California Legislature—2013–14 Regular Session

Assembly Bill No. 2525

Introduced by Assembly Members Bonta and Levine

February 21, 2014

An act to amend Sections 12311 and 25100 of, to amend the heading of Title 2.6 (commencing with Section 17701.01) of, to add the heading of Division 1 (commencing with Section 17701.01) to, and to add Division 2 (commencing with Section 17801.01) to, Title 2.6 of, the Corporations Code, relating to worker cooperative companies.

LEGISLATIVE COUNSEL’S DIGEST

AB 2525, as introduced, Bonta. Limited Liability Worker Cooperative Act.

Existing law, the California Revised Uniform Limited Liability Company Act, governs the formation and operation of limited liability companies. Existing law authorizes a limited liability company to engage in any lawful business activity, except as specified, but prohibits construing the act to permit a limited liability company to render professional services, as defined. Existing law provides for the filing of specified records and further provides that an individual who signs such a record affirms under penalty of perjury that the information in the record is accurate.

Existing law, the Consumer Cooperative Corporation Law, provides for the organization and operation of primarily consumer cooperatives, and is also applicable to other cooperatives. Existing law provides for, among other things, information to be included in a cooperative corporation’s by laws, the definition of terms for purposes of that law, and requirements as to voting rights of members and time periods for sending notice of meetings at which members are entitled to vote. Existing law requires a cooperative corporation to include in its name the word “cooperative.”

This bill would establish the Limited Liability Worker Cooperative Act, which would provide for the organization and operation of worker cooperative companies. The bill would authorize a worker cooperative company to be formed for any lawful purpose provided that it is organized and conducts its business primarily for the mutual benefit of its members as patrons of the worker cooperative company. The bill would authorize a worker cooperative company to engage in any lawful business activity, except as specified, but would prohibit construing the act to permit a worker cooperative company to render professional services, as defined. The bill would authorize certain classes of membership in the worker cooperative company, including a worker-member class. The bill would provide that members of the worker cooperative company have equal votes, but would authorize the worker-member class to have ultimate decisionmaking authority. The bill would authorize members of a class to vote separately on any matter. The bill would authorize a worker cooperative company to include in its name the word “cooperative.” The bill would define certain terms for its purposes. The bill would specify that the provisions of the California Revised Uniform Limited Liability Act apply to worker cooperative companies, except as provided. Because this bill would expand the scope of the crime of perjury, the bill would impose a state-mandated local program.

Existing law, the Corporate Securities Law of 1968, provides for the regulation of the issuance of corporate securities, requires the qualification of an offer or sale of securities, and provides for exemptions from qualification.

This bill would exempt the issuance of a membership by a worker cooperative company, as specified, from certain securities requirements.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

SECTION 1.  

Section 12311 of the Corporations Code is
amended to read:

12311.  

(a) The names of all corporations formed under this
part shall include “cooperative.” No corporation shall be formed
under this part unless there is affixed or prefixed to its name some
word or abbreviation which will indicate that it is a corporation,
as distinguished from a natural person, a firm, or an unincorporated
association.

(b) No person shall adopt or use the word “cooperative” or any
abbreviation or derivation thereof, or any word similar thereto, as
part of the name or designation under which it does business in
this state, unless incorporated as provided in this part begin insert or organized
as a worker cooperative company under Division 2 end insert begin insert (commencing
with Section 17801.01) end insert begin insert of Title 2.6, end insert or unless incorporated as a
nonprofit cooperative association under Chapter 1 (commencing
with Section 54001) of Division 20 of the Food and Agricultural
Code, as a stock cooperative, as defined in Section 11003.2 of the
Business and Professions Code, as a limited-equity housing
cooperative, as defined in Section 817 of the Civil Code, as a credit
union or organization owned for the mutual benefit of credit unions,
or under some other law of this state enabling it to do so. However,
the foregoing prohibition shall be inapplicable to any credit union
or organization owned for the mutual benefit of credit unions, any
housing cooperative, the financing of which is insured, guaranteed,
or provided, in whole or in part, by a public or statutorily chartered
entity pursuant to a program created for housing cooperatives, a
nonprofit corporation, a majority of whose membership is
composed of cooperative corporations, or an academic institution
that serves cooperative corporations.

(c) A domestic or foreign corporation or association which did
business in this state under a name or designation including the
word “cooperative” prior to September 19, 1939, and which
conducts business on a cooperative basis substantially as set forth
in this part, may continue to do business under that name or
designation.

(d) Any person, firm, individual, partnership, trust, domestic
corporation, foreign corporation, or association which did business
in this state under a name or designation including the word
“cooperative” prior to September 19, 1939, but which does not
conduct business on a cooperative basis as contemplated by Section
12201 of this part, may continue to do business under that name
or designation if the words “not organized under the law relating
to cooperative corporations” are always placed immediately after
the name or designation wherever it is used.

(e) Any foreign corporation, organized under and complying
with the cooperative law of the state or other jurisdiction of its
creation, may use the term “cooperative” in this state if it has
complied with the laws of this state applicable to foreign
corporations, insofar as those laws are applicable to it, and if it is
doing business on a cooperative basis as contemplated by Section
12201.

SEC. 2.  

The heading of Title 2.6 (commencing with Section
17701.01) of the Corporations Code is amended to read:

 

Title 2.6.  begin delete CALIFORNIA REVISED UNIFORM LIMITED
LIABILITY COMPANY ACT end delete begin insert LIMITED LIABILITY COMPANIES end insert

 

SEC. 3.  

The heading of Division 1 (commencing with Section
17701.01) is added to Title 2.6 of the Corporations Code, to read:

 

Division 1.  California Revised Uniform Limited
Liability Company Act

 

SEC. 4.  

Division 2 (commencing with Section 17801.01) is
added to Title 2.6 of the Corporations Code, to read:

 

Division 2.  Limited Liability Worker
Cooperative Act

 

Article 1.  General Provisions

 

17801.01.  

(a) The Legislature finds and declares that the
formation of employee-owned businesses and the participation of
employees in the management of businesses in this state will
promote the stabilization of local economies, anchor business
activity, and increase productivity. The Legislature further finds
that the encouragement of employee-owned businesses will
increase and broaden community investments in this state and
encourage new capital formation through employee ownership.

(b) This division may be cited as the Limited Liability Worker
Cooperative Act.

(c) (1) A worker cooperative company may be formed under
this division for any lawful purpose provided that it is organized
and conducts its business primarily for the mutual benefit of its
members as patrons of the worker cooperative company.

(2) The earnings, savings, or benefits of the company shall be
used for the general welfare of the members or shall be
proportionately and equitably distributed to some or all of its
members or its patrons, based upon their patronage of the company,
in the form of cash, property, evidences of indebtedness, capital
credits, memberships, or services.

(3) Worker cooperative companies are democratically controlled
and are not organized to make a profit for themselves, as such, or
for their members, as such, but primarily for their members as
patrons.

17801.02.  

(a) Except as provided in this section, the definitions
of Section 17701.02 shall apply to this division.

(b) For purposes of this division, the following definitions apply:

(1) “Class” refers to those memberships that: (A) are identified
in the articles of organization or operating agreement as being a
different type of membership; or (B) have the same rights with
respect to voting, dissolution, redemption, distributions, and
transfer. For the purpose of this subdivision, rights shall be
considered the same if they are determined by a formula applied
uniformly.

(2) “Distribution” shall mean both dividend distribution and
patronage distribution.

(3) “Member” has the same meaning as in subdivision (p) of
Section 17701.02. A member may also be a patron of the worker
cooperative company.

(4) “Patron” means any of the following:

(A) A member who provides personal services to, purchases
goods from, or uses the services of the worker cooperative
company.

(B) A person who uses the worker cooperative company to
market, process, or handle their products or services.

(5) “Patronage” means the amount of value created by a member
measured as provided in the articles of organization or operating
agreement of the worker cooperative company. Value may include
personal services contributed, number of hours worked, job
creation, or any other measure as provided in the articles of
organization or operating agreement.

(6) “Patronage distribution” means any transfer of cash or
property made to a patron of the worker cooperative company, the
amount of which is computed with reference to the patron’s
patronage of the worker cooperative company.

(7) “Worker” means a natural person who provides labor to the
worker cooperative company in exchange for compensation.

(8) “Worker cooperative company,” means an entity formed
under this division or an entity that becomes subject to this division.
A worker cooperative company is majority-controlled by its
worker-members.

(9) “Worker-member” means a worker who is a member of the
worker cooperative company and whose patronage includes
providing labor to the worker cooperative company.

17801.03.  

(a) A worker cooperative company is an entity
distinct from its members.

(b) A worker cooperative company may have any lawful
purpose, regardless of whether for profit, except the banking
business, the business of issuing policies of insurance and assuming
insurance risks, or the trust company business. A worker
cooperative company may render services that may be lawfully
rendered only pursuant to a license, certificate, or registration
authorized by the Business and Professions Code, the Chiropractic
Act, the Osteopathic Act, or the Yacht and Ship Brokers Act, if
the applicable provisions of the Business and Professions Code,
the Chiropractic Act, the Osteopathic Act, or the Yacht and Ship
Brokers Act authorize a worker cooperative company to hold that
license, certificate, or registration.

(c) A worker cooperative company has perpetual duration.

(d) Nothing in this division shall be construed to permit a worker
cooperative company to render professional services, as defined
in subdivision (a) of Section 13401 and in Section 13401.3, in this
state.

17801.04.  

(a) Each member of the worker cooperative
company shall have an equal vote in their membership class, but
the worker-member class shall have ultimate decisionmaking
authority.

(b) Notwithstanding subdivision (r) of Section 17704.07,
members of a specified class or group of members may vote
separately or with all or any class or group of members on any
matter.

(c) If the proprietary interests of the members are unequal, the
worker cooperative company must state this in its articles.

17801.05.  

The Secretary of State shall provide on its Internet
Web site information and sample documents for forming a worker
cooperative company.

17801.06.  

The provisions of Division 1 (commencing with
Section 17701.01) shall apply to a worker cooperative company,
except where a provision is in conflict with, or inconsistent with
the provisions of this division.

SEC. 5.  

Section 25100 of the Corporations Code is amended
to read:

25100.  

The following securities are exempted from Sections
25110, 25120, and 25130:

(a) Any security (including a revenue obligation) issued or
guaranteed by the United States, any state, any city, county, city
and county, public district, public authority, public corporation,
public entity, or political subdivision of a state or any agency or
corporate or other instrumentality of any one or more of the
foregoing; or any certificate of deposit for any of the foregoing.

(b) Any security issued or guaranteed by Canada, any Canadian
province, any political subdivision or municipality of that province,
or by any other foreign government with which the United States
currently maintains diplomatic relations, if the security is
recognized as a valid obligation by the issuer or guarantor; or any
certificate of deposit for any of the foregoing.

(c) Any security issued or guaranteed by and representing an
interest in or a direct obligation of a national bank or a bank or
trust company incorporated under the laws of this state, and any
security issued by a bank to one or more other banks and
representing an interest in an asset of the issuing bank.

(d) Any security issued or guaranteed by a federal savings
association or federal savings bank or federal land bank or joint
land bank or national farm loan association or by any savings
association, as defined in subdivision (a) of Section 5102 of the
Financial Code, which is subject to the supervision and regulation
of the Commissioner of Financial Institutions of this state.

(e) Any security (other than an interest in all or portions of a
parcel or parcels of real property which are subdivided land or a
subdivision or in a real estate development), the issuance of which
is subject to authorization by the Insurance Commissioner, the
Public Utilities Commission, or the Real Estate Commissioner of
this state.

(f) Any security consisting of any interest in all or portions of
a parcel or parcels of real property which are subdivided lands or
a subdivision or in a real estate development; provided that the
exemption in this subdivision shall not be applicable to: (1) any
investment contract sold or offered for sale with, or as part of, that
interest, or (2) any person engaged in the business of selling,
distributing, or supplying water for irrigation purposes or domestic
use that is not a public utility except that the exemption is
applicable to any security of a mutual water company (other than
an investment contract as described in paragraph (1)) offered or
sold in connection with subdivided lands pursuant to Chapter 2
(commencing with Section 14310) of Part 7 of Division 3 of Title
1.

(g) Any mutual capital certificates or savings accounts, as
defined in the Savings Association Law, issued by a savings
association, as defined by subdivision (a) of Section 5102 of the
Financial Code, and holding a license or certificate of authority
then in force from the Commissioner of Financial Institutions of
this state.

(h) Any security issued or guaranteed by any federal credit
union, or by any credit union organized and supervised, or
regulated, under the Credit Union Law.

(i) Any security issued or guaranteed by any railroad, other
common carrier, public utility, or public utility holding company
which is (1) subject to the jurisdiction of the Interstate Commerce
Commission or its successor or (2) a holding company registered
with the Securities and Exchange Commission under the Public
Utility Holding Company Act of 1935 or a subsidiary of that
company within the meaning of that act or (3) regulated in respect
of the issuance or guarantee of the security by a governmental
authority of the United States, of any state, of Canada or of any
Canadian province; and the security is subject to registration with
or authorization of issuance by that authority.

(j) Any security (except evidences of indebtedness, whether
interest bearing or not) of an issuer (1) organized exclusively for
educational, benevolent, fraternal, religious, charitable, social, or
reformatory purposes and not for pecuniary profit, if no part of the
net earnings of the issuer inures to the benefit of any private
shareholder or individual, or (2) organized as a chamber of
commerce or trade or professional association. The fact that
amounts received from memberships or dues or both will or may
be used to construct or otherwise acquire facilities for use by
members of the nonprofit organization does not disqualify the
organization for this exemption. This exemption does not apply
to the securities of any nonprofit organization if any promoter
thereof expects or intends to make a profit directly or indirectly
from any business or activity associated with the organization or
operation of that nonprofit organization or from remuneration
received from that nonprofit organization.

(k) Any agreement, commonly known as a “life income
contract,” of an issuer (1) organized exclusively for educational,
benevolent, fraternal, religious, charitable, social, or reformatory
purposes and not for pecuniary profit and (2) which the
commissioner designates by rule or order, with a donor in
consideration of a donation of property to that issuer and providing
for the payment to the donor or persons designated by him or her
of income or specified periodic payments from the donated
property or other property for the life of the donor or those other
persons.

(l) Any note, draft, bill of exchange, or banker’s acceptance
which is freely transferable and of prime quality, arises out of a
current transaction or the proceeds of which have been or are to
be used for current transactions, and which evidences an obligation
to pay cash within nine months of the date of issuance, exclusive
of days of grace, or any renewal of that paper which is likewise
limited, or any guarantee of that paper or of that renewal, provided
that the paper is not offered to the public in amounts of less than
twenty-five thousand dollars ($25,000) in the aggregate to any one
purchaser. In addition, the commissioner may, by rule or order,
exempt any issuer of any notes, drafts, bills of exchange or banker’s
acceptances from qualification of those securities when the
commissioner finds that the qualification is not necessary or
appropriate in the public interest or for the protection of investors.

(m) Any security issued by any corporation organized and
existing under the provisions of Chapter 1 (commencing with
Section 54001) of Division 20 of the Food and Agricultural Code.

(n) Any beneficial interest in an employees’ pension,
profit-sharing, stock bonus or similar benefit plan which meets the
requirements for qualification under Section 401 of the federal
Internal Revenue Code or any statute amendatory thereof or
supplementary thereto. A determination letter from the Internal
Revenue Service stating that an employees’ pension, profit-sharing,
stock bonus or similar benefit plan meets those requirements shall
be conclusive evidence that the plan is an employees’ pension,
profit-sharing, stock bonus or similar benefit plan within the
meaning of the first sentence of this subdivision until the date the
determination letter is revoked in writing by the Internal Revenue
Service, regardless of whether or not the revocation is retroactive.

(o) Any security listed or approved for listing upon notice of
issuance on a national securities exchange, if the exchange has
been certified by rule or order of the commissioner and any warrant
or right to purchase or subscribe to the security. The exemption
afforded by this subdivision does not apply to securities listed or
approved for listing upon notice of issuance on a national securities
exchange, in a rollup transaction unless the rollup transaction is
an eligible rollup transaction as defined in Section 25014.7.

That certification of any exchange shall be made by the
commissioner upon the written request of the exchange if the
commissioner finds that the exchange, in acting on applications
for listing of common stock, substantially applies the minimum
standards set forth in either subparagraph (A) or (B) of paragraph
(1), and, in considering suspension or removal from listing,
substantially applies each of the criteria set forth in paragraph (2).

(1) Listing standards:

(A) (i) Shareholders’ equity of at least four million dollars
($4,000,000).

(ii) Pretax income of at least seven hundred fifty thousand
dollars ($750,000) in the issuer’s last fiscal year or in two of its
last three fiscal years.

(iii) Minimum public distribution of 500,000 shares (exclusive
of the holdings of officers, directors, controlling shareholders, and
other concentrated or family holdings), together with a minimum
of 800 public holders or minimum public distribution of 1,000,000
shares together with a minimum of 400 public holders. The
exchange may also consider the listing of a company’s securities
if the company has a minimum of 500,000 shares publicly held, a
minimum of 400 shareholders and daily trading volume in the
issue has been approximately 2,000 shares or more for the six
months preceding the date of application. In evaluating the
suitability of an issue for listing under this trading provision, the
exchange shall review the nature and frequency of that activity
and any other factors as it may determine to be relevant in
ascertaining whether the issue is suitable for trading. A security
that trades infrequently shall not be considered for listing under
this paragraph even though average daily volume amounts to 2,000
shares per day or more.

Companies whose securities are concentrated in a limited
geographical area, or whose securities are largely held in block by
institutional investors, normally may not be considered eligible
for listing unless the public distribution appreciably exceeds
500,000 shares.

(iv) Minimum price of three dollars ($3) per share for a
reasonable period of time prior to the filing of a listing application;
provided, however, in certain instances an exchange may favorably
consider listing an issue selling for less than three dollars ($3) per
share after considering all pertinent factors, including market
conditions in general, whether historically the issue has sold above
three dollars ($3) per share, the applicant’s capitalization, and the
number of outstanding and publicly held shares of the issue.

(v) An aggregate market value for publicly held shares of at
least three million dollars ($3,000,000).

(B) (i) Shareholders’ equity of at least four million dollars
($4,000,000).

(ii) Minimum public distribution set forth in clause (iii) of
subparagraph (A) of paragraph (1).

(iii) Operating history of at least three years.

(iv) An aggregate market value for publicly held shares of at
least fifteen million dollars ($15,000,000).

(2) Criteria for consideration of suspension or removal from
listing:

(i) If a company that (A) has shareholders’ equity of less than
one million dollars ($1,000,000) has sustained net losses in each
of its two most recent fiscal years, or (B) has net tangible assets
of less than three million dollars ($3,000,000) and has sustained
net losses in three of its four most recent fiscal years.

(ii) If the number of shares publicly held (excluding the holdings
of officers, directors, controlling shareholders and other
concentrated or family holdings) is less than 150,000.

(iii) If the total number of shareholders is less than 400 or if the
number of shareholders of lots of 100 shares or more is less than
300.

(iv) If the aggregate market value of shares publicly held is less
than seven hundred fifty thousand dollars ($750,000).

(v) If shares of common stock sell at a price of less than three
dollars ($3) per share for a substantial period of time and the issuer
shall fail to effectuate a reverse stock split of the shares within a
reasonable period of time after being requested by the exchange
to take that action.

A national securities exchange, certified by rule or order of the
commissioner under this subdivision, shall file annual reports when
requested to do so by the commissioner. The annual reports shall
contain, by issuer: the variances granted to an exchange’s listing
standards, including variances from corporate governance and
voting rights’ standards, for any security of that issuer; the reasons
for the variances; a discussion of the review procedure instituted
by the exchange to determine the effect of the variances on
investors and whether the variances should be continued; and any
other information that the commissioner deems relevant. The
purpose of these reports is to assist the commissioner in
determining whether the quantitative and qualitative requirements
of this subdivision are substantially being met by the exchange in
general or with regard to any particular security.

The commissioner after appropriate notice and opportunity for
hearing in accordance with the provisions of the Administrative
Procedure Act, Chapter 5 (commencing with Section 11500) of
Part 1 of Division 3 of Title 2 of the Government Code, may, in
his or her discretion, by rule or order, decertify any exchange
previously certified that ceases substantially to apply the minimum
standards or criteria as set forth in paragraphs (1) and (2).

A rule or order of certification shall conclusively establish that
any security listed or approved for listing upon notice of issuance
on any exchange named in a rule or order of certification, and any
warrant or right to purchase or subscribe to that security, is exempt
under this subdivision until the adoption by the commissioner of
any rule or order decertifying the exchange.

(p) A promissory note secured by a lien on real property, which
is neither one of a series of notes of equal priority secured by
interests in the same real property nor a note in which beneficial
interests are sold to more than one person or entity.

(q) Any unincorporated interindemnity or reciprocal or
interinsurance contract, that qualifies under the provisions of
Section 1280.7 of the Insurance Code, between members of a
cooperative corporation, organized and operating under Part 2
(commencing with Section 12200) of Division 3 of Title 1, and
whose members consist only of physicians and surgeons licensed
in California, which contracts indemnify solely in respect to
medical malpractice claims against the members, and which do
not collect in advance of loss any moneys other than contributions
by each member to a collective reserve trust fund or for necessary
expenses of administration.

(1) Whenever it appears to the commissioner that any person
has engaged or is about to engage in any act or practice constituting
a violation of any provision of Section 1280.7 of the Insurance
Code, the commissioner may, in the commissioner’s discretion,
bring an action in the name of the people of the State of California
in the superior court to enjoin the acts or practices or to enforce
compliance with Section 1280.7 of the Insurance Code. Upon a
proper showing a permanent or preliminary injunction, a restraining
order, or a writ of mandate shall be granted and a receiver or
conservator may be appointed for the defendant or the defendant’s
assets.

(2) The commissioner may, in the commissioner’s discretion,
(A) make public or private investigations within or outside of this
state as the commissioner deems necessary to determine whether
any person has violated or is about to violate any provision of
Section 1280.7 of the Insurance Code or to aid in the enforcement
of Section 1280.7, and (B) publish information concerning the
violation of Section 1280.7.

(3) For the purpose of any investigation or proceeding under
this section, the commissioner or any officer designated by the
commissioner may administer oaths and affirmations, subpoena
witnesses, compel their attendance, take evidence, and require the
production of any books, papers, correspondence, memoranda,
agreements, or other documents or records which the commissioner
deems relevant or material to the inquiry.

(4) In case of contumacy by, or refusal to obey a subpoena
issued to, any person, the superior court, upon application by the
commissioner, may issue to the person an order requiring the
person to appear before the commissioner, or the officer designated
by the commissioner, to produce documentary evidence, if so
ordered, or to give evidence touching the matter under investigation
or in question. Failure to obey the order of the court may be
punished by the court as a contempt.

(5) No person is excused from attending or testifying or from
producing any document or record before the commissioner or in
obedience to the subpoena of the commissioner or any officer
designated by the commissioner, or in any proceeding instituted
by the commissioner, on the ground that the testimony or evidence
(documentary or otherwise), required of the person may tend to
incriminate the person or subject the person to a penalty or
forfeiture, but no individual may be prosecuted or subjected to any
penalty or forfeiture for or on account of any transaction, matter,
or thing concerning which the person is compelled, after validly
claiming the privilege against self-incrimination, to testify or
produce evidence (documentary or otherwise), except that the
individual testifying is not exempt from prosecution and
punishment for perjury or contempt committed in testifying.

(6) The cost of any review, examination, audit, or investigation
made by the commissioner under Section 1280.7 of the Insurance
Code shall be paid to the commissioner by the person subject to
the review, examination, audit, or investigation, and the
commissioner may maintain an action for the recovery of these
costs in any court of competent jurisdiction. In determining the
cost, the commissioner may use the actual amount of the salary or
other compensation paid to the persons making the review,
examination, audit, or investigation plus the actual amount of
expenses including overhead reasonably incurred in the
performance of the work.

The recoverable cost of each review, examination, audit, or
investigation made by the commissioner under Section 1280.7 of
the Insurance Code shall not exceed twenty-five thousand dollars
($25,000), except that costs exceeding twenty-five thousand dollars
($25,000) shall be recoverable if the costs are necessary to prevent
a violation of any provision of Section 1280.7 of the Insurance
Code.

(r)  begin insert (1) end insert begin insert   end insert Any shares or memberships issued by any corporation
organized and existing pursuant to the provisions of Part 2
(commencing with Section 12200) of Division 3 of Title 1,
provided the aggregate investment of any shareholder or member
in shares or memberships sold pursuant to this subdivision does
not exceed three hundred dollars ($300). This exemption does not
apply to the shares or memberships of that corporation if any
promoter thereof expects or intends to make a profit directly or
indirectly from any business or activity associated with the
corporation or the operation of the corporation or from
remuneration, other than reasonable salary, received from the
corporation. This exemption does not apply to nonvoting shares
or memberships of that corporation issued to any person who does
not possess, and who will not acquire in connection with the
issuance of nonvoting shares or memberships, voting power
(Section 12253) in the corporation. This exemption also does not
apply to shares or memberships issued by a nonprofit cooperative
corporation organized to facilitate the creation of an unincorporated
interindemnity arrangement that provides indemnification for
medical malpractice to its physician and surgeon members as set
forth in subdivision (q).

begin insert

(2) Notwithstanding paragraph (1), any membership issued by
a worker cooperative company organized and existing pursuant
to the provisions of Division 2 (commencing with Section 17801.01)
of Title 2.6, provided the primary motivation of the purchaser is
to use or consume the products or services of the worker
cooperative company or to otherwise patronize the worker
cooperative company and is not primarily motivated by the
prospect of a return on investment, shall be exempted from Sections
25110, 25120, and 25130.

end insert

(s) Any security consisting of or representing an interest in a
pool of mortgage loans that meets each of the following
requirements:

(1) The pool consists of whole mortgage loans or participation
interests in those loans, which loans were originated or acquired
in the ordinary course of business by a national bank or federal
savings association or federal savings bank having its principal
office in this state, by a bank incorporated under the laws of this
state or by a savings association as defined in subdivision (a) of
Section 5102 of the Financial Code and which is subject to the
supervision and regulation of the Commissioner of Financial
Institutions, and each of which at the time of transfer to the pool
is an authorized investment for the originating or acquiring
institution.

(2) The pool of mortgage loans is held in trust by a trustee which
is a financial institution specified in paragraph (1) as trustee or
otherwise.

(3) The loans are serviced by a financial institution specified in
paragraph (1).

(4) The security is not offered in amounts of less than
twenty-five thousand dollars ($25,000) in the aggregate to any one
purchaser.

(5) The security is offered pursuant to a registration under the
Securities Act of 1933, or pursuant to an exemption under
Regulation A under that act, or in the opinion of counsel for the
issuer, is offered pursuant to an exemption under Section 4(2) of
that act.

(t) (1) Any security issued or guaranteed by and representing
an interest in or a direct obligation of an industrial loan company
incorporated under the laws of the state and authorized by the
Commissioner of Financial Institutions to engage in industrial loan
business.

(2) Any investment certificate in or issued by any industrial
loan company that is organized under the laws of a state of the
United States other than this state, that is insured by the Federal
Deposit Insurance Corporation, and that maintains a branch office
in this state.

SEC. 6.  

No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of
the Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the California
Constitution.