Chap. 382.—-An ACT to amend and re-enact section thirty-eight hundred and
fifty-five of the Code of Virginia relating to co-operative asocalone. a“
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Approved March 20, 1920.

1. Be it enacted by the general assembly of Virginia, That sec-
tion thirty-eight hundred and fifty-five of the Code of Virginia be
amended and re-enacted so as to read as follows:

Sec. 3855. Co-operative associations——Any number of persons not
less than five may, under the provisions of this chapter, associate them-
selves together as a co-operative association, society, company, or
exchange, for the purpose of conducting any agricultural, dairy, mer-
cantile, merchandise, brokerage, manufacturing, or mechanical busi-
ness on the co-operative plan, and in addition to the information re-
quired to be set forth in its certificate of incorporation under section
thirty-eight hundred and fifty, the word “co-operative” shall be a
part of the name.

The provisions of this chapter shall apply to co-operative associa-
tions created under this section, except so far as the same are in con-
flict with the following special. provisions applicable only to such
co-operative associations:

(a) No stockholder in any such association shall own shares of
a greater par value than one thousand dollars, except as hereinafter
provided or be entitled to more than one vote.

(b) At any regular meeting or any regularly called special meet-
ing at which at least a majority of all its stockholders shall be pres-
sent or represented, 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 co-
operative association, provided that it shall not so invest a total amount
in excess of twenty-five per centum of the amount of its capital stock.

(c) Whenever such association shall purchase the business of an-
other 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 one thousand
Jollars, the directors of the association are authorized to hold the
shares in excess of one thousand dollars 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 pro-
ceeds thereof as currently received to the former owners of said
business. Certificates of stock shall not be issued to any subscriber
until fully paid, but the by-laws of the association may allow sub-
scribers to vote as stockholders ; provided, part of the stock subscribed
for has been paid in cash.

(d) The net earnings and profits shall be apportioned, distributed
and applied as the association may at any general or special meeting
direct. The association may in its by-laws prescribe the terms and
conditions, rules and regulations under and by which the shareholders
or employees, or co-operating non-shareholders may participate in
the earnings of the association. |

Unless and until otherwise ordered by the association at any gen-
eral 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 said
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 co-operation; and shall
apportion the remainder of said net profits by uniform dividends to
its shareholders upon the amount of purchases of said association
from its shareholders, and sales by the association to its shareholders
or for their account, and upon the wages and salaries of employees,
and one-half of such uniform dividend to co-operating non-share-
holders unless otherwise provided by the by-laws of said 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 to the co-operative non-
shareholders and upon the amount of their purchases, and not upon
the purchases made by the said association. If the association be
engaged to any extent in the purchase and sale of the products of
farm or orchard or as selling agent of such products, or if the associa-
tion be a productive association, such as a creamery, cannery, or
factory, and the like, dividends to such extent shall be paid to the
persons so furnishing such products, and upon the amounts so fur-
nished, and not upon sales by the association.

(e) Any such association may, either in its charter or by-laws,
provide and require that no share of its stock shall be issued to or
voted by any person not a member of a non-stock corporation or
non-stock corporations named or designated in such corporation or
non-stock corporations named or designated in such charter or by-
laws, or may in like manner provide that shares of its stock may be
issued to or owned by persons not members of such designated non-
stock corporation or non-stock corporations, but that when so owned
such stock shall have no voting power. .

(f{) No corporation or association hereafter organized or doing
business for profit in this State shall be entitled to use the term “co-
operative” as part of its corporate or other business name or title.
unless it has complied with the provisions of this section; 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 of any association legally organized hereunder.

(zg) An emergency is declared to exist in the need for organizing
co-operative associations, as herein provided for, without delay, and
this act shall be in force from its passage.