holder of a membership
certificate in an association without capital stock and the holder of
voting stock in an association organized with capital stock, provided
that for all purchasing associations, each such member not holding
stock in the association shall have paid for the then current year a
membership fee of not less than one ($1.00) dollar to, and is enrolled
on the membership list of, the respective associations.

A member shall lose his membership and his right to vote if he
ceases to meet the requirements of membership under this section and
under section seven. ,

(d) The term ‘‘Association” means a corporation organized under
this act or that has adopted or may hereafter adopt the provisions
thereof. ,

(e) The term ‘‘person’’ shall include individuals, firms, partner-
ships, corporations, and associations. —

(f) The term ‘‘board’”’ means the board of directors.

(g) The term ‘patron’? means a person using the marketing
facilities of an association for the marketing of agricultural products,
or a person using the purchasing or service facilities of an association
for the purchase of supplies or the rendering of service.

(i) ‘‘This act’? may be referred to as. the “Agricultural Co-
operative Association Act.” - i |

Section 3. Who May Organize.—Five or more adult persons, en-
gaged in agriculture as bona fide producers of agricultural products,
or two.or more associations of such producers, may form a non-profit
co-operative association, with or without capital stock, under the
provisions of this act. | | ,

Section 7. Members.—(a) Under the terms and conditions pre-
scribed in its by-laws, an association shall admit as members only
bona fide producers of agricultural products, including tenants and
landlords receiving a share of the crop, and co-operative associations
of such producers. 7

(b) Under the terms and conditions prescribed in the by-laws, a
member shall lose his membership and his right to vote if he ceases to
belong to the class eligible to membership under this section, but he
shall remain subject to any liability to the association incurred by
him while a member of the association except in any agricultural
corporation operating on a non-profit co-operative basis under charter
granted prior to nineteen hundred and one, a member shall not lose
his membership and his right to vote if he ceases to belong to the class
eligible to membership but shall retain the same so long as he shall
own his stock in said corporation.

(c) No member shall be personally liable for any debt or liability
of the association. |

(d) No member shall have more than one vote regardless of
whether such member is an individual or a co-operative association;
except that in any agricultural corporation operating on a non-profit
co-operative basis under charter granted by the General Assembly of
Virginia prior to nineteen hundred and one, such member may have
one vote for each share of stock in said corporation.

(e) If a member of a non-stock association be other than a
natural person, such member may be represented by any individual,
associate, officer or member thereof, duly authorized in writing.

Section 9. Amendments to the Certificate of Incorporation.—An
association may amend its certificate of incorporation in accordance
with the provisions of the general corporation laws of the State either
by the affirmative vote of a majority of all of its members or 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. A
written or printed notice of the proposed amendment setting forth
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 preferential rights of any outstanding non-
voting stock shall be adopted until the written consent of two-thirds
of the holders of such outstanding non-voting stock has been ob-
tained. Except as otherwise stated herein, the provisions of the
general corporation law of this State shall apply to amending the
certificate of incorporation of associations operating hereunder.

Section 14. Membership Certificates; Stock, When Issued; Liabil-
ity; Limitation on Transfer of Ownership; Dividends; Patronage Re-
funds; Certificates of Equity—(a) When a member of an association
established without capital stock has paid his membership fee in full,
he shall receive a certificate of membership.

(b) No association shall issue voting stock to a member until it
has been fully paid for. The promissory notes of the members may
be accepted by the association as full or partial payment. The asso-
ciation shall hold the stock as security for the payment of the note,
but such retention as security shall not affect the member’s right to
vote.

(c) Except for debts lawfully contracted between him and the
association, no member shall be liable for the debts of the association
to an amount exceeding the sum remaining unpaid on his member-
ship fee or his subscription to the capital stock, including any unpaid
balance on any promissory notes given in payment thereof.

(d) Any association organized with stock under this act may issue
preferred stock, with or without the right to vote; such stock may be
redeemable or retirable by the association on such terms and condi-
tions as may be provided for by the certificate of incorporation and
printed on the face of the certificate. |

(e) The by-laws of each joint stock association shall prohibit the
transfer of voting stock to anyone not eligible to membership in the
association, and such restrictions must be printed upon every certificate
subject thereto.

(f) The association may at any time, except when the debts of
the association exceed fifty per centum (50%) of the assets thereof,
buy in or purchase its voting stock at book value thereof as con-
clusively determined by the board of directors, and pay for it in cash
within one (1) year thereafter.

(g) Dividends in excess of six per centum per annum on the
actual cash value of the consideration received by the association
shall not be paid on stock or membership-capital, but dividends may
be cumulative if so provided in the certificate of incorporation.

(h) Savings and earnings, or either, derived by an association
from the acquisition, purchase and sale of supplies, when returned to
members shall be returned to all members of the association on a basis
which shall be alike as to all such members and shall be computed on
the total amount of all supplies of every kind acquired, purchased and
sold by the said association, any distribution of savings or earnings
made to non-members shall be on the same basis as to members.

(i) The association may from time to time issue to each patron a
certificate of equity evidencing the patron’s interest in any fund,
capital investment or other assets of the association. Such certificate
may be transferred only to the association, or to such other purchaser
as may be approved by the board of directors, upon such terms and
conditions as shall be provided in the by-laws and printed upon the
certificate.

Section 19. Annual Reports.—Each association incorporated or
domesticated under this act or adopting the provisions of this act
shall make such reports and audits to the Division of Markets as the
Director of the Division of Markets with the approval of the Com-
missioner of Agriculture and Immigration and the Board of Agri-
culture and Immigration may require; provided however, that when
any association is audited by a certified public accountant and a copy
of such audit is filed with the Division of Markets, no further audit
of said association shall be required. The Director of the Division of
Markets with the approval of the Commissioner of Agriculture and
Immigration and the Board of Agriculture and Immigration shall
report to the Attorney General any violation of the provisions of this
act by any association, and the Attorney General shall thereupon in-
stitute appropriate proceedings against any such association if in his
opinion such proceedings are justified.

A written report of the audit, including a statement of services
rendered by the association with total amount of business transacted
and balance sheet, income and expenses, salaries of officers, directors,
managers and administrative personnel and other proper information,
shall be submitted to the annual meeting of the members of the
association.
Section 21. Limitations of the Use of the Word ‘‘Co-operative.’’—
No person, firm, corporation or association, domestic or foreign, here-
after commencing business in this State shall use the word ‘“‘co-
operative’, or any abbreviations thereof, as a part of its corporate or
business name unless it has complied with the provisions of this act
or some other statute of this State relating to co-operative associations.
A foreign association organized under and complying with the co-
operative law of the State of such association’s creation shall be
entitled to use of term ‘‘co-operative”’ in this State if it has obtained
the privilege of doing business in this State under any co-operative
statute of this State. Any person violating the provisions of this
section shall be deemed guilty of a misdemeanor and shall be subject
to a fine not exceeding fifty dollars. For the purpose of this section,
each day’s violation may be considered a separate offense.

Section 30. Fees and Taxes.—Associations as defined in sub-
section (d) of section two of this act shall pay an annual license fee
of ten dollars ($10.00) which shall be in lieu of all other corporation,
franchise, and income taxes, taxes on capital, taxes and charges upon
reserves held by the association, and all State and local license taxes
except as hereinafter provided.

No retail purchasing association shall be required to pay any State
or local retail merchants license taxes measured by sales of seeds,
feeds, fertilizer and fertilizer materials, agricultural lime, stock salt,
spray materials, harness, plows, harrows, repairs for plows and harrows,
and containers for agricultural and horticultural products, when such
supplies are sold to members of such association; provided that
twenty-five per cent. of the total sales of such an association may
consist of merchandise not included in the above list and may be
sold to members or to non-members but on such volume of merchandise
not included in such list the association shall pay the same taxes as
are paid by a merchant and separate records shall be kept of that
part of the business; also provided that an amount of fifty per cent.
in retail value of the above named commodities may be sold to non-
members without incurring or causing any additional tax liability.
The sale of such supplies to or for non-members of such retail pur-
chasing association, except as provided in this section, and the sale
of any supplies other than those enumerated whether to or for mem-
bers or non-members, shall subject such association to all State and
local taxes, provided that the sale to non-members of a surplus of
seasonable goods included in the above list, not exceeding in value
fifteen per cent. of such goods purchased in a calendar year, shall not
be considered as causing an additional tax liability if such goods are
sold to another association or to a merchant licensed to sell such
goods. In any locality which imposes local levies on the capital of
retail merchants instead of imposing a local retail merchants license
tax, a similar tax may be imposed by such locality on the capital of
any retail purchasing association therein in the same ratio as the
amount of sales of supplies other than those exempt from tax hereunder
bears to the total sales of such associations.
A wholesale purchasing association shall be subject to all State
and local taxes which are imposed on wholesale merchants.

An association engaged in manufacturing shall be subject to taxa-
tion in the same manner and to the same extent as a non-cooperative
manufacturing corporation.

The State Tax Commissioner is authorized and directed to prescribe
and enforce appropriate rules and regulations for the keeping and
preservation of proper records for making reports to the proper
assessing authorities by all such associations for the purpose of enabling
the proper assessing authorities to ascertain and to assess the proper
taxes.