BILL ANALYSIS Ó AB 816 Page 1 Date of Hearing: May 13, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 816 (Bonta) - As Amended April 30, 2015 ----------------------------------------------------------------- |Policy |Banking and Finance |Vote:|9 - 3 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- 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 AB 816 Page 2 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 AB 816 Page 3 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 The author believes California's worker cooperative law is outdated and lacks a framework applicable to general worker cooperatives.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 AB 816 Page 4 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