COOPERATIVE ASSOCIATIONS ‑- ARTICLES ‑- AMENDMENT ‑- FORMATION OF CORPORATION ‑- MERGER OF ASSOCIATION AND CORPORATION

COOPERATIVE ASSOCIATIONS ‑- ARTICLES ‑- AMENDMENT ‑- FORMATION OF CORPORATION ‑- MERGER OF ASSOCIATION AND CORPORATION.

(1) A cooperative association organized under chapter 23.86 RCW may not amend its articles of association so as to form a corporation under chapter 23.01 RCW.

(2) Same: Such a cooperative association may not merge into an existing business corporation which is presently a holding corporation of the cooperative.

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                                                                  January 8, 1963

Honorable Victor A. Meyers
Secretary of State
Legislative Building
Olympia, Washington

                                                                                                                  Cite as:  AGO 63-64 No. 1

Dear Sir:

            By letter previously acknowledged you requested the opinion of this office on questions which are paraphrased as follows:

            (1) May a cooperative association organized under the provisions of chapter 23.86 RCW amend its articles of association to become a corporation under chapter 23.01 RCW?

            (2) May such a cooperative association merge into an existing business corporation which is presently the holding corporation for the cooperative?

            We answer both questions in the negative.

                                                                     ANALYSIS

            Question 1:

            Chapter 23.86 RCW is a special act which authorizes persons to associate for the transaction of any lawful business on the cooperative plan, whereas chapter 23.01 RCW authorizes the formation of corporations for any lawful business purpose.

            In an earlier opinion of this office dated June 23, 1938, to the  [[Orig. Op. Page 2]] Secretary of State, Honorable Belle Reeves, this office held that a corporation formed under chapter 185, Laws of 1933 (chapter 23.01 RCW) could not properly amend its articles so as to authorize it to do business as a cooperative under chapter 19, Laws of 1913 (chapter 23.86 RCW).1/   On page 2 of that opinion this office observed as follows:

            "Turning now to Rem. Rev. Stat. Secs. 3904 to 3929, authorizing a corporation to operate on the cooperative plan, it will be seen that by Sections 3904-9, 3904-10, 3904-12, 3904-16 and 3904-19, the powers and privileges and government of corporations operating on the cooperative plan are widely different from those of general corporations. . . ."

            InMidland Co-operative Wholesale v. Range Co-operative Oil Association, 200 Minn. 538, 274 N.W. 624 (1937), the Minnesota supreme court held that the power to amend does not include the power to change the nature, purpose, and character of a corporation.  In that case the plaintiff was organized as a wholesale oil cooperative and unsuccessfully sought to amend its articles so as to authorize it to engage in any mercantile, jobbing, wholesale and retail, mining, manufacturing or mechanical business.  The statute under which plaintiff sought to amend (Mason's Minn. St. 1927, § 7844) provided that the articles of incorporation of any cooperative association could be amended so as to change the name or title, to increase or diminish its capital stock or to change the number and par value of shares of capital stock or "in respect to any other matter which the original articles of incorporation of the same kind might lawfully have contained."  This statute is similar to RCW 23.86.060.

            It is generally accepted that, where a corporation is organized under a special statute pertaining only to corporations of a like nature such corporation has no right to amend its charter radically, fundamentally or materially changing its purpose.  See, 111 A.L.R., 1525 Annot. ‑ Power of corporation to amend its charter in respect to character or kind of business.  Our supreme court has indicated its approval of the rule that a corporation cannot create a new corporate entity by amendment.  Crutcher v. Scott Publishing Co., 42 Wn. (2d) 89, 96, 253 P. (2d) 925 (1953).

            If a cooperative association were to amend its articles of association to become a corporation under chapter 23.01 RCW, it would be effectuating a fundamental change in its purpose and character which for the foregoing reasons it would not have the authority to do.

             [[Orig. Op. Page 3]]

            Accordingly, the answer to your first question is that a cooperative association organized pursuant to chapter 23.86 RCW may not amend its articles of association to become a corporation under chapter 23.01 RCW.

            Question 2:

            RCW 23.01.460 provides as follows:

            "(1) Any two or more domestic corporations, formed for any purpose for which a corporation might be formed under this chapter, and any domestic corporations and any foreign corporations with authority to carry on any business for the conduct of which a corporation might be organized under this chapter, may be

            "(a) merged into one of such domestic corporation, or

            "(b) consolidated into a new corporation to be formed under this chapter:Provided, Such foreign corporations are authorized by the law or laws of the government under which they were formed to effect such merger or consolidation.

            "(2) Any such domestic corporations and any such foreign corporations may be

            "(a) merged into one of such foreign corporations, or

            "(b) consolidated into a new corporation to be formed under the law or laws of the government under which one of such foreign corporations was formed:Provided, The laws of such foreign government authorize such merger or consolidation."  (Emphasis supplied.)

            In the case ofMatteson v. Ziebarth, 40 Wn. (2d) 286, 294, 295, 242 P. (2d) 1025 (1952), our supreme court discussed merger and consolidation under the above statute as follows:

             [[Orig. Op. Page 4]]

            "The kind of corporations which may merge or consolidate in this state are specified in Rem. Rev. Stat. (Sup.), § 3803-42 [P.P.C. § 443-15].  It is there provided, in part, that any two or more domestic corporations, formed for any purpose for which a corporation might be formed 'under this act,' may be merged into one of such domestic corporations.  A corporation may be formed, under the act, 'for any lawful business purpose' with certain exceptions not here in point.  Rem. Rev. Stat. (Sup.), § 3803-2 [P.P.C. § 441-1]."

            RCW 23.01.020 (1) [Rem. Rev. Stat. (Sup.) § 3803-2] provides as follows:

            ". . .

            "(1) Where special provision is made by law for the preparation, contents and filing of articles of incorporation of designated classes of corporations,such corporations shall be formed under such special provisions, and not hereunder."  (Emphasis supplied.)

            This being the statutory rule pertaining to certain classes of corporations it follows that the same rule applies to cooperative associations formed under a special statute with specific provisions made for preparation, contents and filing articles of association.

            Chapter 23.86 RCW contains special provisions for the preparation, contents and filing of articles of association for cooperative associations.  Therefore, a cooperative association is not a corporation which may be formed under chapter 23.01 RCW and consequently may not merge with an existing business corporation under RCW 23.01.460.