Colorado Cooperative Law

Cooperatives in Colorado are generally governed by the Colorado Revised Statutes (CRS), Articles 55, 56, 58 and Article 101, Part 5. Colorado has an older (Article 55) and a newer cooperative law (Article 56). Colorado cooperative law and the suite of Colorado cooperative statutes has developed cumulatively over more than five decades.

Article 55- Cooperative “marketing” associations. 

In 2004, Colorado adopted statutes for health care coverage cooperatives (Title 10, Article 16, Sections 1001-1015). These organizations are known as health care coverage cooperatives, but formed under the standard cooperative statutes. Article 55 Cooperatives, also known  as “marketing cooperatives” or “goods and services cooperatives” generally include the more historically conventional cooperative industries, such as housing cooperatives, and utility cooperatives. Use of Article 55 statutes has dwindled over the years and is now used mostly by utility or electric cooperative associations.  

Article 55, (Section 101) of the CRS defines a “Cooperative Association” as “any cooperative organization, association, company, or corporation formed under this article and may be defined as follows…” This section goes on to explain these five principal attributes of cooperatives:

• Distribution of earnings are made in proportion to value of labor/services/contribution – otherwise known as patronage – rendered to or purchased from the association;
• Dividends on equity capital shall be limited;
• Voting rights shall be limited to association members;
• The business of the association shall not be carried on for profit, but rather for the mutual benefit of all members.  Membership eligibility and the transfer or assignment of membership interests may be prescribed and governed by the cooperative association; and
• Cooperative associations may admit to membership any other cooperative association.

Article 56 expands upon Article 55 and governs cooperatives more generally, including worker cooperatives, stock cooperatives or membership cooperatives, as well as standard purchasing and marketing cooperatives. The majority of cooperatives in Colorado have been formed under or converted to Article 56 entities. One such way that Article 56 expanded the reach of Article 55 was in its recognition of “Renewable Energy Cooperatives,” which is intended to “promote electric energy efficiency technologies to its members, generating electricity from renewable resources and technologies, and transmitting and selling the electricity at wholesale.”  The recent addition of this section to the Cooperative statute books allowed for the creation and propagation of what are commonly known as community solar gardens.

Article 56, (Section 103) of the CRS defines a “Cooperative” as having the following characteristics:

• The cooperative’s business is to be operated at cost and any net margins at the end of a fiscal year are to be returned to members on a patronage basis;
• Dividends on equity capital is limited;
• Voting rights are limited to members;
• Cooperative’s business is to be carried on for the mutual benefit of members; and (most critically)
• Members are not liable for any debt, obligation, or liability of the cooperative.

Article 58- Uniform Limited Cooperative Association Act (“ULCAA”)

Article 58 is a recent addition to the suite of Colorado cooperative statutes and is a slightly differently cooperative form, known as the Uniform Limited Cooperative Association Act (“ULCAA”). Article 58 further expands Colorado’s cooperative statutory options by recognizing, creating and governing unincorporated cooperative associations that seek to combine the traditional cooperative principles with more flexible capital structures, such as allowing for voting patronage membership stock in addition to voting investor membership stock. One of the key members of the ULCAA drafting committee (National Conference of Commissioners on Uniform State Laws or NCCUSL) had spent several decades practicing in Denver, Colorado and representing many Colorado cooperatives. ULCAA was drafted to further expand and provide flexibility to new generations of cooperative associations.  

Here are some of the key highlights of ULCAA as identified by NCCUSL:

• ULCAA sought to address the need for some cooperatives to bring in outside capital.  Under an Article 55 or 56 Cooperative, non-members are prohibited from receiving voting rights. ULCAA changed this by authorizing Article 58 Cooperatives to grant voting rights to members who are not “patron-members” but who are labeled “investor-members”.
•  Permission for “foreign” cooperatives to apply for and receive a certificate of authority to transact business in the enacting jurisdiction.
• A statutory process and required filings for conversion of a limited cooperative association to another entity (or vice versa), and the effect of conversion on the rights, duties, liabilities, immunities and debts of the converting entity

Article 101

Lastly, Article 101, Part 5 governs Public Benefit Corporation elections for Cooperatives, among other entities.