CHAPTER 324

AN ACT providing for the formation of nonprofit corporations
to be known as Telephone Cooperatives, for the purpose of
promoting and encouraging the fullest possible use of tele-
phone service in this State by making such service available
at the lowest cost consistent rcith sound economy and prudent
management of such cooperatives; prescribing the rights,
powers and duties of such cooperatives; authorizing and rcgu-
lating the issuance of bonds and other obligations by such
cooperatives, and providing for the payment of such obliga-
tions and the rights of the holders thereof; and providing when
the State Corporation Commission may require public tele-
phone companies to make telephone service available to com-
munities not now served.

[S 6]
Approved April 5, 1950

Be it enacted by the General Assembly of Virginia, as follows:
1. § 1. Short Title—This act may be cited as the “Telephone
Cooperatives Act”’.

§ 2. Purpose.—Any number of natural persons not less than
five may, by executing, filing and recording a certificate as herein-
after set forth, form a cooperative, either with or without capital
stock, not organized for pecuniary profit, for the purpose of pro-
moting and encouraging the fullest possible use of telephone service
by making telephone service and facilities available at the lowest
cost consistent with sound economy and prudent management of
the business of such cooperatives.

§ 3. Definitions.—The following terms whenever used or re-
ferred to in this act, shall have the following meanings, unless a
different meaning appears from the context:

(1) “Cooperative” shall mean a telephone corporation formed
under this act.

(2) “Municipality” shall mean any city or incorporated town
of the State.
(3) “Person” shall mean and include natural persons, firms
associations, cooperatives, corporations, business trusts, partner
ships and bodies politic.

(4) “Telephone service” shall mean and include service ove)
wire or cable lines, including voice carrier, service by voice carrie!
system over electric distribution and transniission lines, service ove)
radio circuits, and any other service involving the transmission 0!
voice or sound between fixed points.

(5) “Acquire” shall mean and include construct, acquire by
purchase, lease, devise, gift or the exercise of the power of eminent
domain, or other mode of acquisition.

(6) “System” shall mean and include any plant, works, system.
facilities, or properties, or any part or parts thereof, together with
all appurtenances thereto, used or useful in connection with the
transmission of voice or sound, or both.

(8) “Obligations” shall mean and include bonds, interim cer.
tificates or receipts, notes, debentures, and all other evidences of
indebtedness either issued or the payment thereof assumed by a
cooperative.

(9) “Federal agency” shall mean and include the United States
of America, the President of the United States of America, and any
and all other authorities, agencies, and instrumentalities of the
United States of America, heretofore or hereafter created.

(10) “Improve” shall mean and include construct, reconstruct,
improve, replace, extend, enlarge, alter, better or repair.

(11) “Board” shall mean the board of directors of a coopera-
tive formed under this act.

(12) “Member” shall mean and include each natural person
signing the certificate of incorporation of a cooperative and each
person admitted to membership therein pursuant to law or its
by-laws. |

§ 4. Certificate of Incorporation.—The certificate of incorpora-
tion shall be entitled and endorsed “Certificate of Incorporation of
the 2... cece eee ee eee Telephone Cooperative” (the blank space
being filled in with the distinguishing part of the name of the
cooperative) and shall state:

(1) The name of the cooperative, which name need not contain
the word “corporation” or “incorporated” but shall be such as to
distinguish it from any other cooperative.

(2) A reasonable designation of the territory in which its
operations are principally to be conducted.

(3) The location of its principal office and post office address
thereof.

(4) The maximum number of directors, not less than five.
(5) The names and post office addresses of the officers and
directors who are to manage the affairs of the cooperative for the
first year of its existence, or until their successors are chosen.

(6) The period, if any, limited for the duration of the cooper-
ative. .

(7) The terms and conditions upon which persons shall be
admitted to membership in the cooperative, and in the case of a
cooperative incorporating with capital stock a statement of the
maximum and minimum amount of the capital stock of the cooper-
ative, and its division into shares.

The certificate of incorporation may also contain any provision
not inconsistent with law which the incorporators may choose to
insert for the regulation of the business and the conduct of the
affairs of the cooperative; and any provision as to the plan of
financial organization, or relating to the internal regulation or
government of the cooperative, its directors and members.

§ 5. Limitation—The words “Telephone Cooperative” shall
not be used in the corporate names of corporations other than
those formed pursuant to the provisions of this act.

§ 6. Filing Certificate of Incorporation.—The natural persons
executing the certificate of incorporation shall be residents of the
territory in which the principal operations of the cooperative are
to be conducted who intend to use telephone service to be furnished
by the cooperative. The certificate of incorporation shall be sub-
scribed by at least five such persons and acknowledged by them
before an officer authorized by the law of this State to take and
certify acknowledgments of deeds and conveyances. When so ac-
knowledged the certificate shall be filed in accordance with the
provisions of § 56-48 of the Code of Virginia, and when so filed the
articles of incorporation, or certified copies thereof, shall be re-
ceived in all the courts of this State and elsewhere as prima facie
evidence of the facts contained therein, and of the due incorpora-
tion of the cooperative. All of the provisions of § 56-48 of the
Code of Virginia in so far as not inconsistent with this act are
hereby made applicable to such cooperatives, and as soon as the
charter is lodged for recordation in the office of the State Corpo-
ration Commission, the proposed cooperative described therein.
under its designated name, shall be and constitute a body corpo-
rate, with all of the applicable powers provided for in said section.

§ 7. Board of Directors.—Every cooperative formed hereun-
der shall have a board of directors of five or more members, which
shall constitute the governing body of the cooperative. The direc-
tors, other than those named in the certificate of incorporation,
shall be elected annually by the members. The directors must be
members and shall not be entitled to compensation for their serv-
ices as directors, except that a per diem of not to exceed ten
dollars a day may be paid directors for attending regular and
special meetings of the board. Directors shall be entitled to reim-
bursement for expenses incurred by them in the performance of
their duties. The directors shall elect annually from their own
number a president and one or more vice-presidents. They shall
also elect a secretary and a treasurer, who need not be directors
or members, and may combine the offices of secretary and treasurer
and designate the combined office as secretary-treasurer.

§ 8. Powers of board of directors.——The board of directors of
a cooperative shall have power to do all things necessary and in-
cidental in conducting the business of the cooperative, including,
but not limited to:

(1) If authorized by the certificate of incorporation, or by
resolution of its members, the power to adopt and amend by-laws
for the management and regulation of the affairs of the cooperative,
subject, however, to the right of such members to alter or repeal
such by-laws. The by-laws of a cooperative may make provisions,
not inconsistent with law or its certificate of incorporation,
regulating the admission, suspension or expulsion of members;
the transfer of memberships, the fees and dues of members and
the termination of memberships on nonpayment of dues or other-
wise; the number, times and manner of choosing, qualifications,
terms of office, official designations, powers, duties and compen-
sation of its officers; defining a vacancy in the board or in any
office and the manner of filling it; the number of menbers, not
less than ten per centum of the total number of members, to
constitule a quorum at meetings, the date of the annual meeting
and the giving of notice thereof and the holding of special meetings
and the giving of notice thereof; the terms and conditions upon
which the cooperative is to render service to its members, the dis-
position of the revenues and receipts of the cooperative; regular
and special meetings of the board and the giving of notice thereof.

(2) To appoint agents and employees and to fix their compen-
sation and the compensation of the officers of the cooperative.

(3) To execute all instruments.

(4) To make its own rules and regulations as to its procedure.

§ 9. Membership.—A cooperative shall issue to its members
certificates of membership. Only members shall be entitled to vote
and each member shall be entitled to only one vote at the meetings
of the members of the cooperative. The liability of each member
shall be limited to the unpaid portion of his membership fee or
subscription to capital stock, and any unpaid bills for telephone
service from the cooperative. The equity of members of a nonstock
cooperative shall be in proportion to the revenue paid the coopera-
tive by each member. A cooperative shall be operated on a non-
profit basis for the mutual benefit of its members. The by-laws of
the cooperative or its contract with its members shall contain
such provisions relative to the disposition of revenues and receipts
as may be necessary and appropriate to establish and maintain
its nonprofit and cooperative character.

§ 10. Service to members.—Except as hereinafter provided,
the corporate purpose of each cooperative formed hereunder shall
be to render service to its members only, and no person shall be-
come or remain a member unless such person uses telephone service
supplied by the cooperative and shall have complied with the terms
and conditions in respect to membership contained in the by-laws
of the cooperative. Should the cooperative acquire any telephone
facilities already dedicated or devoted to the public use it may,
for the purpose of continuing existing service and avoiding hard-
ship, continue to serve the persons served directly from such
facilities at the time of such acquisition without requiring that
such persons become members. In no event shall the number of
such nonmembers served exceed forty-nine per centum (49%) of
the total number of persons served by the cooperative. Such non-
member customers shall have the right to become members upon
nondiscriminatory terms.

The rates to such nonmembers shall be on a cost basis similar
to those charged members.

§ 11. Powers granted.—Each corporation formed under this
act shall have power to do any and all acts or things necessary
or incidental for carrying out the purpose for which it was formed,
including, but not limited to:

(1) To furnish or provide telephone service or any of the
facilities necessary therefor in connection with the furnishing or
providing of such service with others both within and without
this State.

(2) To sue and be sued.

(3) To have a seal and alter the same at pleasure.

(4) To acquire, hold and dispose of property, real and per-
sonal, tangible and intangible, or interests therein and to pay
therefor in cash or property or on credit, and to secure and pro-
cure payment of all or any part of the purchase price thereof on
such terms and conditions as the board shall determine.

(5) To render service and to acquire, own, operate, maintain
and improve a system or systems.

(6) To accept gifts or grants of money, or property, real or
personal, from any person, municipality or Federal agency and to
accept voluntary and uncompensated services.

(7) To sell, lease, mortgage or otherwise encumber or dispose
of all or any part of its property, as hereinafter provided.

(8) To contract debts, borrow money and to issue or assume
the payment of bonds, and other obligations.

(9) To fix, maintain and collect reasonable fees, rents, tolls
and other charges for service rendered.
(10) To exercise all the powers set forth in § 56-48 of the Code
of Virginia, including the power of eminent domain as prescribed
for other public service corporations by general law.

(12) To issue nonassessable nonvoting common and preferred
capital stock and pay noncumulative dividends thereon not exceed-
ing four per centum per annum and no cooperative operating here-
under shall pay more than four per centum per annum interest on
membership capital.

(13) To perform any and all of the foregoing acts and to do
any and all of the foregoing things under, through or by means of
its own officers, agents and employees, or by contracts with any
person, Federal agency or municipality.

‘ § 12. Disposition of property—No cooperative may sell,
mortgage, lease or otherwise encumber or dispose of any of its
property other than property which, in the judgment of the
board, is neither necessary nor useful in operating or maintaining
the cooperative’s system and which in any One year shall not ex-
ceed ten per centum in value of the value of all the property of
the cooperative, unless authorized so to do by the votes of at least
a two-thirds majority of its members.

§ 13. Issue obligations.—Every cooperative formed hereunder
is empowered and authorized, from time to time, to issue its obli-
gations in anticipation of its revenues for any corporate purpose.
Such obligations may be authorized by resolution or resolutions of
the board, and may bear such date or dates, mature at such time
or times, not exceeding forty years from their respective date,
bear interest at such rate or rates not exceeding six per centum
per annum, payable at such times, be in such denominations, be in
such form, either coupon or registered, carry such registration
privileges, be executed in such manner, be payable in such medium
of payment, at such place or places, and be subject to such terms
of redemption, not exceeding par and accrued interest, as such
resolution or resolutions provide. Such obligations may be sold
in such manner and upon such terms as the board determines at
not less than par and accrued interest. Pending the preparation
or execution of definitive bonds, or obligations, interim receipts
or certificates or temporary bonds may be delivered to purchasers
of such obligations.

§ 14. Covenants.—In connection with the issuance of any
obligations a cooperative may make covenants or agreements and
do any and all acts or things that a corporation can make or do
under the laws of the State of Virginia.

§ 15. Purchase obligations.—A cooperative shall have power
out of any funds available therefor to purchase any obligations
issued by it at a price not exceeding the principal amount thereof
and accrued interest thereon. All bonds so purchased shall be
cancelled.
§ 16. Consolidation or merger.—Any two or more coopera
tives created under the provisions of this act, may consolidate o1
merge into a single corporation in the manner prescribed by law
which consolidated or merged corporation shall exercise all the
powers and authority and shall be vested with all the rights.
franchises and privileges of each of the corporations so consolidated
or merged.

§ 17. Rates and refunds.—A cooperative formed hereunder
shall be required to furnish reasonably adequate services and
facilities, subject to the regulations of the State Corporation
Commission, as provided in § 18 of this act. The charge made
by any such cooperative for any service rendered or to _ be
rendered, either directly or in connection therewith, shall be non-
discriminatory, reasonable and just, and every discriminatory, un-
just or unreasonable charge for such service is prohibited and
declared unlawful. Reasonable and just charges for service within
the meaning of this section shall be such charges as shall produce
sufficient revenue to pay all legal and other necessary expense
incident to the operation of its system, to include maintenance
cost, operating charges, interest charges on bonds or other obliga-
tions, to provide for the liquidation of bonds or other evidences
of indebtedness, to provide adequate funds to be used as working
capital, as well as reasonable reserves and funds for making
replacements and also for the payment of any taxes that may
be assessed against such cooperative or its property, it being the
intent and purpose hereof that such charges shall produce an in-
come sufficient to maintain such cooperative property in a sound
physical and financial condition to render adequate and efficient
service. Any rate too low to meet the foregoing requirements shall
be unlawful.

§ 18. Regulations.——Every cooperative organized under this
act shall be subject to the jurisdiction of the State Corporation
Commission in the same manner and to the same extent as are
other similar utilities under the laws of Virginia.

§ 19. Dissolution—Any cooperative created hereunder may
be dissolved in the manner prescribed by § 13-61 and the follow-
ing sections of the Code of Virginia.

§ 20. Charter amendments.—A cooperative created hereunder
may amend its certificate of incorporation to change its corporate
name, to increase or reduce the number of its directors or change
any other provision therein, provided that no cooperative shall
amend its certificate of incorporation to embody therein any pur-
pose, power or provision which would not be authorized if its
original certificate including such additional or changed purpose,
power or provision were offered for filing at the time a certificate
under this section is offered. Such amendment may be accomplished
in the method prescribed by law for corporations generally.
§ 21. Charter fees——The general laws of Virginia relating to
fees and other charges in connection with issuing charters, amend-
ments thereto, consolidations and dissolutions of corporations
organized on a mutual basis or without capital stock, shall apply
to cooperatives organized under the provisions of this act.

§ 22. Conflicting laws.—This act is to be liberally construed
and the enumeration of any object, purpose, power, method or thing
shall not be deemed to exclude like or similar objects, purposes,
powers, manners, methods or things, and any provisions of other
laws in conflict with the provisions of this act shall not apply to
cooperatives operating hereunder.

§ 23. Adoption of provisions.—Any Virginia corporation en-
gaged in the furnishing of telephone service in the State, may come
under the provisions of this act by filing with the Commission a
Certificate of Adoption, in accordance with the provisions of
§ 13-252 of the Code of Virginia, and relinquishing all rights and
powers granted by the former charter.

§ 24. Extension of service to territory not being served.—
If, from any rural territory not now being served, application be
made to the State Corporation Commission by a group of five or
more persons, natural or artificial, to require an extension of tele-
phone service to such territory, the Commission shall, if necessary
to accomplish the purposes sought, fix a time for hearing upon the
application, on such terms and conditions as the Commission pre-
scribes, and, if it be established to the satisfaction of the Com-
mission that a proper guaranteed revenue for a sufficient number
of years will accrue to any company which may be required to con-
struct the desired extension, and that a reasonable return will
accrue to the company constructing the extension, then the Com-
mission is authorized to require the nearest, or most advantageously
located public telephone company to such territory to construct
such extension to such point or points in such territory and to
serve such customer or customers therein, as in its judgment is
deemed right and proper.

§ 25. Constitutionality—If any provision of this act, or the
application of such provision to any person, body, or circumstance,
be held invalid, the remainder of this act, or the application of
such provisions to persons, bodies, or circumstances, other than
those as to which it has been so held invalid shall not be affected
thereby. |