Washington State’s Cooperative Law Overhauled Effective January 1, 2016

For the first time in years, Washington’s cooperative statutes have been given a facelift.  Effective January 1, 2016 (except certain provisions affecting Limited Liability Companies (LLCs)), Washington state has created a set of uniform common provisions governing business organizations and other entities in the state. The law, commonly known as the “Hub Bill”, still divides the most common entities by type. These types include corporations, LLCs, limited partnerships and limited liability partnerships, general cooperative associations, and non-profit corporations. Before the new law, entity-specific laws contained all the legal requirements pertaining to each entity type in its own provisions.

The new act creates a “hub-and-spoke” model, consolidating the legal requirements common to all entities into a single, new chapter in RCW 23.95, while individual entity acts remain as spokes containing all entity-specific requirements. The full law can be found on the Web here.  

Broadly, common provisions affected include, among others:

1. the Secretary of State’s oversight for certain business organizations and other entities;
2. reservation and registration of entity names;
3. registered agents;
4. foreign entities doing business in Washington; and
5. entity dissolution and reinstatement.

In addition to specific changes in rules and procedures, the Act also amends entity-specific sections, as necessary, to remove redundant provisions which have been moved to the new common provisions in RCW 23.95.

In light of these changes, executives, lawyers, paralegals and other persons who set up and help maintain the affected types of entities (including cooperatives) should become familiar with this new statute. This alert focuses on changes to the existing cooperative statute RCW 23.86.

Association Name (RCW 23.86.030)

RCW 23.86.030(1) governs the names a cooperative may use. It has been amended and now requires names of cooperatives to conform to the requirements of Article 3 of RCW 23.95. The names a cooperative may use remain unchanged, but Article 3 introduces additional requirements including names that are permitted (or prohibited).  

Filing of Articles (RCW 23.86.055) 

RCW 23.86.055(1) and RCW 23.86.055(2) governs the filing of articles of incorporation have been amended. This change affects the procedure for filing. The new law requires the articles of incorporation to be signed by incorporators and delivered to the Secretary of State for filing in accordance with Article 2 of RCW 23.95. Persons filing articles of incorporation must familiarize themselves with the procedures set forth in Article 2 of RCW 23.95. 

Rules Regarding Filing Fees (RCW 23.86.070)

The rules concerning filing fees for cooperatives have been amended. 

Effective January 1, 2016, cooperatives will now be subject to the applicable fees, charges, and penalties established by the Secretary of State under RCW 23.95.260 and RCW 43.07.120. The Secretary of State is given the authority to adopt rules to establish fees for various services, including:

1. filing entity filings; 
2. furnishing copies or certified copies of any filed record; and
3. furnishing a certificate of existence, registration of an entity, or any other certificate.

In addition, the Secretary of State must adopt rules setting authorized license or renewal fees, as well as penalty fees and other miscellaneous charges. There are no fees for:

1. a registered agent's consent to act as agent or statement of resignation;
2. filing articles of dissolution;
3. filing certificates of judicial dissolution;
4. filing statements of withdrawal; and
5. filing annual reports when submitted concurrently with the payment of annual license fees.

The law also puts certain constraints on the fees permitted. For example, under the new provisions, the amount of fees, charges, and penalties established by the Secretary of State cannot be greater than the amounts applicable to entity filings, penalties, and other charges in effect on January 1, 2016.

Registered Agent (RCW 23.86.095)

The old statute (RCW 23.86.095) required a cooperative to have and maintain a registered office and a registered agent in this state. The new Act amends this section to require a cooperative to have and maintain only a registered agent in Washington State, in accordance with Article 4 of RCW 23.95. Importantly, a cooperative must familiarize itself with the requirements of Article 4 of RCW 23.95 in its entirety, as it adds additional requirements and clarifications. For example, except in RCW 23.95.445(1)(d), which requires the provision of an address when a registered agent resigns, if any other provision of Chapter 4 of RCW 23.95 requires that a record state an address, the record must state: (i) a street address in the state of Washington;  and (ii) a mailing address in this state, if different from the street address provided. As such, while the amendment removes the requirement of maintaining a registered office in the state of Washington, a Washington State street address and mailing address in the state of Washington may still be required depending on particular circumstances. Consequently, cooperatives must refer to Chapter 4 of RCW 23.95 to determine what is required for their particular circumstance, as well as to familiarize themselves with the other requirements of Section 4 of RCW 23.95.

Procedure for Conversion of a Cooperative Association to a Domestic Ordinary Business Corporation (RCW 23.86.210)

The provision governing the procedure for conversion of a cooperative to a domestic ordinary business cooperation (RCW 23.86.210) has been amended to institute changes aimed at bringing it into conformity with changes in other sections of the law governing cooperatives. For example, the changes affecting the amendments concerning permitted association names (RCW 23.86.030) and registration of agents (RCW 23.86.095) have been incorporated into RCW 23.86.210 with the effects that the name of a converted organization must now comply with the requirements of Article 3 of RCW 23.95, and the articles of conversion must set forth the converted corporation’s initial registered agent but not its initial registered office, as previously required.  Certain changes with respect to the filing of articles (RCW 23.86.055) have also been incorporated, as applicable.

Procedure for Merger of cooperative association with one or more cooperative associations or business corporations (RCW 23.86.220)

RCW 23.86.220 governs the procedure for the merger of a cooperative association with one or more cooperative associations or business corporations. This section was amended to incorporate certain applicable changes to the procedure for filing. Consequently, the articles of merger must, effective January 1, 2016, be delivered to the Secretary of State for filing in accordance with Article 2 of RCW 23.95, as opposed to the previous procedure. 

Annual Report for Secretary of State (RCW 23.86.310)

RCW 23.86.310 governs annual reports. Effective January 1, 2016, cooperatives are required to deliver annual reports to the Secretary of State in accordance with the new RCW 23.95.255, which makes several changes to RCW 24.06.440. Cooperatives should thus, familiarize themselves with the procedures and requirements enumerated in RCW 23.95.255.

Administrative Dissolution (RCW 23.86.330)

The law also updated the rules governing administrative dissolution of cooperatives were governed by RCW 23B.14.200 (grounds for administrative dissolution), 23B.14.210 (procedure and effects of an administrative dissolution) and RCW 23.86.340 (re-instatement). Effective January 1, 2016, Article 6 of RCW 23.95, which amends and consolidates the previous governing statutes, will govern administrative dissolutions for cooperatives. Article 6 of RCW 23.95 amends and adds several provisions, so cooperatives are advised to familiarize themselves with Article 6 of RCW 23.95.

Changes to Rules Governing Foreign Entities (RCW 23.86.370)

Old law required foreign corporations desiring to conduct affairs in the state of Washington under the authority of the chapter governing cooperative associations (RCW 23.86) to be subject to RCW 24.06.340 (rules concerning admission of a foreign corporation) and RCW 24.06.435 (rules concerning conducting affairs without certificate of authority). Effective January 1, 2016, Article 5 of RCW 23.95 which regulates foreign entities will, instead, govern such foreign corporations. Additionally, foreign corporations desiring to conduct affairs the state of Washington under the authority of the chapter governing cooperative associations will be subject to RCW 24.06.367 (which governs the filing of documents with respect to a certificate of authority as an insurance company) and RCW 24.06.369 (which governs the registration or reservation of names with respect to a certificate of authority as an insurance company).

Repealed Laws

Certain provisions specific to cooperatives have been repealed to remove redundant provisions which move to the new superseding provisions in 23.95. The repealed provisions are:

1. RCW 23.86.155 (rules governing failure to appoint registered agent);
2. RCW 23.86.300 (rules concerning changing of registered office or registered agent and service of process on corporations);
3. the previously mentioned RCW 23.86.320 (which prescribed rules for the filing of annual or biennial report of domestic and foreign corporations);
4. RCW 23.86.335 (which prescribed rules concerning names not distinguishable from the name of a governmental entity);
5. the previously mentioned RCW 23.86.340 (which governed reinstatement after dissolution).