Several times I have been approached by collectives that are concerned about not being a legally recognized cooperative. They ask if I have any tips about how to gain the legal status of a cooperative. I am no expert on the widely varying ways in which state and provincial governments treat cooperatives, but what I do know seems to indicate that there is usually no compelling reason to become a legal cooperative. So far, I have not heard of a single governmental entity in North America that will legally recognize a collective in which no-one is in charge. Hierarchy is hard-wired into our political system, and "cooperative law" is generally designed for consumer and agricultural co-ops with hierarchical power structures. There may be benefits of cooperative status, but often it will serve a collective equally well to become a standard corporation.
Further muddying the waters, many governments require that voting be majority rule, or place other legal restrictions on decision making that is contrary to collective management. For example, the blocking of consensus generally has no legal validity, and you will probably be required to elect a president. Many collectives deal with these legal issues by ignoring them. But this is based on trust and could cause big problems if a disgruntled member decides to sue. Ask a lawyer about what your options are, so you at least know the legality of your systems.
One way of legally creating a system of one vote per person (rather than one vote per share, as may be required) among members with differing levels of investment is to create two classes of stock. The first type is voting stock, which may be inexpensive and limited to one per member. Then, as members stick around and acquire more equity, they can start acquiring additional shares of "preferred stock," which does not carry a vote and may be set up to not pay dividends.
Another way to squirm out of any requirements to make decisions like a mainstream corporation may be to have periodic board meetings as often as you are required to do so. At these meetings you can decide, by a majority vote, to approve the decisions made by consensus since the last board meeting. Corporate law usually calls for the owners to vote for a board of directors, who in turn appoint a manager. So the board could (in theory) appoint its membership to collectively manage the operation, except that arrangement would probably be considered conflict of interest because managers are not legally allowed to be on the board.
What should be clear by now is that the law is not well-suited to the purposes of collective management. So what's a law-abiding collective to do? For now, the best bet appears to be to humor the system: Create legal structures that work wherever you can, and creatively circumvent those mandatory structures that do not work. But again I urge you to speak with an expert about your collective's specific situation, as the law can be a rather confusing beast (and one which I have not yet tamed). The important thing to keep in mind is that a collective can and does take on all legal forms, including sole proprietorship, partnership, and the various corporate forms. Collectives also exist extralegally, and there is no form of legal recognition, including "cooperative status," that resembles the way a worker collective functions. The decision should boil down to taking whatever structure requires the least expense and red tape.
For more detailed information, consult the following guide: Honigsberg, Peter Jan, Bernard Kamoroff, and Jim Beatty. We Own It: Starting and Managing cooperatives &Employee-Owned Ventures, 1991
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