Hawaii cooperative law includes a long history of cooperative development and statues like the Consumer Cooperative Association’s Act and the Sustainable Business Corporations Act.
Cooperative Law Generally
Hawaii’s cooperative law landscape encompasses statutes governing various cooperative models, including Agricultural Cooperatives (HRS Chapter 421), Consumer Cooperatives (HRS Chapter 421C), Limited-Equity Housing Cooperatives (HRS Chapter 421H), and Cooperative Housing Corporations (HRS Chapter 421I). While the Consumer Cooperative Association’s Act serves as the broadest framework, encompassing entities such as electric utility cooperative associations, Hawaii currently lacks specific legislation tailored to worker cooperatives. Agricultural cooperatives primarily organize under the Agricultural Cooperative Associations Act, while Consumer Cooperative Associations Act accommodates cooperatives outside agriculture and housing sectors. Limited-Equity Housing cooperatives adhere to nonprofit corporation regulations, and Cooperative Housing Corporations largely function under domestic profit corporation statutes, with provisions under the Hawaii Business Corporation Act. These laws have evolved over time through amendments, reflecting Hawaii’s commitment to facilitating cooperative enterprise development.
Statutes
Consumer Cooperative Association’s Act
Hawaii’s Consumer Cooperative Association’s Act was enacted in 1982 and it is the broadest of Hawaii’s co-op laws and includes electric utility cooperative associations, defined as “a consumer cooperative association that provides electric utility service as a public utility.” (HRS § 421C-1). An association may be incorporated under the Consumer co-op law “for the purpose of transacting any lawful business for its membership, the general public, or both.” (HRS § 421C-2) The impetus of the consumer co-op law was the desire to form a food cooperative on Oahu. It was last amended with a minor change to HRS § 421C-36 (exemption of voting stock from registration) in order to reference the updated securities law. HRS § 421C-41 and § 421C-42 pertaining to electric utility cooperatives were added in 2005.
Examples
- Kokua Country Foods Cooperative
- Kauai Island Utility Cooperative
- Hawaii Nonipower Cooperative
- Waimanalo Market Co-op
Agricultural Cooperatives Associations Act
At present, the majority of cooperatives involved in agriculture form under the Agricultural Cooperatives Associations Act. A few multi-stakeholder agricultural cooperatives have formed under the Consumer Cooperative Associations Act. Cooperatives other than those involved in agriculture or housing, generally use the Consumer Cooperative Associations Act.
Hawaii’s Agricultural Cooperative Associations Act enacted in 1949 is based on the Uniform Agricultural Cooperative Associations Act. The same is true for many other states that have agricultural cooperative laws, resulting in less variation among state laws. For an interesting survey of Hawaii agricultural cooperatives in 1959, see “Agricultural Cooperatives in Hawaii – 1959”, C.W. Peters, Agricultural Economics Report No. 42, University of Hawaii, Dec. 1959. At that time, of the 27 agricultural cooperatives surveyed only 4 were stock corporations with all others set up on a membership fee plan. Various amendments have taken place throughout the years, with the most recent ones being in 2004 to: HRS § 421-6(e) on filing and recording of articles of incorporation; HRS § 421-23 on taxation; and HRS § 421-21.6 on mergers (aside from the repeal of an obsolete provision in 2008).
Examples
- Cacao Farmers of Hawaii
- Kala`ulu Cooperative
- Hawaii Swine Producers Cooperative
- United Kau Farmers Cooperative
- Hawaii Ulu Producers Cooperative
- Hawaii Island Energy Cooperative
- Friends with Farms Cooperative
Limited-equity Housing Cooperatives Act
The legislature enacted the Limited-Equity Housing Cooperatives Act (HRS Chapter 421H) in 1987. Limited-Equity Housing cooperatives are organized as nonprofit corporations under HRS, Chapter 414D (Hawaii Nonprofit Corporations Act). (HRS § 421H-1). Many Cooperative Housing Corporations are organized as domestic profit corporations. Unless inconsistent, the provisions of the Hawaii Business Corporation Act apply to Cooperative Housing Corporations. (HRS § 421I-11).
Cooperative Housing Corporations Act
Under the Cooperative Housing Corporations Act, a cooperative housing corporation is one that:
- Has one and only one class of stock outstanding;
- Allows each tenant shareholder to occupy a dwelling unit for dwelling purposes solely by reason of the tenant shareholder’s ownership of stock in the corporation;
- Does not allow a shareholder to receive, either conditionally or unconditionally, any distributions from the corporation except when there is a complete or partial liquidation of the corporation; provided that this paragraph does not apply to earnings and profits of the corporation; and
- Has eighty per cent or more of the gross income for the taxable year in which taxes are paid or incurred pursuant to 26 United States Code section 216(A) derived from tenant shareholders.
- Diamond Head Ambassador Hotel, Ltd.
- Tahitienne Inc. Condos
- Sans Souci, Inc.
Sustainable Business Corporations Act
Hawaii does not currently have a Limited Cooperative Associations Act. In 2011 Hawaii enacted a Sustainable Business Corporations Act. The law provides that “a domestic corporation incorporated under chapter 414 [the Hawaii Business Corporation Act] may elect to become a sustainable business corporation under this chapter by including in its articles or amending its articles to include a statement that the corporation is a sustainable business corporation.” HRS § 420D-3. This wording limits the options for cooperatives to be sustainable business corporations since most are incorporated under statutes pertaining to the specific type of cooperative. Hawaii’s co-op laws may, however, in the future be amended to incorporate the Sustainable Business Corporations Act.
Major Cases
Hawaii has very little in terms of case law on cooperatives and practitioners often look to case law from other states.
Hawaiian Properties, Ltd. v. Tauala, 125 Haw. 176, 184, 254 P.3d 487, 495 (Ct. App. 2011)- “Ownership of a cooperative membership, combined with the right to occupy a unit in the cooperative project, is a form of property ownership, even though cooperative owners do not directly hold the title to their properties. This form of home ownership is unlikely to have the economic value of fee simple ownership or a conventional long-term leasehold interest, but it has value and constitutes a right of property beyond mere possession.”
Cooperative Support Organizations
Numerous general and state specific resources organized by topic are available on The Kohala Center’s.
The Kohala Center, Rural and Cooperative Business Development Services.
University of Hawaii, College of Tropical Agriculture and Human Resources, Cooperative Extension Office
Hawaii Based Cooperative Professionals and Business Resources
Elizabeth Dunne, Esq.- Dunne Law, LLC
edunnelaw@gmail.com
(808) 554-1409
Teresa Young- Rural Cooperative Business Development Specialist
808-887-6411 office
P.O. Box 437462, Kamuela, HI 96743
7401 Pedrick Road, Dixon, California, 95620
(916) 761-8686
tcastanias@aol.com
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