CHAPTER 437

An Act to amend and reenact Chapter 9 of Title 56 of the Code of Vir-
ginia, consisting of §§ 56-209 to 56-281, both inclusive, relating to
electric co-operative associations. P

[S 22]

Approved March 30, 1956

Be it enacted by the General Assembly of Virginia:
1. That Chapter 9 of Title 56 of the Code of Virginia, consisting of
i Se 200 to 56-231, both inclusive, is hereby amended and reenacted as
ollows:

CHAP 9
ELECTRIC CO-OPERATIVES ACT

§ 56-209. Definitions—The following terms whenever used or re-
ferred to in this chapter, shall have the following meanings, unless a dif-
ferent meaning clearly appears from the context:
(a) “Co-operative” shall mean an electric corporation formed under
this chapter.

Sint (b) “Municipality” shall mean any city or incorporated town of the

e.

(c) “Person” shall mean and include natural persons, firms, associa-
Hong, co-operatives, corporations, business trusts, partnerships and bodies
politic.

(d) “Energy” shall mean and include any and all electric energy no
matter how or where generated or produced.

(e) “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. a

(f) “System” shall mean and include any plant, works, system, facili-
ties, or properties, or any part or parts thereof, together with all appurte-
nances thereto, used or useful in connection with the generation, production,
transmission or distribution of energy.

(g) “Law” shall mean any act or statute, general, special or local, of
this State, including this Code, or any section thereof. ;

(h) “Obligation” shall mean and include bonds, interim certificates or
receipts, notes, debentures, and all other evidences of indebtedness either
issued by, or the payment of which is assumed by a co-operative.

(i) “Federal agency” shall mean and include the United States of
America, the President of the United States of America, Tennessee Valley
Authority, the Federal Administrator of the Rural Electrification Adminis-
tration and any and all other authorities, agencies and instrumentalities
of the United States of America, heretofore or hereafter created.

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

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

(1) “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.

§ 56-210. Organization; 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 without capital
stock, not organized for pecuniary profit, for the purpose of promoting and
encouraging the fullest possible use of electric energy by making electric
energy available at the lowest cost consistent with sound economy and
prudent management of the business of such co-operative.

§ 56-211. Certificate of incorporation.—The certificate of incorpora-
tion mentioned in the preceding section shall be entitled and endorsed
“Certificate of Incorporation of the ...........:...00 Electric Co-operative” (the
blank space being filled in with the distinguishing part of the name of the
co-operative) and shall state:

(a) 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.

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

(c) The location of its principal office and post office address thereof.
fi (d) The maximum number of directors, which shall be not less than

ve.

(e) 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.

f) The period, if any, limited for the duration of the co-operative.
CH. 437] ACTS OF ASSEMBLY 621

(g) 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 law or the provisions of 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 directors and members.

§ 56-212. Name of other corporations not to include term “electric
co-operative’.—The words “electric co-operative” shall not be used in the
corporate name of corporations other than (1) those formed pursuant to
the provisions of this chapter and (2) non-stock corporations of which
electric co-operatives are members.

§ 56-213. Filing certificate of incorporation; effect thereof; other
provisions of law applicable-—The natural persons 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 electric
energy 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 authorized 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; and when so filed the articles of incorporation, or
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 such co-operative. All of the provisions of
the Virginia Stock Corporation Act and the Virginia Non-Stock Corporation
Act insofar as not inconsistent with this chapter are hereby made applic-
able 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 con-
stitute a body corporate, with all of the applicable powers provided for in
§ aie. A co-operative need not have a registered office or a registered
agent.

§ 56-214. Consolidation of electric co-operatives.—Any two or more
co-operatives may enter into an agreement for the consolidation of such co-
operatives. Such agreement shall set forth the terms and conditions of the
consolidation, the name of the proposed consolidated co-operative, the num-
ber of its directors, not less than five, the time of the annual meeting and
election and the names of at least five persons to be directors until the first
annual meeting. If such agreement is approved by the votes of a majority
of the members of each co-operative after due notice as prescribed in Title
18.1, the directors named in the agreement shall subscribe and acknowledge
a certificate conforming substantially to the original certificates of incorpo-
ration, except that it shall be entitled and endorsed “Certificate of Con-
Solidation Of ............s0000 ” (the blank space being filled in with the names
of the co-operatives being consolidated) and shall state:

(1) The names of the co-operatives being consolidated.

(2) The name of the consolidated co-operative.

(3) The other items required to be stated in an original certificate of
inequpovation, and, to the extent desired, other items permitted to be so
stated.

Such certificate of consolidation and a certified copy or copies thereof
shall be filed and recorded in the same places as an original certificate of
incorporation and thereupon the proposed consolidated co-operative, under
622 ACTS OF ASSEMBLY [VA., 1956

its designated name, shall be and constitute a body corporate with all the
powers of a co-operative originally formed hereunder.

§ 56-215. Dissolution of electric co-operatives—A co-operative
may be dissolved in the manner prescribed by Chapter 7 of Article 1 or
Chapter 6 of Article 2 of Title 13.1.

56-216. Charter amendments.—A co-operative may amend its
certificate of incorporation to change its corporate name, to increase or re-
duce the number of its directors or change any other provision therein;
provided, however, that no co-operative shall amend its certificate of incor-
poration to embody therein any purpose, power or provision which would
not be authorized if an 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 accom-
plished in the method prescribed by law for corporations generally.

§ 56-217. General powers granted.—Each corporation formed under
this chapter shall have power to do any and all acts or things necessary or
incidental for carrying out the purpose for which it is formed, including,
but not limited to the power:

(a) To produce, generate, transmit and distribute electric energy.

(b) To sue and be sued.

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

. (d) To acquire, hold and dispose of property, real and personal, tangi-
ble and intangible, or interests therein and to pay therefor in cash or prop-
erty 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. a .

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

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

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

‘’ (h) To contract debts, borrow money and to issue or assume the pay-
ment of bonds, and other obligations.

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

(j) To exercise all the powers set forth in § 56-49, including the power
of eminent domain as prescribed for other public service corporations by
general law.

(k) To assist its members, by loans or otherwise, in the acquisition by
them of such installation and wiring, and the obtaining of such machinery,
equipment and appliances, as will enable them to secure the greatest bene-
fit from the use of energy supplied by the co-operative.

(1) To issue non-assessable non-voting common and preferred capital
stock and pay non-cumulative dividends thereon not exceeding six per
centum per annum and no co-operative operating hereunder shall pay more
than six per centum per annum interest on membership capital.

(m) To perform any and all of the foregoing acts and 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 munici-

_ § 56-218. Power to dispose of property.—No co-operative 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 neces-
sary nor useful in operating and maintaining the co-operative’s system and
which in any one year shall not exceed ten per centum in value of the value
CH. 437] ACTS OF ASSEMBLY 623

of all the property of the co-operative, or merchandise), unless authorized so
to do by the votes of at least a two-thirds majority of its members. :
§ 56-219. Power to issue obligations.—A co-operative shall have.
power and is hereby 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 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 exceed-
ing par and accrued interest, as such resolution may provide. Such obliga-_
tions may be sold in such manner and upon such terms as the board may .
determine at not less than.par and accrued interest. Pending the prepara- |
tion or execution of definitive bonds, or obligations, interim receipts or,
certificates of temporary bonds may be delivered to the purchaser of.such
obligations. 7
§ 56-220. Covenants in connection with obligations.—In connection
with the issuance of any obligations 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 this State. oo
§ 56-221. Power to purchase its own obligations.—A co-operative
shall have power out of any funds available therefor to purchase any'
obligation issued by it at a price not exceeding the principal amount there--
of and accrued interest thereon. All bonds so purchased shall be cancelled. |
§ 56-222. Board of directors of electric co-operatives.—Each co-oper-
ative shall have a board of directors of five or more members, which board :
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 entitled to vote, unless the by-laws provide that,
in lieu of electing the whole number of directors annually, the directors:
shall be divided into either two or three classes at the first or any subsequent '
annual meeting, each class to be as nearly equal in number as possible,
with the term of office of the directors of the first class to expire at the next:
succeeding annual meeting, the term of the second class to expire at the.
second succeeding annual meeting, and the term of the third class, if any,’
to expire at the third succeeding annual meeting; and that at each annual
meeting after such classification a number of directors equal to the number :
of the class whose term expires at the time of such meeting shall be elected’
to hold office until the second succeeding annual meeting where the by-laws
provide for two classes of directors, or until the third succeeding annual’
meeting where the by-laws provide for three classes of directors. The di-
rectors must be members and shall not be entitled to compensation for their
services as directors, except that a per diem of not more than fifteen’
dollars may be paid directors for attending regular and special meetings of
the board. Directors shall be entitled to reimbursement for expenses in-
curred 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 two latter offices and
designate the combined office as secretary-treasurer.
§ 56-223. Powers of board of directors.—The board of directors of a
co-operative shall have power to do all things necessary or incidental in con-
ducting the business of the co-operative, including, but not limited to the:

er:
(a) If authorized by the certificate of incorporation, or by resolution
624 ACTS OF ASSEMBLY [vA., 1956

of its members having voting power, to adopt and amend by-laws for the
management and regulation of the affairs of the co-operative, subject, how-
ever, to the right of the members to alter or repeal such by-laws. The
by-laws of a co-operative 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 non-payment of dues or
otherwise; the number, times and manner of choosing, qualifications, terms
of office, official 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 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 co-operative is to render service to its members; the disposition
of the revenues and receipts of the co-operative; and regular and special
meetings of the board and the giving of notice thereof.

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

(c) To execute all instruments.

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

§ 56-224. Rights and liabilities of members.—A co-operative shall
issue to its members certificates of membership 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
electric energy of machinery or appliances purchased 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 the members. The
by-laws of a co-operative or its contract with the members shall contain
such provisions relative to the disposition of revenues and receipts as may
be necessary and appropriate to establish and maintain its non-profit and
co-operative character.

§ 56-225. Service to members.—Except as hereinafter provided, the
corporate purpose of each co-operative formed hereunder shall be to render
service to its members only, and no person shall become or remain a member
unless such person shall use electric energy supplied by such co-operative
and shall have complied with the terms and conditions in respect to member-
ship contained in the by-laws of such co-operative. The membership fee of
the co-operative shall not exceed ten dollars. Should the co-operative acquire
any electric facilities already dedicated or devoted to the public use it may,
for the purpose of continuing existing service and avoiding hardship, con-
tinue 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 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 non-
discriminatory terms. The rates to such non-members shall be on a cost
basis similar to those charged members.

§ 56-226. Adequate service; rates.—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 § 56-227. The charge made by any such co-operative for any service
rendered or to be rendered, either directly or in connection therewith, shall
be nondiscriminatory, 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
CHS. 437, 488] ACTS OF ASSEMBLY 625

this section shall be such charges as shall produce sufficient revenue to pay
all legal and other necessary expenses incident to the operation of the
system, to include maintenance cost, operating charges, interest charges on
bonds or other obligations, 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
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 adequate and
efficient service. Any rate too low to meet the foregoing requirements
shall be unlawful.

§ 56-227. Regulation by Commission.—Any co-operative organized
under this chapter shall be subject to the jurisdiction of the Commission in
the same manner and to the same extent as are other similar utilities under
the laws of this State.

§ 56-228. Charter fees, ete.—The general laws relating to fees and
other charges in connection with issuing charters, amendments thereto,
éonsolidations 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.

§ 56-229. Construction of chapter; conflicting laws.—This chapter is
to be liberally construed and the enumeration of any object, purpose, power,
manner, 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.

§ 56-230. Adoption of provisions of chapter by other corporations.—
Any corporation of this State engaged in the production, generation, trans-
mission or distribution of electric energy 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 its former charter.

§ 56-231. How chapter cited——This chapter may be cited as the
“Electric Co-operatives Act”.

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