/Docs/G/Cooplaw-WorkerCoop-Bylaws-CmA/Sec/0.md
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ARTICLE 7 – Financial Provisions
  1. Fiscal Year
    The fiscal year of the Cooperative is January 1st through December 31st.
  2. Definitions
    1. “Surplus” shall be defined as the excess of revenues over Expenses for a fiscal year attributable to Member labor.
    2. “Profit” shall be defined as the excess of revenues over Expenses for a fiscal year attributable to non-Member labor.
    3. “Loss” shall be defined as the excess of Expenses over revenues for a fiscal year.
    4. Surplus, Profit, and Loss shall be determined on a tax basis. Surplus and Profit shall not include cash contributions by Members to capital.
    5. “Expenses” shall include Distributions paid pursuant to Section 7.6, payments of any interest and principal on any debts of the Cooperative, and reasonable reserves as determined by the Board of Directors.
    6. The “Collective Account” shall be Surplus, Profit, and reserves that are retained in the Cooperative and not distributed to Members.
    7. “Patronage” shall be defined as hours worked by each Member for the Cooperative.
    8. “Patronage Dividends” shall have the definition contained in Internal Revenue Code Section 1388(a) (dividends paid to Members based on Patronage).
    9. “Member Account” shall be defined as each Member’s capital account in the Cooperative (initial capital contribution plus written notices of allocation minus Distributions minus Losses plus/minus any other item that affects the balance in the Member’s capital account).
    10. “Distribution” means the distribution of interest on capital contributed, but does not include Patronage Dividends.
  3. Allocations
    1. Any Profit shall be credited to the Collective Account.
    2. Any Surplus shall be credited to the Collective Account as necessary to bring the year’s contribution to the Collective Account up to 25% of the year’s combined Profit/Surplus. All other Surplus shall be paid as Patronage Dividends in direct proportion to Patronage during the fiscal year.
    3. Any Loss shall be allocated 75% to Member Accounts in direct proportion to Patronage during the fiscal year and 25% to the Collective Account, with the exception of Losses occurring and/or carried over from the Cooperative’s first two fiscal years, which shall be allocated 100% to the Collective Account.
    4. The percentages referred to in this section can be changed for a coming fiscal year by the Board.
  4. Patronage Dividends
    1. Patronage Dividends shall be made 50% in cash and 50% to each individual Member Account as a written notice of allocation, unless different proportions are approved by the Board within eight-and-a-half months of the fiscal year’s close – however, at least 20% must be distributed in cash.
    2. Patronage Dividends may be by qualified or non-qualified written notices of allocation or a combination of the two.
  5. Members’ Covenant to Declare Income for Tax Purposes
    Each Member shall take into account on his or her income tax return any Patronage Dividends which are made in qualified written notices of allocation (as defined in 26 U.S.C. Section 1388) at their stated dollar amounts in the manner provided in 26 U.S.C. Section 1385(a) in the taxable year in which the Member receives such written notices of allocation.
  6. Distributions of Interest on Member Accounts
    The Cooperative may, by a decision of the Board, pay interest to Members on the Members Accounts. The interest may be paid in cash or as an additional credit to the Member Accounts. The rate of interest shall be determined by the Board, but may not, in one year, exceed 15 percent of each Member’s contributed capital, which includes capital contributions, membership fees, and capital credits.
  7. Periodic Redemption of Member Accounts
    1. The Cooperative shall aim to pay out in cash to the Members all funds credited to their Member Accounts within three years of the date they were first credited.
    2. As a general rule, written notices of allocation credited to Member Accounts (including notices now converted to debt) will be paid out in the order in which they are credited, with the oldest paid out first. However, the Board can decide to accelerate the repayment of debt owed to former Members on a case-by-case basis.
    3. If the Cooperative does not have sufficient funds to pay out all funds credited to Member Accounts for a given fiscal year, then funds will be paid out in proportion to the balance in the Member Accounts.
  8. Payment Rights Upon Membership Termination
    1. When a Membership is terminated for any reason, including a Member’s death, the amount in the Member Account will automatically be converted to debt owed to the former Member, or, if necessary, to the Member’s estate, or to another assignee designated by the Member.
    2. The Cooperative shall repay the debt within five years of the Membership termination, with interest accruing at the discount rate – as set by the Federal Reserve Bank of San Francisco – plus two percent, on the amount outstanding at the end of each fiscal year.
    3. The Cooperative, in settling a Member Account, shall have the right to set off any and all indebtedness of the former Member to the Cooperative.
  9. Priority of Payments
    Notwithstanding anything else to the contrary in this Article, payments by the Cooperative shall be made in the following order of priority:
    1. First, to make payments of any necessary expenses related to the operation of the cooperative, including wages, and payments of any interest and principal on any debts of the Cooperative,
    2. Second, to pay Patronage Dividends to all eligible Members,
    3. Third, to pay Distributions to all eligible Members, and
    4. Fourth, to make periodic redemptions pursuant to Section 7.7.
  10. Dissolution Distributions
    1. Upon liquidation, dissolution, or sale of the assets of the Cooperative, any assets left after payment of all debts and Member Account balances shall be distributed to all persons who are current or living past Members in proportion to the number of hours each Member worked during the time he or she was a Member of the Cooperative.
    2. No distribution need be made to any person who fails to acknowledge the receipt of notice of liquidation in a timely manner. Said notice shall be deemed sufficient if sent by certified mail, at least 30 days before distribution of any residual assets, to the person’s last known business or residence address.
  11. Unclaimed Equity Interests
    Any proprietary interest in the Cooperative held by a Member that would otherwise escheat to the State of California as unclaimed personal property shall instead become the property of the Cooperative if the Cooperative gives at least 60 days prior notice of the proposed transfer to the affected Member by (1) first-class or second-class mail to the last address of the Member shown on the Cooperative’s records, and (2) by publication in a newspaper of general circulation in the county in which the Cooperative has its principal office. No property or funds shall become the property of the Cooperative under this section if written notice objecting to the transfer is received by the Cooperative from the affected Member prior to the date of the proposed transfer.