CHAPTER 395

FORMERLY

HOUSE BILL NO. 564

AS AMENDED BY HOUSE AMENDMENT NO. 1

AN ACT TO AMEND TITLE 6, DELAWARE CODE, RELATING TO THE DELAWARE WORKERS COOPERATIVE ACT.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE (Three-fifths of all members elected to each House thereof concurring therein):

Section 1. Amend Title 6, Delaware Code, by adding a new chapter to read as follows: "CHAPTER 14. DELAWARE WORKERS COOPERATIVE ACT.

§ 1401. Definitions.

As used in this chapter, unless the context otherwise requires:

(a) 'Certificate of acceptance' means a certificate of acceptance filed in accordance with § 1407 of this chapter including, except where the context requires otherwise, any amendments thereto and corrections and restatements thereof.

(a) 'Employee' means any person employed by a workers cooperative.

(b) 'Member' means any patron of a workers cooperative that has been accepted for membership in such workers cooperative and whose membership has not been terminated.

(c) 'Nonvoting stock' means any stock of a workers cooperative that, as of the time of determination, is not voting stock.

(d) 'Organizational documents' mean the certificate of incorporation of the workers cooperative, the bylaws of the workers cooperative, and agreements among the stockholders and the workers cooperative. Provisions of this chapter setting forth requirements with respect to the organizational documents shall be deemed to be satisfied if such requirements are contained in or implemented through at least one of the documents referred to in the preceding sentence.

(f) 'Patron' means any person that (i) performs (directly or indirectly) services for a workers cooperative or (ii) receives (directly or indirectly) services from a workers cooperative.

(g) 'Patronage' means services (i) performed (directly or indirectly) by a person for a workers cooperative or (ii) received by a person (directly or indirectly) from a workers cooperative.

(g) 'Person' means a natural person, partnership (whether limited or general), limited liability company, trust (whether common law or business), estate, association, corporation, custodian, nominee, or any other entity.

(h) 'Stockholder' means any person that holds stock issued by a workers cooperative.

(k) 'Voting trust agreement' means an agreement in writing by and among two or more stockholders and the workers cooperative with respect to the exercise of the voting rights of the voting stock held by one or more of such stockholders.

(1) 'Workers cooperative' means any corporation that (1) is incorporated under the laws of this State and (ii) files a certificate of acceptance, which certificate has been accepted for Ming by the Office of the Secretary of State in accordance with § 1409 of this chapter and has become effective. A workers cooperative may be organized for any lawful business or activity.

(m) 'Written notice of allocation' means a written instrument that discloses to a member that stated dollar amount of such member's patronage allocation and the terms for payment of that amount by the workers cooperative.

§ 1402. Operating on a Cooperative Basis.

(a) The organizational documents shall provide that the workers cooperative intends to operate on a cooperative basis and to comply with the requirements of this chapter.

(b) A workers cooperative under this chapter may perform services for and receive services from its patrons, members, stockholders, and other persons and engage in such other activities as may be reasonably related to the provision or receipt of such services. In addition, a workers cooperative may engage in any other lawful activity.

§ 1403, Members.

(a) The organizational documents shall establish qualifications and the method of acceptance and termination of members; provided, however, that, pursuant to the organizational documents, at least a majority of the members of a workers cooperative shall be employees of the workers cooperative.

(b) Except as otherwise provided in the organizational documents, at least a majority of the employees of the workers cooperative shall be members of the workers cooperative.

§ 1404. Ownership of Voting and Nonvoting Stock.

(a) Except as otherwise provided in the organizational documents, all voting stock shall be owned by members; provided, however, that, pursuant to the organizational documents, at least a majority of each class of voting stock shall be owned by members.

(b) The nonvoting stock of a workers cooperative may be owned by any person. § 1405. Voting Rights of Members and Stockholders.

Pursuant to the organizational documents (or voting trust agreements), at least a majority of the board of directors shall be elected by the members on the basis of one member one vote.

§ 1406. Allocation of Earnings.

(a) The net earnings of a workers cooperative shall be allocated and distributed by the board of directors in accordance with the organizational documents.

(b) Except as otherwise provided in the organizational documents, all of the net earnings of the workers cooperative with respect to a period of time shall be allocated to members on the basis of (i) patronage during such period of time, (ii) capital contributions, or (iii) some combination of patronage during such period of time and capital contributions; provided, however, that, pursuant to the organizational documents, at least a majority of the allocated earnings of the workers cooperative with respect to a period of time shall be allocated to members on the basis of (i) patronage during such period of time, (ii) capital contributions, or (iii) some combination of patronage during such period of time and capital contributions.

(c) The allocation, distribution, and payment of earnings required by this section may be in cash, credits, written notices of allocation, or any other type of tangible or intangible property, including, without limitation, shares of stock issued by the workers cooperative.

§ 1407 Certificate of Acceptance; Amendment; Restatement; Cancellation,

(a) In order for a corporation to constitute a workers cooperative, such corporation must execute a certificate of acceptance. The certificate of acceptance shall be filed in the office of the Secretary of State and shall set forth:

(1) The name of the corporation;

(2) A statement that the provisions of §§ 1402 through 1406, inclusive, of this chapter have been complied with as of the date of such certificate;

(3) The future effective date or time (which shall be a date or time certain) of effectiveness of the certificate if it is not to be effective upon the filing of the certificate; and

(4) Any other information the workers cooperative desires to include therein.

(b) (1) A certificate of acceptance may be amended by filing a certificate of amendment thereto in the office of the Secretary of State. The certificate of amendment shall set forth:

a. The name of the workers cooperative;

b. The amendment to the certificate; and

c, The future effective date or time (which shall be a date or time certain) of effectiveness of the certificate if it is not to be effective upon the filing of the certificate.

(2) A certificate of acceptance may be amended at any time for any purpose as the workers cooperative may determine. A workers cooperative that becomes aware that any statement in a certificate of acceptance was false when made or that any matter described has changed making the certificate false in any material respect, shall promptly file a certificate of amendment.

(c) (1) A certificate of acceptance may be restated by integrating into a single instrument all the provisions of the certificate of acceptance that are then in effect and operative as a result of there having been previously filed one or more certificates of amendment pursuant to subsection (b) of this section, and the certificate of acceptance may be amended or further amended by the filing of a restated certificate of acceptance. The restated certificate of acceptance shall be specifically designated as such in its heading and shall set forth:

a. The present name of the workers cooperative; and, if the name has been changed, the name of the workers cooperative at the time its original certificate of acceptance was filed under this chapter;

a. The date of filing of the original certificate of acceptance with the Secretary of State;

b. The information required to be included pursuant to subsection (a) of this section; and. Any other information the workers cooperative desires to include therein.

(2) A certificate of acceptance may be restated at any time for any purpose as the workers cooperative may determine. A workers cooperative that becomes aware that any statement in a restated certificate of acceptance was false when made or that any matter described has changed making the certificate false in any material respect, shall promptly file a certificate of amendment or restated certificate of acceptance.

(d) (1) A certificate of acceptance shall be canceled by a workers cooperative upon the earlier of (i) the date on which the workers cooperative shall no longer be continuing as a body corporate pursuant to the first sentence of § 278 of Title 8, and (ii) a decision to cancel the certificate of acceptance in accordance with the organizational documents (or voting trust agreements).

(2) In addition to the provisions of paragraph (I) of this subsection (d) of this section, a workers cooperative that becomes aware that it no longer complies with the requirements of this chapter shall, within 60 days after becoming aware of such noncompliance, either come into compliance or cancel its certificate of acceptance; provided, however, that if such noncompliance is corrected within such 60-day period, such noncompliance shall not affect the prior or on-going qualification of such workers cooperative under this chapter.

(3) In order to cancel its certificate of acceptance, a workers cooperative shall file a certificate of cancellation in the office of the Secretary of State, which certificate of cancellation shall set forth:

a. The name of the workers cooperative;

b. The date of filing of its certificate of acceptance;

c. The future effective date or time (which shall be a date or time certain) of effectiveness of the certificate if it is not to be effective upon the filing of the certificate; and

d. Any other information the workers cooperative desires to include therein.

The cancellation of a certificate of acceptance shall not affect the prior qualification of such workers cooperative under this chapter.

e. Whenever any certificate authorized to be filed with the office of the Secretary of State under any provision of this chapter has been so filed and is an inaccurate record of the action therein referred to, or was defectively or erroneously executed, such certificate may be corrected by filing with the office of the Secretary of State a certificate of correction of such certificate which shall be executed and filed in accordance with this chapter. The certificate of correction shall specify the inaccuracy or defect to be corrected and shall set fort the portion of the certificate in corrected form. In lieu of filing a certificate of correction, the certificate may be corrected by filing with the office of the Secretary of State a corrected certificate which shall be executed and filed in accordance with this chapter. The corrected certificate shall be specifically designated as such in its heading, shall specify the inaccuracy or defect to be corrected, and shall set forth the entire certificate in corrected form. A certificate corrected in accordance with this section shall be effective as of the date the original certificate was filed, except as to those persons who are substantially and adversely affected by the corrections, and as to those persons the corrected certificate shall be effective from the filing date.

§ 1408. Execution of Certificate.

(a) Each certificate required by this chapter to be filed in the office of the Secretary of State shall be executed by an authorized officer of the workers cooperative.

(a) Unless otherwise provided in the organizational documents, any person may sign any certificate or amendment thereof or enter into any organizational document or amendment thereof by any agent, including an attorney-in-fact. An authorization, including a power of attorney, to sign any certificate or amendment thereof or to enter into an organizational document or amendment thereof need not be in writing, need not be sworn to, verified or acknowledged, and need not be filed in the office of the Secretary of State, but if in writing, must be retained by the workers cooperative.

(b) The execution of a certificate constitutes an oath or affirmation, under the penalties of perjury in the third degree, that, to the best of the knowledge and belief of the person executing such certificate, the facts stated therein are true.

§ 1409. Filing of Certificate.

(a) The certificate of acceptance and any certificates of amendment, correction, or cancellation and of any restated certificate shall be delivered to the office of the Secretary of State for filing. A person who executes a certificate as an agent or fiduciary need not exhibit evidence of his authority as a prerequisite to filing. Upon receipt of all filing fees required by law, the Secretary of State shall certify that the certificate of acceptance, the certificate of amendment, the certificate of correction, the certificate of cancellation, or the restated certificate has been filed in his office by endorsing upon the filed certificate the word 'Filed,' and the date and hour of the filing. This endorsement is conclusive of the date and time of its filing in the absence of actual fraud. The Secretary of State shall thereupon file and index the endorsed certificate.

(b) Upon the tiling of a certificate of acceptance in the office of the Secretary of State, or upon the future effective date or time of a certificate of acceptance as provided for therein, the certificate of acceptance shall be effective. Upon the filing of a certificate of amendment, certificate of correction or restated certificate in the office of the Secretary of State, or upon the future effective date or time of a certificate of amendment or restated certificate as provided for therein, the certificate of acceptance shall be amended or restated as set forth therein. Upon the tiling of a certificate of cancellation or upon the future effective date or time of a certificate of cancellation, the certificate of acceptance shall be canceled.

(c) A fee as set forth in § 1410(a)( I) of this title shall be paid at the time of the filing of a certificate of acceptance, a certificate of amendment, a certificate of correction or restated certificate,

(d) A fee as set forth in § 1410(a)(2) of this title shall be paid for a certified copy of any certificate on file as provided for by this chapter, and a fee as set forth in § 1410(a)(3) of this title shall be paid for each page copied.

(e) Any signature on any certificate authorized to be filed with the Secretary of State under any provision of this chapter may be a facsimile, a conformed signature or an electronically transmitted signature, Any such certificate may be filed by telecopy, fax or similar electronic transmission; provided, however, that the Secretary of State shall have no obligation to accept such filing if such certificate is illegible or otherwise unsuitable for processing.

§ 1410. Fees.

(a) No document required to be filed under this chapter shall be effective until the applicable fee required by this section is paid. The following fees shall be paid to and collected by the Secretary of State for the use of this State:

(1) Upon the receipt for filing of a certificate of acceptance, a certificate of amendment, a certificate of correction, or a certificate of cancellation, a fee in the amount of $100.

(2) For certifying copies of any paper on file as provided for by this chapter, a fee in the amount of $20 for each copy certified. In addition, a fee of $1 per page shall be paid in each instance where the Secretary of State provides the copies of the document to be certified.

(3) For issuing further non-certified copies, a fee in the amount of $5 for the first page and $1 for each additional page.

(b) In addition to those fees charged under subsection (a) of this section, there shall be collected by and paid to the Secretary of State the following:

(1) For all services described in subsection (a) of this section that are requested to be completed within two hours on the same day as the day of the request, an additional sum of up to $500;

(2) For all services described in subsection (a) of this section that are requested to be completed within the same day as the day of the request, an additional sum of up to $200; and

(3) For all services described in subsection (a) of this section that are requested to be completed within a 24-hour period from the time of the request, an additional sum of up to $100.

The Secretary of State shall establish (and may from time to time alter or amend) a schedule of specific fees payable pursuant to this subsection.

§ 1411. Use of Names Regulated.

Without limiting the applicability of § 102(a)(1) of Title 8, the name of each workers cooperative may, but need not, contain the words 'Cooperative,' 'Workers Cooperative,' Worker Owned Cooperative,' 'Employees Cooperative,' or 'Employee Owned Cooperative' (or words or abbreviations of like import).

§ 1412. Reserved Power of State to Amend or Repeal Chapter.

All provisions of this chapter may be altered from time to time or repealed, and all rights of workers cooperatives, members, patrons and stockholders thereof, and other persons are subject to this reservation.

§ 1413. Construction and Application of Chapter.

(a) The rule that statutes in derogation of the common law are to be strictly construed shall have no application to this chapter.

(b) It is the policy of this chapter to give maximum effect to the principle of freedom of contract and to the enforceability of contractual arrangements between persons.

(a) Nothing in this chapter shall be construed to limit in any way whatsoever the application of any other provision of the laws of this State relating to corporations, including, without limitation and by way of example only, the laws regarding incorporation, mergers, and dissolutions.

(d) It is intended that a workers cooperative qualified under this chapter will constitute a 'corporation operating on a cooperative basis' and an 'eligible worker owned cooperative' within the meaning of § 138I(a)(2) and § 1042(c)(2), respectively, of the Internal Revenue Code of 1986, as amended, or under any successor provisions.

§ 1404. Short Title.

This chapter may be cited as the "Delaware Workers Cooperative Act."

Approved June 26, 1996