Governance documents provide clarity about the rules that a cooperative’s members agree to follow, and can play a major role in avoiding lengthy conflicts. A cooperative’s governance documents are the written documents that set out rules for the cooperative’s members and the cooperative as a whole. This page generally describes the purposes and types of governance documents. You can find samples via the links to the Legal Library.
Governance documents recommended for all co-ops
Operating agreements
Cooperative corporations call this document the “bylaws,” whereas LLC’s call this document the “operating agreement.”
While the articles document acts like a constitution for the cooperative, providing only basic information and foundational rules of governance, theUnlike the articles, the bylaws/operating agreement is not filed with the Secretary of State, but is adopted by the owners of the entity, and a copy of the most current version must always be kept in the entity’s records.
Disclosure document
In California, a cooperative corporation must give a disclosure document to its members before they are admitted as members. The disclosure document gives the member information about what they’re committing to, and must state certain information, such as:
- how the members can get a copy of the articles of incorporation and bylaws for free,
- whether members can transfer their membership to others
- whether they must contribute fees or dues, and
- whether the membership is “redeemable” (can be sold back to the corporation). See CA Corp. Code Sec. 12401(b) for the full list of requirements.
The prospective new member typically signs the disclosure document to acknowledge receipt. Other states may require corporations to issue a similar document to each new member before admitting them.
Governance documents required for corporations
Bylaws
Cooperative corporations call this document the “bylaws,” whereas LLCs call this document the “operating agreement.” Bylaws describe in detail how the cooperative is governed by the members and any representatives they appoint to make decisions on their behalf. State law usually contains detailed default provisions about how the cooperative is governed – by drafting bylaws, the members set their own rules, which may differ from the default rules under state law (as much as state law allows). Bylaws are not filed with the Secretary of State, but is adopted by the owners of the entity, and a copy of the most current version must always be kept in the entity’s records.
Governance documents required for LLCs
Articles of incorporation
If the members choose to form it as an LLC, the articles document is called “articles of organization.”
The “articles” of a cooperative is a document that contains basic information about the cooperative such as:
- Name,
- Address,
- Purpose,
- legal entity type (e.g., cooperative corporation or LLC),
- types of members, and
- foundational rules for how the cooperative will be governed.
Once the articles document is filed with the Secretary of State, a copy is published on the Secretary’s website, and the legal entity named in the document comes into existence. The articles can be changed, but it is typically more difficult to change them than the bylaws/operating agreement.
Membership Agreement
LLCs in California and other states may ask their members to sign a membership agreement when becoming a member, in addition to signing the LLC’s operating agreement, although this is not absolutely required. LLC membership agreements typically state how much a member paid as their initial capital contribution, as well as the most important terms of the operating agreement. Both the new member and an authorized signer of the LLC sign the membership agreement.
Governance documents required for cooperative conversions
Step 1 – Letter of Intent + Memorandum of Understanding (MOU) among Workers
Step 2 – The Conversion Agreement + Cooperative Governance Documents
Step 3 – Executory Documents – the “Now Everything is Final and Official” Documents
Step 4 – A Few Final Formalities
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