The Massachusetts Employee Cooperative Corporations Act (1982), drafted by David Ellerman and Peter Pitegoff of the ICA Group, was the first U.S. American worker cooperative business statute. It was intended to directly adopt the Mondragon "internal capital account" worker cooperative to the U.S. American legal system.
Massachusetts General Laws
Part I. Administration of the Government
Title XXII. Corporations
Chapter 157A. Employee Cooperative Corporations
§ 1. Short title
This chapter shall be known and may be cited as the Employee Cooperative Corporations Act.
§ 2. Definitions
As used in this chapter the following words shall, unless the context clearly requires otherwise, have the following meanings:
“Employee cooperative”, a corporation which has elected to be governed by the provisions of this chapter.
“Member”, a natural person who has been accepted for membership in, and owns a membership share issued by an employee cooperative.
§ 3. Corporations organized under chapter 156D; election to be governed as employee cooperative
Any corporation organized under chapter 156D may elect to be governed as an employee cooperative under this chapter, by so stating in its articles of organization or articles of amendment filed in accordance with chapter 156B.
A corporation so electing shall be governed by all provisions of said chapter one hundred and fifty-six B other than sections seventy-eight to eighty-five, inclusive, except as otherwise provided in this chapter.
§ 4. Revocation of election
An employee cooperative may revoke its election under this chapter by a vote of two-thirds of the members and through articles of amendment filed in accordance with section seventy-two of said chapter one hundred and fifty-six B.
§ 5. Corporate name
An employee cooperative may include the word “cooperative” or “co-op” in its corporate name.
§ 6. Members; membership shares; fees; rights and responsibilities
(a) The articles of organization or the by-laws shall establish qualifications and the method of acceptance and termination of members. No person may be accepted as a member unless employed by the employee cooperative on a full time or part time basis.
(b) An employee cooperative shall issue a class of voting stock designated as “membership shares”. Each member shall own only one such membership share, and only members may own such shares.
(c) Membership shares shall be issued for a fee as shall be determined from time to time by the directors. Sections twenty-four, twenty-five, twenty-eight and thirty of said chapter one hundred and fifty-six B shall not apply to such membership shares. Sections seventy-six and eighty-five to ninety-eight, inclusive, of said chapter one hundred and fifty-six B shall not apply to membership shares whose redemption price is determined by reference to internal capital accounts as defined in section nine.
(d) Members of an employee cooperative shall have all the rights and responsibilities of stockholders of a corporation organized under said chapter one hundred and fifty-six B, except as otherwise provided in this chapter.
§ 7. Voting shares; by-laws; amendment of articles of organization
(a) No capital stock other than membership shares shall be given voting power in an employee cooperative, except as otherwise provided in this chapter or in the articles of organization.
(b) Notwithstanding the provisions of section seventeen of said chapter one hundred and fifty-six B, the power to amend, or repeal by-laws of an employee cooperative shall be in the members only, except to the extent that directors are authorized to amend or repeal the by-laws in accordance with said section seventeen.
(c) Sections seventy, seventy-one and seventy-four of said chapter one hundred and fifty-six B shall be construed to limit voting on any amendment of the articles of organization of an employee cooperative to the members, except that amendments adversely affecting the rights of stockholders as defined in section seventy-seven of said chapter one hundred and fifty-six B may not be adopted without the vote of such stockholders as provided in section seventy-one of said chapter one hundred and fifty-six B.
§ 8. Net earnings or losses; apportionment, distribution and payment
(a) The net earnings or losses of an employee cooperative shall be apportioned and distributed at such times and in such manner as the articles of organization or by-laws shall specify. Net earnings declared as patronage allocations with respect to a period of time, and paid or credited to members, shall be apportioned among the members in accordance with the ratio which each member's patronage during the period involved bears to total patronage by all members during that period. As used in this chapter, “patronage” means the amount of work performed as a member of an employee cooperative, measured in accordance with the articles of organization and by-laws.
(b) The apportionment, distribution, and payment of net earnings required by subsection (a) may be in cash, credits, written notices of allocation, or capital stock issued by the employee cooperative.
§ 9. Internal capital accounts; recall or redemption of shares; interest; collective reserve account
(a) Any employee cooperative may establish through its articles of organization or by-laws a system of internal capital accounts, to reflect the book value and to determine the redemption price of membership shares, capital stock, and written notices of allocation. As used in this chapter, “written notice of allocation” means a written instrument which discloses to a member the stated dollar amount of such member's patronage allocation and the terms for payment of that amount by the employee cooperative.
(b) The articles of organization or by-laws of an employee cooperative may permit the periodic redemption of written notices of allocation and capital stock, and must provide for recall and redemption of the membership share upon termination of membership in the cooperative. No redemption shall be made if such redemption would result in the liability of any director or officer of the employee cooperative under section sixty-one of said chapter one hundred and fifty-six B.
(c) The articles of organization or by-laws may provide for the employee cooperative to pay or credit interest on the balance in each member's internal capital account.
(d) The articles of organization or by-laws may authorize assignment of a portion of retained net earnings and net losses to a collective reserve account. Earnings assigned to the collective reserve account may be used for any and all corporate purposes as determined by the board of directors.
§ 10. Internal capital account cooperatives
(a) An internal capital account cooperative is an employee cooperative whose entire net book value is reflected in internal capital accounts, one for each member, and a collective reserve account, and in which no persons other than members own capital stock. In an internal capital account cooperative, each member shall have one and only one vote in any matter requiring voting by stockholders.
(b) An internal capital account cooperative shall credit the paid-in membership fee and additional paid-in capital of a member to the member's internal capital account, and shall also record the apportionment of retained net earnings or net losses to the members in accordance with patronage by appropriately crediting or debiting the internal capital accounts of members. The collective reserve account in an internal capital account cooperative shall reflect any paid-in capital, net losses, and retained net earnings not allocated to individual members.
(c) In an internal capital account cooperative, the balances in all the individual internal capital accounts and collective reserve account, if any, shall be adjusted at the end of each accounting period so that the sum of the balances is equal to the net book value of the employee cooperative.
(d) Sections seventy-six and eighty-five to ninety-eight, inclusive, of said chapter one hundred and fifty-six B shall not apply to an internal capital account cooperative.
§ 11. Conversion of membership shares and internal capital accounts upon revocation of election; consolidation or merger
(a) When any employee cooperative revokes its election in accordance with section four, the articles of amendment shall provide for conversion of membership shares and internal capital accounts or their conversion to securities or other property in a manner consistent with said chapter one hundred and fifty-six B.
(b) An employee cooperative which has not revoked its election under this chapter may not consolidate or merge with another corporation other than an employee cooperative. Two or more employee cooperatives may consolidate or merge in accordance with sections seventy-eight, eighty, eighty-one, eighty-four and eighty-five of said chapter one hundred and fifty-six B.