Chap. 166.—An ACT to amend and re-enact section 3855 of the Code of Vir-
ginia, relating to co- operative associations. {S B 176]

Approved March 10, 1928

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

Section 3855. Co-operative associations——Any number of persons
not less than five may, under the provisions of this chapter, associate
themselves 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 holder of common stock in any such association shall own
shares of a greater par value than one thousand dollars, except as here-
inafter provided or be entitled to more than one vote.

(b) At ahy regular meeting or any regularly called special meeting
at which at least a majority of all its stockholders shall be present or
represented, such association may by a majority vote of the stock-
holders present or represented, subscribe for shares and invest its capi-
tal or reserve fund in the capital stock of any corporation or co-opera-
tive 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 trans-
fer to the association of such business at such valuation shall be equiva-
lent to payment in cash for the shares of stock so issued. In case the
cash value of such purchased business exceeds one thousand dollars 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 proceeds thereof as currently
received to the former owners ot said business. Certificates of stock
shall not be issued to any subscriber until fully paid, but the by-laws
of the association may allow subscribers to vote as stockholders; pro-
vided, 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 general
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-shareholders unless otherwise provided by the by-laws
of said association as follows: If the association be engaged in the mer-
cantile business, then to the extent the business is so conducted, divi-
dends, 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 as-
sociation be engaged to any extent in the purchase and sale of products
of farm or orchard or as selling agent of such products, or if the as-
sociation be a productive association, such as a creamery, cannery, or
factory, and the like, dividends to such extent shall be paid to the per-
sons so furnishing such products and upon the amounts so furnished,
and not upon sales by the association.

(e) Any such association may, either in its charter or by-laws, pro-
vide 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 cor-
porations 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.

({) .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 corpora-
tion or association violating the provisions of this section may be en-
joined from doing business under such name at the instance of any
stockholder of any association legally organized hereunder.

(g) Any co-operative marketing association or corporation incor-
porated under chapter forty-eight, acts of general assembly nineteen
hundred and twenty-two, or under the general corporation laws of
this State, may be brought under the provisions of this act, and be
entitled to all the benefits thereof, and be subject to all provisions,
restrictions and limitations thereof by amending their articles of as-
sociation or incorporation in the same manner as set out in section
twenty-four, chapter forty-eight, acts of general assembly nineteen hun-
dred and twenty-two, in cases of such associations and corporations
existing under chapter forty-eight, acts of assembly nineteen hundred
and twenty-two, either by original incorporations or by amendment,
and in cases of such associations and corporations existing under the
general corporation laws by amending according to the provisions of
section thirty-seven hundred and eighty, Code of Virginia nineteen
hundred and nineteen; but when such amendment is had in the case
of a corporation or association existing under provisions of chapter
forty-eight, acts of assembly nineteen hundred and twenty-two, all
special privileges under chapter forty-eight, acts of assembly nineteen
hundred and twenty-two, are thereby surrendered.