Until 2016, California's cooperative statute was written for consumer cooperatives, which left little room for a worker-owned business to raise outside capital. The California Worker Cooperative Act, 📝California AB 816, passed with advocacy from the Sustainable Economies Law Center, changed that. It gave the 📝Worker Cooperative a statutory definition, reserved 📝Patronage Dividend distributions for the 📝Worker-Member class, and created 📝Community Investor Shares, a class of outside investment whose voting rights are limited to approving a merger, sale of major assets, reorganization, or dissolution (Corporations Code §12253). It also raised the securities exemption for member investments from $300 to $1,000.
Those changes make the cooperative form a practical alternative to B Corps and nonprofits for founders who want contributors to own and govern the business while still attracting capital for product and market development, much as a conventional C corporation does.
After thinking a lot about 📝Governance Systems and considering B Corps and nonprofits, 📝Brian Swichkow prompted me to look at cooperatives. I was surprised to learn the law had recently been updated to enable exactly the kind of organization we were imagining: patronage dividends allocated by contributions the cooperative defines for itself, and investor shares with the economic and legal qualities traditional investors need. Before the change, I saw consumer cooperatives as all but limited to farms and grocery stores, because profits had to be distributed every year and outside investment was effectively a donation to the cause.