BYLAWS OF COOPERATIVES

Unlike Articles of Incorporation, Bylaws do not need to filed with the state.  However,
Bylaws are an important document that lays out how the cooperative is to be governed.  The
governing body (whether it consists of an elected Board of Directors or all members of a
collective) must abide the Bylaws. 

Typically, a cooperative’s Bylaws can only be changed by a democratic vote (or in some
cases, consensus) of the membership.  For this reason, cooperatives usually limit their Bylaws to
fundamental governance-level issues.  More specific operational procedures may be documented
in policy manuals or handbooks, which can be changed as needed by Directors, (co-)managers,
committee members, staff, or other bodies using approved decision-making processes.

Bylaws are organized into sections, and most sections are broken up into subsections.  In this
document, only the lengthier sections are broken up into subsections for ease of reading. 
However, shorter sections can benefit from being broken down as well.  Bylaws can be easily
referenced when numbers or letters are assigned to sections and subsections.     

Many consumer-owned cooperatives post their Bylaws on their websites. More links and
resources can be found on the US Federation of Worker Cooperatives’ Resources Library. 

Cooperative Bylaws should include: 

I.    Mission, purpose, and legal structure  

This section often includes the cooperative’s mission statement, vision statement, or stated
purpose. This is also a good place to restate the information outlined in the Articles of
Incorporation.  The Bylaws should agree with the Articles, but you may wish to include this
useful phrase:

“The articles of incorporation are hereby made a part of these bylaws.  In case of any
inconsistency between the articles of incorporation and these bylaws, the provisions of the
articles of incorporation are controlling.” 

II.    Membership
This section should describe each membership class (if more than one). For each membership
class, outline who is eligible for membership, the requirements for membership, voting rights. 
Specify rules for suspension or termination of membership, including guidelines for returning
member investments.  Note that membership shares are often non-transferrable.

In worker cooperatives, this section or an alternative section may also outline guidelines relating
to additional rights and responsibilities of workers.  Such guidelines may address working
conditions, the pay scale or pay differential, and more. 
III.    Membership Meetings  
This section should address the details of annual (or periodic) general membership meetings. 
Such details may include: 

a)    How often are regular membership meetings held?  How is the agenda compiled?  How is
the time and location of the meeting announced?

b)    How are special membership meetings called?  How are special meetings announced? 

c)    What decision-making process is used?  Consensus?  Modified consensus?  Majority vote? 
What percentage of participants must vote in favor in order to approve a decision?  Do stand-
asides affect the outcome?  Possible “majority” thresholds include 50% plus 1, 66%, 75%, and
occasionally greater percentages. 

d)   What number or percentage of members is needed for quorum?  

IV.    Board of Directors:  
Note: in some smaller cooperatives (especially collectives), the entire membership constitutes
the governing body, or the Board.  If this is the case, members may still find it useful to
distinguish governance-level decisions from operational decisions.

The “Board Directors” section should answer these questions: 

a)    What is the minimum or maximum number of Board Directors?  It may be useful to specify
a range in the Bylaws, so the Board can grow if needed.  Cooperatives often try to have an odd
number of directors.  Do you want the Board to reflect certain constituents?  Many consumer-
owned cooperatives strive to fill a certain number of seats with staff members.

b)    How are Board Directors elected?  How long are Board terms?  Many cooperatives try to
stagger terms, so that only about half of the Board seats are up for re-election at a time.  This
helps to ensure organizational stability and preserve institutional memory.

c)     How are vacancies filled?  Some cooperatives allow the Board Directors to fill vacant seats,
while others require a special vote of the membership.  Others offer vacant seats to runners-up
from recent elections. 

d)    Under what circumstances can Directors be removed?  What is the process for removing
Directors?  In cases of serious misconduct or negligence, suspension or removal may be
automatic.  In other cases, there may need to be a mechanism for empowering members to recall
Directors or Board Decisions.

e)    Will Directors be paid for serving on the Board?  If so, how much?  Different states have
different statutes.  

f)    Do you wish to prohibit Board Directors from voting if they have a conflict of interest (such
as compensation of officers)?  Here is a useful phrase: 

“It shall be the duty of all board directors to make prompt and full disclosure to the board of
any personal, professional, or financial conflict of interest in a matter under discussion.  When a
conflict of interest is disclosed, the board member must not participate in the discussion or vote
on the relevant issue.”
  
g)    How often are Board Meetings held?  How will the time and location be communicated to
members?  Under what circumstances can emergency Board meetings be called, and how will
they be announced?

h)    What are the general duties of Board Directors?  What is their relationship to the
management, staff, and members? 

i)    What is the role of the management?  Typically (co-)managers oversee daily operations in
compliance with general guidelines set by the Board, and report to the Board of Directors.

j)    Will there be Board Committees?  Should these be defined in the Bylaws?  How are Board
Committees formed?  What are the limitations of Board Committees’ decision-making power?

V.    Board Officers 

The Board may be required to designate a President / Chair, Secretary, Treasurer, and / or
alternatives.  Check your state’s requirements, and outline the duties of each officer in
subsections.  Also specify how officers are designated (elected directly by the membership or
chosen by Board Directors) and how long their terms last.

VI.    Finances
Be sure to cover the following (check your state’s statutes): 

a)       How are net proceeds (both margins and losses) apportioned?

b)       How are proceeds distributed?

c)       What are your policies for patronage refunds and reserves?
d)       Check the IRS code for guidelines for equity records.  Cover equity redemption for
terminating members, deceased members, and unclaimed equity.

e)       Consent to patronage distributions.  Another useful phrase:

“Consent to patronage distributions” means that all members will report their co-op patronage
refunds and retained capital equity to the IRS as earnings.  Each year members will receive a
1099 form itemizing their patronage refunds earned in that year.”
   
It is helpful to state in the Bylaws and in your membership contract that individuals consent to
comply with relevant tax laws upon becoming members.

VII.    Administration and Miscellaneous

This section can include a variety of topics (organized into subsections).  Topics may include
when the fiscal year begins, what meeting process is used (Robert’s Rules of Order, Butler’s
Formal Consensus, or another system detailed in a separate text that can be referenced by
members), use of a corporate seal or logo, indemnification and insurance coverage for Directors,
financial reviews, options for advisory councils and committees, and more. Separate sections can
be created for these topics if desired.

VIII.    Amendment to the Bylaws

It is important to state the procedure for amending the Bylaws.  How does a Board Director or
member propose an amendment?  How is an amendment approved?  (This often requires a
period or special general membership meeting and a vote of the membership.  Some cooperatives
require that members petition for a special meeting and / or Bylaws change in order to
demonstrate that their proposal has some support.)

IX.    Dissolution
What procedures should be followed if the cooperative goes out of business?  If members or
Board Directors are interested in dissolving the cooperative voluntarily?  How will remaining
assets be divided?  This part should be consistent with your Articles of Incorporation.

TYPES OF COOPERATIVES
1. Credit Cooperative is one that promotes and undertakes savings and lending services among
its members. It generates a common pool of funds in order to provide financial assistance and
other related financial services to its members for productive and provident purposes;
2. Consumer Cooperative is one the primary purpose of which is to procure and distribute
commodities to members and non- members;
3. Producers Cooperative is one that undertakes joint production whether agricultural or
industrial. It is formed and operated by its members to undertake the production and processing
of raw materials or goods produced by its members into finished or processed products for sale
by the cooperative to its members and non-members. Any end product or its derivative arising
from the raw materials produced by its members, sold in the name of and for the account of the
cooperative, shall be deemed a product of the cooperative and its members;
4. Marketing Cooperative is one which engages in the supply of production inputs to members
and markets their products;
5. Service Cooperative is one which engages in medical and dental care, hospitalization,
transportation, insurance, housing, labor, electric light and power, communication, professional
and other services;
6. Multi-Purpose Cooperative combines two (2) or more of the business activities of these
different types of cooperatives;
7. Advocacy Cooperative is a primary cooperative which promotes and advocates
cooperativism among its members and the public through socially-oriented projects, education
and training, research and communication, and other similar activities to reach out to its intended
beneficiaries;
8. Agrarian Reform Cooperative is one organized by marginal farmers’ majority of which are
agrarian reform beneficiaries for the purpose of developing an appropriate system of land tenure,
land development, land consolidation or land management in areas covered by agrarian reform;
9. Cooperative Bank is one organized for the primary purpose of providing a wide range of
financial services to cooperatives and their members;
10. Dairy Cooperative is one whose members are engaged in the production of fresh milk which
may be processed and/or marketed as dairy products;
11. Education Cooperative is one organized for the primary purpose of owning and operating
licensed educational institutions, notwithstanding the provisions of Republic Act No. 9155,
otherwise known as the Governance of Basic Education Act of 2001;
12. Electric Cooperative is one organized for the primary purpose of undertaking power
generation, utilizing renewable sources, including hybrid systems, acquisition and operation of
sub transmission or distribution to its household members;
13. Financial Service Cooperative is one organized for the primary purpose of engaging in
savings and credit services and other financial services;
14. Fishermen Cooperative is one organized by marginalized fishermen in localities whose
products are marketed either as fresh or processed products;
15. Health Services Cooperative is one organized for the primary purpose of providing
medical, dental, and other health services;
16. Housing Cooperative is one organized to assist or provide access to housing for the benefit
of its regular members who actively participate in the savings program for housing. It is co-
owned and controlled by its members;
17. Insurance Cooperative is one engaged in the business of insuring life and property of
cooperatives and their members;
18. Transport Cooperative is one which includes land and sea transportation, limited to small
vessels, as defined or classified under the Philippine maritime laws, organized under the
provisions of RA 9520;
19. Water Service Cooperative is one organized to own, operate and manage waters systems
for the provision and distribution of potable water for its members and their households;
20. Workers Cooperative is one organized by workers, including the self-employed, who are at
the same time the members and owners of the enterprise. Its principal purpose is to provide
employment and business opportunities to its members and manage it in accordance with
cooperative principles; and
21. Other types of Cooperatives as may be determined by the Authority.

NAME OF YOUR COOPERATIVE

A corporate name is an important part of corporate communication and advertising today and can
be a very valuable asset. It tells people who you are and will often represent the goodwill that
you have built up with your customers and suppliers.
An approved federal corporate name offers an extra degree of protection of your rights to that
name. Specifically, federal incorporation allows your business to operate using its corporate
name right across Canada, which is important if you decide to expand your business to other
provinces or territories.

Choosing A Name
Your name must meet certain requirements before it is approved by CDA:
 The name must be distinctive.
 The name must not cause confusion with any existing name or trade-mark.
 The name must include a legal element.
  The name must not include unacceptable terms.

ELECT BOARD OF DIRECTORS

The ultimate control of any corporation is legally in the hands of the board of directors. In a
cooperative, however, the board is responsible to its members as users rather than to investors
whose first objective is to maximize profits. Taking the time to listen to member-users, learning
the issues, understanding the responsibilities of directors and how their role differs from other
key people, and making decisions based on what is in the best interests of the membership, will
allow the cooperative director to serve members effectively.

MEMBERS OF COOPERATIVES
Participation is a responsibility of cooperative members
Members of a resident-owned community have both rights and responsibilities. Those rights
and responsibilities are outlined in the bylaws, in standard parliamentary procedure, and in local,
state and federal laws. Most cooperatives’ bylaws define a member as a person who is, among
other things:
“... willing to accept membership responsibilities, including but not limited to voluntary
participation in the governance of the cooperative and in the operation of the community.”
What does this mean? Members’ participation in the co-op will ebb and flow, and can be as
simple as handing out meeting flyers, or as involved as running for office. However, members
always have a responsibility to:
 hold the board accountable for its actions, including obeying all bylaws, and applicable
local, state and federal laws,
 pay carrying charges (rent) in full and on time,
 ask good and thoughtful questions at annual meeting,
 stay informed about issues in the community by observing board meetings and reading all
co-op correspondence,
 adhere to board-approved policies and procedures, including the meeting code of
conduct,
 disclose any conflict of interest with the co-op to the board of directors by completing a
conflict-of-interest form,
 vote on matters brought to the membership,
  deliver valid complaints in writing to the board of directors,
 pay the membership fee in full (or per the subscription/membership agreement),
 obey the community rules,
 treat community members with respect and be a good neighbor.
And, mostly important, be active in the community, as each member’s time and talent allows.
Additionally, members in good standing always have the right to:
 be heard at a membership meeting;
 run for office at co-op elections, in accordance with the member-approved bylaws;
 inspect co-op records, in accordance with the member-approved bylaws, except those
with personal information about members;
 be given proper notice for all board and member meetings;
 be treated fairly, respectfully and without discrimination;
 have equal access to services;
 deliver a valid petition to the board of directors when/if there is a serious issue to bring to
the members for deliberation;
 insist on a fair hearing before an expulsion.

COOPERATIVE COMMITTEE
All committees report to the Board of Directors and should work strictly within the charges
given them by the Board of Directors. Each committee will have a board member assigned to
them as a liaison.
Committee members play a supportive role to the board by doing research, gathering
information, tabulating data, making comparisons, determining cost options, and presenting
recommendations to the Board. Committees contribute to productive board meetings and
facilitate the co-op’s orderly operation.
Committees enable the Board of Directors to receive more resident input. Their suggestions
and recommendations to the board are intended to represent the cooperative owner’s point of
view and to offer different viewpoints from those of the manager or a contractor.
Committees do not set policy. Committee members must understand that it is their duty to
recommend, and that it is the duty of the Board to consider and enact. Members who understand
the proper role of the committee are less likely to become disillusioned if their recommendations
are not followed. The committee may be concerned with but one segment of the co-op, while the
Board must consider what is best for the development as a whole, both for the present and for the
future. The responsibility for making decisions rests with the Board of Directors.
Committees are an excellent place to for developing leaders to learn the cooperative and can
be a future board member. Committee members work on bits and pieces of the huge job of
making the cooperative work. Committee members are an excellent place to look for new board
members to replace a board member who is moving away.
Depending on the committee’s task, from three to ten members form a group of workable
size. Committee members should, insofar as possible, represent all elements of the co-op
population with regard to age, race, religion, and sex.

ELECTION COMMITTEE
ARTICLE V Committees; Section 3: Committees Election Committee. An Election
Committee is hereby created and shall be composed of three (3) members to be elected during a
general assembly meeting and shall hold office for a term of one (1) year or until their successors
shall have been elected and qualified. Within ten (10) days after their election they shall elect
from among themselves a Chairperson, Vice-Chairperson and a Secretary. No member of the
committee shall hold any other position within the Cooperative during his term of office.By
Laws RA 9520 or the Philippine Code of 2008.
ARTICLE V Committees; Section 4: The Election Committee shall formulate election rules
and guidelines and recommend to the GA for approval; implement election rules and guidelines
duly approved by the GA; recommend necessary amendments to the election rules and
guidelines, in consultation with the Board of Directors, for approval of the GA; By Laws RA
9520 or the Philippine Code of 2008.
ARTICLE V Committees; Section 4: The Election Committee shall supervise the conduct,
manner and procedure of election and other election related activities and act on the changes
thereto; canvass and certify the results of the election; proclaim the winning candidates; By Laws
RA 9520 or the Philippine Code of 2008.
ARTICLE V Committees; Section 4: The Election Committee shall decide election and other
related cases except those involving the Election Committee or its members, and perform such
other functions as prescribed in the By-laws or authorized by the GA. By Laws RA 9520 or the
Philippine Code of 2008.