business washington
Legal requirements for Board of Directors &amp; officers for WA state worker co-ops
<p>Myself and several friends are planning on starting a for profit worker-owned cooperative business that will provide landscaping services in Washington state. We have decided to form our cooperative under the state's legal business structure for Cooperative Associations  (<a href="http://app.leg.wa.gov/rcw/default.aspx?cite=23.86" rel="nofollow">RCW 23.86</a>), and are currently in the process of drafting our Articles of Association and our Bylaws.</p>

<p>State regulations force Cooperative Associations to have a certain organizational structure similar to a C corporation, where you have a Board of Directors that governs the organization, and is voted in by the member-owners of the cooperative (<a href="http://app.leg.wa.gov/RCW/default.aspx?cite=23.86.080" rel="nofollow">RCW 23.86.080</a>). Furthermore, the statutes require the Board to elect officers such as a President, Vice President, Treasurer, and Secretary (<a href="http://app.leg.wa.gov/RCW/default.aspx?cite=23.86.085" rel="nofollow">RCW 23.86.085</a>).</p>

<p>However, we would like our organization to have a "flatter" organizational structure that does not have a Board of Directors making decisions in the name of the co-op's membership, but rather where all worker-members are Board members who have full, equal membership rights and each get one vote in all collective decisions. We also wish for the legally mandated "officer" positions to be essentially meaningless titles, that confer no priveleges/powers to the members who we arbitrarily select to fill them.</p>

<p>We have been trying to think of a way to satisfy the legal requirement to have a board, while creating no distinction between board members and "regular members". What we came up with for our Bylaws was the following:</p>

<blockquote>
  <p>Immediately upon being granted membership in the Co-op (through the
  process described in this section, below) a person is:</p>
  
  <ul>
  <li>given one seat on the Co-op’s Board of Directors ; and </li>
  <li>granted equal powers and privileges as all other Board members.</li>
  </ul>
  
  <p>Thus all Co-op members are on the Board of Directors, and use of the
  words “member” or “members” will hereafter imply a person or persons
  who are Directors on the Co-op’s Board.  The use of the term
  “collective” shall hereafter refer to all of the members of the
  cooperative together, with all of the powers, privileges, and
  responsibilities granted to the Board by law, and by the Co-op’s Articles
  of Assocation and Bylaws.
  From time to time, as required by RCW 23.86.085, the collective shall elect the following officers: a President, Vice President, Secretary, and Treasurer. None of these officers shall have any powers, rights, privileges that differ in any way from other members.</p>
</blockquote>

<p>Does this satisfy the requirements in RCW 23.86? Is it legal to do this - i.e. to state that every member of an association is on the board and has equal powers/rights/responsibilities?</p>

<p>Are there any changes that should be made to this that would better describe what we are trying to do?</p>

<p>There is no statutory impediment to making "president",  "vice president" and "treasurer" be an honorary title (those offices are mentioned only in the election law). RCW 23.86.087 allows the possibility of removing officers, and charges are to be filed with the secretary. The proposed bylaws (the "None of these officers" clause) would preclude that legally-required function, since there is no exception for functions required by law. </p>

<p>You didn't mention the (recently changed) registered agent requirement so I assume you've sorted that out.</p>

<p>You really need to consult a lawyer.</p>

<p>While on the face of it there is no maximum limit to the number of directors you may find that this structure has unintended consequences.</p>

<p>For example, if a person becomes ineligible to be a director for any reason, does that mean they must leave the co-op?</p>

<p>In addition, the government and other members of the public, will expect (and may be legally entitled to believe) that a person with the title of, say Treasurer, does have some special powers and privileges. When you set up an unconventional structure, you may find that your bank, insurers etc. may not be able to deal with you because <em>their</em> internal procedures assume that you will be conventionally structured.</p>

<p>There are more practical issues to consider: who has the power to sign cheques? open bank accounts? enter and terminate contracts? etc. If every one of 86 members is required to sign a cheque you are going to need some inconveniently large stationary; not to mention that your suppliers will be waiting six months for payment while you gather the signatures. </p>

<p>The reason that the law specifies this type of structure: officers answerable to a board that is answerable to the members is that, by and large, it works.</p>

<p>Right now, you may only have 4 or 5 members and what you are proposing may be workable but you should be setting up your business for growth, not stagnation.</p>
