BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  May 13, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          AB  
          816 (Bonta) - As Amended April 30, 2015


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          |Policy       |Banking and Finance            |Vote:|9 - 3        |
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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:


          This bill reforms and expands the consumer cooperative  
          corporation law to allow general worker cooperatives, and  
          establishes a regulatory framework for the formation and  
          operation of cooperative corporations.  In summary, this bill:


          1)Requires at least 51% of cooperative corporation workers be  
            worker-members or eligible for membership within 2 years of  
            becoming a worker;


          2)Authorizes a worker cooperative to apportion and distribute  








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            earnings and losses in the manner specified in its articles of  
            incorporation or bylaws, but requires any patronage  
            distributions (measured by work performed or personal services  
            contributed) only be made to worker-members;


          3)Authorizes a worker cooperative to create an indivisible  
            reserves account that may not be distributed to the members,  
            and may be used to fund capital projects for the company;


          4)Prescribes certain rules of corporate governance and  
            accounting for the various types of worker cooperatives; 


          5)Increases the aggregate single member investment limit that is  
            exempt from qualification under state securities laws from  
            $300 to $1,000; and


          6)Defines relevant terms and makes various other technical  
            changes.


          FISCAL EFFECT:


          Minor and absorbable costs to the Secretary of State, though  
          these costs could increase if the number of cooperative  
          corporations increases significantly; minor and absorbable costs  
          to the Department of Business Oversight.


          COMMENTS:


          1)Purpose.  According to the author, worker cooperatives create  
            and maintain sustainable jobs, generate wealth to improve the  
            quality of life of their worker-members, allow workers to  








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            democratically self-manage, and promote community and local  
            development.  The author believes California's worker  
            cooperative law is outdated and lacks a framework applicable  
            to general worker cooperatives.  AB 816 is intended to amend  
            the Consumer Cooperative Corporation Law to clarify the law  
            applies to all worker cooperatives, not just consumer  
            cooperatives, provide contours to the governance rules for  
            worker cooperatives, and increase the maximum community  
            investor amount from $300 to $1,000. 


          2)Worker Cooperatives.  Worker cooperatives are businesses  
            democratically owned and governed by their workers.  Worker  
            cooperatives are distinct from other kinds of cooperatives  
            (such as consumer, housing, financial, and others) in that its  
            members are its workers, and are common throughout Europe and  
            Latin America.  The US Federation of Worker Cooperatives  
            estimates there are about 350 worker cooperatives in this  
            country, employing approximately 5,000 people and collectively  
            generating approximately $500 million in annual revenue. 


            Many types of businesses can be organized as cooperatives,  
            ranging from very small businesses to very large multinational  
            companies, in industries from agriculture to finance.  Basic  
            standards for worker cooperatives were established in the  
            World Declaration on Cooperative Worker Ownership, adopted by  
            the International Organization of Industrial, Artisanal and  
            Service Producers' Cooperatives in Norway in 2003. 


          3)The Rochdale Society of Equitable Pioneers.  One of most  
            influential early cooperatives began as a response to  
            industrialization in Lancashire, England in 1844, when a group  
            of weavers and other tradesmen formed the Rochdale Society of  
            Equitable Pioneers.  Learning from the failures of previous  
            cooperatives, the society developed the Rochdale Principles to  
            govern their society.  The core principles were voluntary and  
            open membership; democratic member control (one member, one  








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            vote); distribution of surplus in proportion to trade; payment  
            of limited interest on capital; political and religious  
            neutrality; cash trading (and no credit); and promotion of  
            education.  Though they have been refined over the years,  
            these principles still guide the worker cooperative movement,  
            and were formally adopted by the International Co-operative  
            Alliance in 1937 and amended in 1966 and 1995.





          Analysis Prepared by:Joel Tashjian / APPR. / (916)  
          319-2081