Article VII Nonprofit Operation

Section 1. Interest or Dividends on Capital Prohibited.

The Cooperative shall at all times be operated on a cooperative, nonprofit basis for the mutual benefit of its patrons. No interest or dividends shall be paid or payable by the Cooperative on any capital furnished by its patrons.

Section 2. Patronage Capital.

The Cooperative’s operation shall be so conducted that all members will, through their patronage, furnish capital for the Cooperative. In order to induce patronage and to assure that the Cooperative will operate on a nonprofit basis, the Cooperative is obligated to account on a patronage basis to all its patrons for all amounts received and receivable from the furnishings of energy, utility services, and products in excess of operating costs and expenses properly chargeable against those items. All such amounts in excess of operating costs and expenses at the moment of receipt by the Cooperative are received with the understanding that they are furnished by the patrons as capital. The Cooperative is obligated to pay by credits to a capital account for each patron all such amounts in excess of operating costs and expenses. The books and records of the Cooperative shall be set up and kept in such a manner that at the end of each fiscal year the amount of capital, if any, so furnished by each patron is clearly reflected and credited in an appropriate record to the capital account of each patron, and the Cooperative shall within a reasonable time after the close of the fiscal year notify each patron of the amount of capital so credited to his account. All such amounts credited to the capital account of any patron shall have the same status as though they had been paid to the patron in cash in pursuance of a legal obligation to do so and the patron had then furnished the Cooperative corresponding amounts for capital.

All other amounts received by the Cooperative in excess of costs and expenses shall, in the discretion of the Board of Directors, and insofar as permitted by law, be allocated (a) to offset any losses incurred during the current or any prior fiscal year; or (b) to be held as accumulated reserves, equity or surplus by the Cooperative and not allocated to the members, except in the event of dissolution or liquidation; or (c) to the extent not needed for the preceding purposes, to all its members or patrons on a patronage basis, and included as part of the capital credited on the accounts of its members and patrons as provided herein. Until such event of dissolution or liquidation, accumulated non-operating margins may be utilized, as the board may from time to time determine, to further the purposes and objectives of the Cooperative.

In the event of dissolution or liquidation of the Cooperative, after all outstanding indebtedness of the Cooperative shall have been paid, outstanding capital credits shall be retired without priority on a prorata basis before any payments are made on account of property rights of members. If, at any time prior to dissolution or liquidation, the board shall determine that the financial condition of the Cooperative will not be impaired thereby, the capital then credited to patrons’ accounts may be retired in full or in part.

After December 31, 1977, the board shall determine the method, basis, priority, and order of retirement, if any, for all amounts theretofore and thereafter furnished as capital; provided, however, that the board shall not establish any method, basis, priority or order of retirement which shall impair or work a forfeiture of any substantial right relating to the retirement of capital furnished prior to January 1, 1978.

Except as herein otherwise provided, capital credited to the account of each patron shall be assignable only on the books of the Cooperative pursuant to written instructions from the assignor and only to successors in interest or successors in occupancy in all or a part of said patron’s premises served by the Cooperative unless the board, acting under policies of general application, shall determine otherwise. The patrons of the Cooperative, by dealing with the Cooperative, acknowledge that the terms and provisions of the articles of incorporation and the bylaws shall constitute and be a contract between the Cooperative and each patron, and both the Cooperative and the patrons are bound by such contract, as fully as though each patron had individually signed a separate instrument containing such terms and provisions. The provision of this paragraph of the bylaws shall be called to the attention of each patron of the Cooperative by posting it in a conspicuous place in the Cooperative’s office.

Section 3. Limited Right to Assign.

Any member or patron may assign all or any portion of his patronage capital earned or credited, or expected to be earned or credited in the future, to the Cooperative. Notwithstanding any other provision of the bylaws or other provision of the membership certificate:

  1. If any patron or former patron fails to claim any cash or retirement of capital credits or other payment from the Cooperative within six (6) months after payment of same has been made available to him by notice or by check mailed to him at his last address furnished by him to the Cooperative, such failure shall be and constitutes an irrevocable assignment and gift by such patron of such capital credit or other payment to the Cooperative. Failure to claim any such payment within the meaning of this section shall include, but not be limited to, the failure by such patron or former patron to cash any check or other tender of payment by the Cooperative at the last address furnished to the Cooperative. The assignment and gift provided for under this section shall become effective upon the expiration of above 6 months period.
  2. If any patron or former patron is indebted to the Cooperative on any account whatsoever, and such patron or former patron fails or refuses to pay such debt before delinquency, such failure or refusal shall constitute an irrevocable assignment by the patron or former patron of all patronage capital credited to the account of such patron, and such patronage capital shall be applied against the debt owing from the patron or former patron to the Cooperative; provided that in the event the total amount of patronage capital credited to the account of the patron or former patron exceeds the total amount due and owing to the Cooperative from the patron or former patron, then there shall be assigned to the Cooperative only so much of the patronage capital as is necessary to satisfy in full all amounts due and owing, including interest, penalties and collection fees, to the Cooperative from such patron or former patron.