CHAPTER 434

An Act to amend and reenact Chapter 16 of Title 56 of the Code of vir-
ginta, consisting of §§ 56-485 to 56-508, both inclusive, relating to
telephone co-operative associations. g

[S 19]

Approved March 30, 1956

Be it enacted by the General Assembly of Virginia:
1. That Chapter 16 of Title 56 of the Code of Virginia, consisting of
$8 66-485 to 56-508, both inclusive, is hereby amended and reenacted as
ollows:

CHAP 16
Telephone Co-operatives Act

§ 56-485. Short Title—This chapter may be cited as the “Telephone
Co-operatives Act.”

§ 56-486. Who may form co-operative; purpose.—Any number of
natural persons not less than five may, by executing, filing and recording a
certificate as hereinafter set forth, form a co-operative, either with or with-
out capital stock, not organized for pecuniary profit, for the purpose of
promoting and encouraging the fullest possible use of telephone service by
making telephone service and facilities available at the lowest cost consist-
ent with sound economy and prudent management of the business of such
co-operatives.

§ 56-487. Definitions—The following terms, whenever used or re-
ferred to in this chapter, shall have the following meanings, unless a differ-
ent meaning appears from the context:

(1) “Co-operative” shall mean a telephone corporation formed under
this chapter.
int (2) “Municipality” shall mean any city or incorporated town of the

e.
(83) “Person” shall mean and include natural persons, firms, associa-
Hons, co-operatives, corporations, business trusts, partnerships and bodies
politic.
(4) “Telephone service” shall mean and include service over wire or
cable lines, including voice carrier, service by voice carrier system over
electric distribution and transmission lines, service over radio circuits, and
any other service involving the transmission of 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.
CH. 434] ACTS OF ASSEMBLY 613

(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 certificates
or receipts, notes, debentures, and all other evidences of indebtedness
either issued or the payment thereof assumed by a co-operative.

(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, im-
prove, replace, extend, enlarge, alter, better or repair.

(11) “Board” shall mean the board of directors of a co-operative
formed under this chapter.

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

§ 56-488. Certificate of Incorporation.—The certificate of incorpora-
tion shall be entitled and endorsed “Certificate of Incorporation of the........
sayevenewewscacs Telephone Co-operative” (the blank space being filled in with the
distinguishing part of the name of the co-operative) and shall state:

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

(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 co-operative for the first year of its
existence, or until their successors are chosen.

(6) The period, if any, limited for thé duration of the co-operative.

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

The certificate of incorporation may also contain any provision not
inconsistent with Title 18.1 which the incorporators may choose to insert
for the regulation of the business and the conduct of the affairs of the co-
operative; and any provision as to the plan of financial organization, or
relating to the internal regulation or government of the co-operative, its di-
rectors and members.

§ 56-489. Limitation of use of words “telephone co-operative”.—The
words “telephone co-operative” shall not be used in the corporate names of
corporations other than those formed pursuant to the provisions of this
chapter.

§ 56-490. Filing the certificate of incorporation—The natural per-
sons executing the certificate of incorporation shall be residents of the
territory in which the principal operations of the co-operative are to be
conducted who intend to use telephone service to be furnished by the
co-operative. The certificate of incorporation shall be subscribed by at
least five such persons and acknowledged by them before an officer author-
ized by the law of this State to take and certify acknowledgments of deeds
and conveyances. When so acknowledged the certificate shall be filed in
accordance with the provisions of Chapter 8 of Article 1 of Title 13.1 of
the Code of Virginia, and when so filed the articles of incorporation, or
614 ACTS OF ASSEMBLY [va., 1956

certified copies thereof, shall be received in all the courts of this State and
elsewhere as prima facie evidence of the facts contained therein, and of
the due incorporation of the co-operative. All of the provisions of the
Virginia Stock Corporation Act and the Virginia Non-Stock Corporation
Act in so far as not inconsistent with this chapter are hereby made applica-
ble to such co-operatives, and as soon as the charter is lodged for recorda-
tion in the office of the State Corporation Commission, the proposed co-
operative described therein, under its designated name, shall be and consti-
tute a body corporate with all of the applicable powers provided for in
§ oe A co-operative need not have a registered office or a registered
agent.

§ 56-491. Board of directors; officers.—Every co-operative formed
hereunder shall have a board of directors of five or more members, which
shall constitute the governing body of the co-operative. The directors,
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 services as directors, except that a
per diem of not to exceed ten dollars a day may be paid directors for at-
tending regular and special meetings of the board. Directors shall be
entitled to reimbursement for expenses incurred by them in the perform-
ance 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 com-
bined office as secretary-treasurer.

§ 56-492. Powers of board of directors.—The board of directors of a
co-operative shall have power to do all things necessary and incidental in
conducting the business of the co-operative, 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 manage-
ment and regulation of the affairs of the co-operative, subject, however, to
the right of such members to alter or repeal such by-laws. The by-laws of
a co-operative may make provisions, not inconsistent with law or its certifi-
cate 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 otherwise; the
number, times and manner of choosing, qualifications, terms of office, of-
ficial designations, powers, duties and compensation of its officers; defining
a vacancy in the board or in any office and the manner of filling it; the
number of members, not less than ten per centum of the total number of
members, to constitute a quorum at meetings, the date of the annual meet-
ing 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 co-
operative is to render service to its members, the disposition of the revenues
and receipts of the co-operative; regular and special meetings of the board
and the giving of notice thereof.

(2) To appoint agents and employees and to fix their compensation
and the compensation of the officers of the co-operative.

(3) To execute all instruments.

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

§ 56-493. Membership; nonprofit operation.—A co-operative shall is-
sue 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 co-operative. 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 co-
operative. The equity of members of a nonstock co-operative shall be in
proportion to the revenue paid the co-operative by each member. A co-
operative shall be operated on a nonprofit basis for the mutual benefit of
its members. The by-laws of the co-operative or its contract with its mem-
bers 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 co-operative character.

§ 56-494. Service to members; to non-members.—Except as herein-
after provided, the corporate purpose of each co-operative formed here-
under shall be to render service to its members only, and no person shall
become or remain a member unless such person uses telephone service sup-
plied by the co-operative and shall have complied with the terms and con-
ditions in respect to membership contained in the by-laws of the co-opera-
tive. Should the co-operative acquire any telephone facilities already dedi-
eated or devoted to the public use it may, for the purpose of continuing
existing service and avoiding hardship, continue to serve the persons served
directly from such facilities at the time of such acquisition without requir-
ing that such persons become members. In no event shall the number of
such non-members served exceed forty-nine per centum of the total number
of persons served by the co-operative. Such non-member customers shall
have the right to become members upon nondiscriminatory terms.

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

§ 56-495. Powers granted corporation.—Each corporation formed un-
der this chapter shall have power to do any and all acts or things necessary
or incidental for carrying out the purpose for which it was formed, includ-
ing, 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 personal,
tangible and intangible, or interests therein and to pay therefor in cash or
property or on credit, and to secure and procure 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 im-
prove 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 pay-
ment of bonds, and other obligations.

(9) To fix, maintain and collect reasonable fees, rents, tolls and other
charges for services rendered.

(10) To exercise all the powers set forth in § 56-49 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 exceeding four per
centum per annum and no co-operative operating hereunder 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.

§ 56-496. Disposition of property.—No co-operative may sell, mort-
gage, 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 co-operative’s system and which
in any one year shall not exceed ten per centum in value of the value of all
the property of the co-operative, unless authorized so to do by the votes of
at least a two-thirds majority of its members.

§ 56-497. Issue of obligations.—Every co-operative formed hereunder
is empowered and authorized, from time to time, to issue its obligations 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 dates, 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 obli-
gations, interim receipts or certificates or temporary bonds may be de-
livered to purchasers of such obligations.

6-498. Covenants.—In connection with the issuance of any obliga-
tions a co-operative 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.

§ 56-499. Purchase of own obligations.—A co-operative 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 canceled.

§ 56-500. Consolidation or merger.—Any two or more co-operatives
created under the provisions of this chapter, may consolidate or merge into
a single corporation in the manner prescribed by Title 18.1 which consoli-
dated 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.

§ 56-501. Rates and refunds.—A co-operative formed hereunder shall
be required to furnish reasonably adequate services and facilities, subject
to the regulations of the State Corporation Commission, as provided in
§ 56-502. The charge made by any such co-operative for any service ren-
dered or to be rendered, either directly or in connection therewith, shall be
nondiscriminatory, reasonable and just, and every discriminatory, unjust
or unreasonable charge for such service is prohibited and declared unlaw-
ful. 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 obligations, to provide for the liquidation of bonds or other evi-
dences 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
co-operative or its property, it being the intent and purpose hereof that
such charges shall produce an income sufficient to maintain such co-
operative property in a sound physical and financial condition to render

CH. 484] ACTS OF ASSEMBLY 617

adequate and efficient service. Any rate too low to meet the foregoing
requirements shall be unlawful.

§ 56-502. Regulation by State Corporation Commussion.—Every co-
operative organized under this chapter 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.

_ § 56-503. Dissolution—A_ co-operative created hereunder may be
dissolved in the manner prescribed by Chapter 7 of Article 1 or ChaP 6
of Article 2 of Title 18.1.

§ 56-504. Charter amendments.—A co-operative 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 pro-
vision therein, provided that no co-operative shall amend its certificate of
incorporation to embody therein any purpose, 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 ac-
complished in the method prescribed by law for corporations generally.

§ 56-505. Charter fees.—The general laws of Virginia relating to fees
and other charges in connection with issuing charters, amendments there-
to, consolidations and dissolutions of corporations organized on a mutual
basis or without capital stock, shall apply to co-operatives organized under
the provisions of this chapter.

§ 56-506. Construction of chapter; conflicting laws.—This chapter 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 chapter shall not apply
to co-operatives operating hereunder.

§ 56-507. Adoption of provisions by existing corporation.—Any Vir-
ginia corporation engaged in the furnishing of telephone service in the
State may come under the provisions of this chapter by filing with the
Commission a certificate of adoption in the manner provided by paragraph
(b) of § 18.1-334, and relinquishing all rights and powers granted by the
former charter.

§ 56-508. Extension of service to territory not being served.—lf,
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 telephone 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 prescribes, and, if it be established to the satisfaction of
the Commission that a proper guaranteed revenue for a sufficient number
of years will accrue to any company which may be required to construct
the desired extension, and that a reasonable return will accrue to the com-
pany constructing the extension, then the Commission is authorized to
require the nearest, or most advantageously located public telephone com-
pany 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.

2. That the provisions hereof shall become effective January one, nine-
teen hundred fifty-seven.