The Vermont Statutes Online

Title 11C: Mututal Benefit Enterprises

Chapter 001: General Provisions

• § 101. Short title

  This title may be cited as the Mutual Benefit Enterprise Act. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 102. Definitions

  As used in this title, the following words have the following meanings:

  (1) “Articles of organization” means the articles of organization of a mutual benefit enterprise required by section 302 of this title. The term includes the articles as amended or restated.

  (2) “Board of directors” means the board of directors of a mutual benefit enterprise.

  (3) “Bylaws” means the bylaws of a mutual benefit enterprise. The term includes the bylaws as amended or restated.

  (4) “Certificate of authority” means a certificate issued by the Secretary of State for a foreign enterprise to transact business in this State.

  (5) “Contribution,” except as used in subsection 1008(c) of this title, means a benefit that a person provides to a mutual benefit enterprise to become or remain a member or in the person’s capacity as a member.

  (6) “Cooperative” means an entity organized under any cooperative law of any jurisdiction.

  (7) “Designated office” means the office that a mutual benefit enterprise or a foreign enterprise is required to designate and maintain under subdivision 117(a)(1) of this title.

  (8) “Director” means a director of a mutual benefit enterprise.

  (9) “Distribution,” except as used in subsection 1007(e) of this title, means a transfer of money or other property from a mutual benefit enterprise to a member because of the member’s financial rights or to a transferee of a member’s financial rights.

  (10) “Entity” means a person other than an individual.

  (11) “Financial right” means the right to participate in allocations and distributions as provided in articles 10 and 12 of this title but does not include rights or obligations under a marketing contract governed by article 7 of this title.

  (12) “Foreign enterprise” means an entity organized in a jurisdiction other than this State under a law similar to this title.

  (13) “Governance right” means the right to participate in governance of a mutual benefit enterprise.

  (14) “Investor member” means a member that has made a contribution to a mutual benefit enterprise and:

  (A) is not required by the organic rules to conduct patronage with the enterprise in the member’s capacity as an investor member in order to receive the member’s interest; or

  (B) is not permitted by the organic rules to conduct patronage with the enterprise in the member’s capacity as an investor member in order to receive the member’s interest.

  (15) “Mutual benefit enterprise” means an enterprise organized under this title.

  (16) “Member” means a person that is admitted as a patron member or investor member or both in a mutual benefit enterprise. The term does not include a person that has dissociated as a member.

  (17) “Member’s interest” means the interest of a patron member or investor member under section 601 of this title.

  (18) “Members’ meeting” means an annual members’ meeting or special meeting of members.

  (19) “Organic law” means the statute providing for the creation of an entity or principally governing its internal affairs.

  (20) “Organic rules” means the articles of organization and bylaws of a mutual benefit enterprise.

  (21) “Organizer” means an individual who signs the initial articles of organization.

  (22) “Patron member” means a member that has made a contribution to a mutual benefit enterprise and:

  (A) is required by the organic rules to conduct patronage with the enterprise in the member’s capacity as a patron member in order to receive the member’s interest; or

  (B) is permitted by the organic rules to conduct patronage with the enterprise in the member’s capacity as a patron member in order to receive the member’s interest.

  (23) “Patronage” means business transactions between a mutual benefit enterprise and a person that entitles the person to receive financial rights based on the value or quantity of business done between the enterprise and the person.

  (24) “Person” means an individual; corporation; business trust; cooperative; estate; trust; partnership; limited partnership; limited liability company; mutual benefit enterprise; joint venture; association; public corporation; government or governmental subdivision, agency, or instrumentality; or any other legal or commercial entity.

  (25) “Principal office” means the principal executive office of a mutual benefit enterprise or foreign enterprise, whether or not in this State.

  (26) “Record,” used as a noun, means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

  (27) “Required information” means the information a mutual benefit enterprise is required to maintain under section 114 of this title.

  (28) “Sign” means with present intent to authenticate or adopt a record:

  (A) to execute or adopt a tangible symbol; or

  (B) to attach to or logically associate with the record an electronic symbol, sound, or process.

  (29) “State” means a state of the United States, District of Columbia, Puerto Rico, the U.S. Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.

  (30) “Transfer” includes an assignment, conveyance, deed, bill of sale, lease, mortgage, security interest, encumbrance, gift, and transfer by operation of law.

  (31) “Voting group” means any combination of one or more voting members in one or more districts or classes that under the organic rules or this title are entitled to vote and can be counted together collectively on a matter at a members’ meeting.

  (32) “Voting member” means a member that, under the organic law or organic rules, has a right to vote on matters subject to vote by members under the organic law or organic rules.

  (33) “Voting power” means the total current power of members to vote on a particular matter for which a vote may or is to be taken. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012; amended 2019, No. 131 (Adj. Sess.), § 47.)

• § 103. Mutual benefit enterprise subject to amendment or repeal

  A mutual benefit enterprise governed by this title is subject to any amendment or repeal. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 104. Nature of mutual benefit enterprise

  (a) A mutual benefit enterprise organized under this title is an autonomous, unincorporated association of persons united to meet their mutual interests through a jointly owned enterprise primarily controlled by those persons, which permits combining:

  (1) ownership, financing, and receipt of benefits by the members for whose interests the enterprise is formed; and

  (2) separate investments in the enterprise by members who may receive returns on their investments and a share of control.

  (b) The fact that a mutual benefit enterprise does not have one or more of the characteristics described in subsection (a) of this section does not alone prevent the enterprise from being formed under and governed by this title nor does it alone provide a basis for an action against the enterprise. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 105. Purpose and duration of mutual benefit enterprise

  (a) A mutual benefit enterprise is an entity distinct from its members.

  (b) A mutual benefit enterprise may be organized for any lawful purpose, whether or not for profit.

  (c) Unless the articles of organization state a term for a mutual benefit enterprise’s existence, the enterprise has perpetual duration. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 106. Powers

  A mutual benefit enterprise may sue and be sued in its own name and do all things necessary or convenient to carry on its activities. An enterprise may maintain an action against a member for harm caused to the enterprise by the member’s violation of a duty to the enterprise or of the organic laws or organic rules. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 107. Governing law

  The law of this State governs:

  (1) the internal affairs of a mutual benefit enterprise; and

  (2) the liability of a member as member and a director as director for the debts, obligations, or other liabilities of a mutual benefit enterprise. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 108. Supplemental principles of law

  Unless displaced by particular provisions, the principles of law and equity supplement this title. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 109. Requirements of other laws

  (a) This title does not alter or amend any law that governs the licensing and regulation of an individual or entity in carrying on a specific business or profession even if that law permits the business or profession to be conducted by a mutual benefit enterprise, a foreign enterprise, or a member of either.

  (b) A mutual benefit enterprise may not conduct an activity that, under law of this State other than this title, may be conducted only by an entity that meets specific requirements for the internal affairs of that entity unless the organic rules of the enterprise conform to those requirements.

  (c) If an activity of a mutual benefit enterprise is within the scope of the Uniform Common Interest Ownership Act, the requirements of the Uniform Common Interest Ownership Act apply, even if there is a conflicting provision in this title. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 110. Relation to restraint of trade and antitrust laws

  To the extent that a mutual benefit enterprise or activities conducted by the enterprise in this State meet the material requirements for other cooperatives entitled to an exemption from or immunity under any provision of the restraint of trade or antitrust laws of this State, the enterprise and its activities are entitled to the exemption or immunity. This section does not create any new exemption or immunity for an enterprise or affect any exemption or immunity provided to a cooperative organized under any other law. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 111. Name

  (a) The name of a mutual benefit enterprise shall contain the words “mutual benefit enterprise” or the abbreviation “M.B.E.” or “MBE.” “Mutual” may be abbreviated as “Mut.” “Benefit” may be abbreviated as “Ben.” “Enterprise” may be abbreviated as “Ent.”

  (b) Unless otherwise provided in this title, a mutual benefit enterprise may apply to the Secretary of State for authorization to use a name under the procedures and subject to the rules for associations of individuals set forth in 11 V.S.A. chapter 15. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 112. Reservation of name

  (a) A person may reserve the exclusive use of the name of a mutual benefit enterprise, including a fictitious name for a foreign enterprise whose name is not available under section 111 of this title, by delivering an application to the Secretary of State for filing. The application shall set forth the name and address of the applicant and the name proposed to be reserved. If the Secretary of State finds that the name applied for is available under section 111 of this title, the Secretary of State shall reserve the name for the applicant’s exclusive use for a nonrenewable period of 120 days.

  (b) A person who has reserved a name for a mutual benefit enterprise may transfer the reservation to another person by delivering to the Secretary of State a signed notice of the transfer which states the name, street address, and, if different, the mailing address of the transferee. If the person is an organizer of the enterprise and the name of the enterprise is the same as the reserved name, the delivery of articles of organization for filing by the Secretary of State is a transfer by the person to the enterprise. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 113. Effect of organic rules

  (a) The relations between a mutual benefit enterprise and its members are consensual. Unless required, limited, or prohibited by this title, the organic rules may provide for any matter concerning the relations among the members of the enterprise and between the members and the enterprise, the activities of the enterprise, and the conduct of its activities.

  (b) The matters referred to in subdivisions (1) through (12) of this subsection may be varied only in the articles of organization. The articles may:

  (1) state a term of existence for the enterprise under subsection 105(c) of this title;

  (2) limit or eliminate the acceptance of new or additional members by the initial board of directors under subsection 303(b) of this title;

  (3) vary the limitations on the obligations and liability of members for enterprise obligations under section 504 of this title;

  (4) require a notice of an annual members’ meeting to state a purpose of the meeting under subsection 508(b) of this title;

  (5) vary the board of directors meeting quorum under subsection 815(a) of this title;

  (6) vary the matters the board of directors may consider in making a decision under section 820 of this title;

  (7) specify causes of dissolution under subdivision 1202(1) of this title;

  (8) delegate amendment of the bylaws to the board of directors pursuant to subsection 405(f) of this title;

  (9) provide for member approval of asset dispositions under section 1501 of this title;

  (10) subject to section 820 of this title, provide for the elimination or limitation of liability of a director to the enterprise or its members for money damages pursuant to section 818 of this title;

  (11) provide for permitting or making obligatory indemnification under subsection 901(a) of this title; and

  (12) provide for any matters that may be contained in the organic rules, including those under subsection (c) of this section.

  (c) The matters referred to in subdivisions (1) through (25) of this subsection may be varied only in the organic rules. The organic rules may:

  (1) require more information to be maintained under section 114 of this title or provided to members under subsection 505(k) of this title;

  (2) provide restrictions on transactions between a member and an enterprise under section 115 of this title;

  (3) provide for the percentage and manner of voting on amendments to the organic rules by district, class, or voting group under subsection 404(a) of this title;

  (4) provide for the percentage vote required to amend the bylaws concerning the admission of new members under subdivision 405(e)(5) of this title;

  (5) provide for terms and conditions to become a member under section 502 of this title;

  (6) restrict the manner of conducting members’ meetings under subsections 506(c) and 507(e) of this title;

  (7) designate the presiding officer of members’ meetings under subsections 506(e) and 507(g) of this title;

  (8) require a statement of purpose in the annual meeting notice under subsection 508(b) of this title;

  (9) increase quorum requirements for members’ meetings under section 510 of this title and board of directors meetings under section 815 of this title;

  (10) allocate voting power among members, including patron members and investor members, and provide for the manner of member voting and action as permitted by sections 511 through 517 of this title;

  (11) authorize investor members and expand or restrict the transferability of members’ interests to the extent provided in sections 602 through 604 of this title;

  (12) provide for enforcement of a marketing contract under subsection 704(a) of this title;

  (13) provide for qualification, election, terms, removal, filling vacancies, and member approval for compensation of directors in accordance with sections 803 through 805, 807, 809, and 810 of this title;

  (14) restrict the manner of conducting board meetings and taking action without a meeting under sections 811 and 812 of this title;

  (15) provide for frequency, location, notice, and waivers of notice for board meetings under sections 813 and 814 of this title;

  (16) increase the percentage of votes necessary for board action under subsection 816(b) of this title;

  (17) provide for the creation of committees of the board of directors and matters related to the committees in accordance with section 817 of this title;

  (18) provide for officers and their appointment, designation, and authority under section 822 of this title;

  (19) provide for forms and values of contributions under section 1002 of this title;

  (20) provide for remedies for failure to make a contribution under subsection 1003(b) of this title;

  (21) provide for the allocation of profits and losses of the enterprise, distributions, and the redemption or repurchase of distributed property other than money in accordance with sections 1004 through 1007 of this title;

  (22) specify when a member’s dissociation is wrongful and the liability incurred by the dissociating member for damage to the enterprise under subsections 1101(b) and (c) of this title;

  (23) provide the personal representative or other legal representative of a deceased member or a member adjudged incompetent with additional rights under section 1103 of this title;

  (24) increase the percentage of votes required for board of director approval of:

  (A) a resolution to dissolve under subdivision 1205(a)(1) of this title;

  (B) a proposed amendment to the organic rules under subdivision 402(a)(1) of this title;

  (C) a plan of conversion under subsection 1603(a) of this title;

  (D) a plan of merger under subsection 1607(a) of this title; and

  (E) a proposed disposition of assets under subsection 1503(1) of this title; and

  (25) vary the percentage of votes required for members’ approval of:

  (A) a resolution to dissolve under section 1205 of this title;

  (B) an amendment to the organic rules under section 405 of this title;

  (C) a plan of conversion under section 1603 of this title;

  (D) a plan of merger under section 1608 of this title; and

  (E) a disposition of assets under section 1504 of this title.

  (d) The organic rules shall address members’ contributions pursuant to section 1001 of this title. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 114. Required information

  (a) Subject to subsection (b) of this section, a mutual benefit enterprise shall maintain in a record available at its principal office:

  (1) a list containing the name, last known street address and, if different, mailing address, and term of office of each director and officer;

  (2) the initial articles of organization and all amendments to and restatements of the articles, together with a signed copy of any power of attorney under which any article, amendment, or restatement has been signed;

  (3) the initial bylaws and all amendments to and restatements of the bylaws;

  (4) all filed articles of merger and statements of conversion;

  (5) all financial statements of the enterprise for the six most recent years;

  (6) the six most recent annual reports delivered by the enterprise to the Secretary of State;

  (7) the minutes of members’ meetings for the six most recent years;

  (8) evidence of all actions taken by members without a meeting for the six most recent years;

  (9) a list containing:

  (A) the name, in alphabetical order, and last known street address and, if different, mailing address of each patron member and each investor member; and

  (B) if the enterprise has districts or classes of members, information from which each current member in a district or class may be identified;

  (10) the federal income tax returns, any State and local income tax returns, and any tax reports of the enterprise for the six most recent years;

  (11) accounting records maintained by the enterprise in the ordinary course of its operations for the six most recent years;

  (12) the minutes of directors’ meetings for the six most recent years;

  (13) evidence of all actions taken by directors without a meeting for the six most recent years;

  (14) the amount of money contributed and agreed to be contributed by each member;

  (15) a description and statement of the agreed value of contributions other than money made and agreed to be made by each member;

  (16) the times at which or events on the happening of which any additional contribution is to be made by each member;

  (17) for each member, a description and statement of the member’s interest or information from which the description and statement can be derived; and

  (18) all communications concerning the enterprise made in a record to all members or to all members in a district or class for the six most recent years.

  (b) If a mutual benefit enterprise has existed for less than the period for which records shall be maintained under subsection (a) of this section, the period for which records shall be kept is the period of the enterprise’s existence.

  (c) The organic rules may require that more information be maintained. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 115. Business transactions of member with mutual benefit enterprise

  Subject to sections 818 and 819-819c of this title, and except as otherwise provided in the organic rules or a specific contract relating to a transaction, a member may lend money to and transact other business with a mutual benefit enterprise in the same manner as a person who is not a member. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 116. Dual capacity

  A person may have a patron member’s interest and an investor member’s interest in a mutual benefit enterprise. When such person acts as a patron member, the person is subject to this title and the organic rules governing patron members. When such person acts as an investor member, the person is subject to this title and the organic rules governing investor members. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 117. Designated office and agent for service of process

  (a) A mutual benefit enterprise or a foreign enterprise that has a certificate of authority under section 1404 of this title shall designate and continuously maintain in this State:

  (1) an office, as its designated office, which need not be a place of the enterprise’s or foreign enterprise’s activity in this State; and

  (2) an agent for service of process at the designated office.

  (b) An agent for service of process of a mutual benefit enterprise or foreign enterprise shall be an individual who is a resident of this State or an entity that is authorized to do business in this State. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 118. Change of designated office or agent for service of process

  (a) Except as otherwise provided in subsection 207(e) of this title, to change its designated office, its agent for service of process, or the street address or, if different, mailing address of its principal office, a mutual benefit enterprise shall deliver to the Secretary of State for filing a statement of change containing:

  (1) the name of the mutual benefit enterprise;

  (2) the street address and, if different, mailing address of its designated office;

  (3) if the designated office is to be changed, the street address and, if different, mailing address of the new designated office;

  (4) the name of its agent for service of process; and

  (5) if the agent for service of process is to be changed, the name of the new agent.

  (b) Except as otherwise provided in subsection 207(e) of this title, to change its agent for service of process, the address of its designated office, or the street address or, if different, mailing address of its principal office, a foreign enterprise shall deliver to the Secretary of State for filing a statement of change containing:

  (1) the name of the foreign enterprise;

  (2) the name, street address, and, if different, mailing address of its designated office;

  (3) if the current agent for service of process or an address of the designated office is to be changed, the new information;

  (4) the street address and, if different, the mailing address of its principal office; and

  (5) if the street address or, if different, the mailing address of its principal office is to be changed, the street address and, if different, the mailing address of the new principal office.

  (c) Except as otherwise provided in section 204 of this title, a statement of change is effective when filed by the Secretary of State. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 119. Resignation of agent for service of process

  (a) To resign as an agent for service of process of a mutual benefit enterprise or foreign enterprise, the agent shall deliver to the Secretary of State for filing a statement of resignation containing the name of the agent and the name of the enterprise or foreign enterprise.

  (b) After receiving a statement of resignation under subsection (a) of this section, the Secretary of State shall file it and mail or otherwise provide or deliver a copy to the mutual benefit enterprise or foreign enterprise at its principal office.

  (c) An agency for service of process of a mutual benefit enterprise or foreign enterprise terminates on the earlier of:

  (1) the 31st day after the Secretary of State files a statement of resignation under subsection (b) of this section; or

  (2) when a record designating a new agent for service of process is delivered to the Secretary of State for filing on behalf of the enterprise or foreign enterprise and becomes effective. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)

• § 120. Service of process

  (a) An agent for service of process appointed by a mutual benefit enterprise or foreign enterprise is an agent of the enterprise or foreign enterprise for service of process, notice, or a demand required or permitted by law to be served upon the enterprise or foreign enterprise.

  (b) If a mutual benefit enterprise or foreign enterprise does not appoint or maintain an agent for service of process in this State or the agent for service of process cannot with reasonable diligence be found at the address of the designated office on file with the Secretary of State, the Secretary of State is an agent of the enterprise or foreign enterprise upon which process, notice, or a demand may be served.

  (c) Service of process, notice, or a demand on the Secretary of State as agent of a mutual benefit enterprise or foreign enterprise may be made by delivering to the Secretary of State two copies of the process, notice, or demand. The Secretary of State shall forward one copy by registered or certified mail, return receipt requested, to the enterprise or foreign enterprise at its principal office.

  (d) Service is effected under subsection (c) of this section on the earliest of:

  (1) the date the mutual benefit enterprise or foreign enterprise receives the process, notice, or demand;

  (2) the date shown on the return receipt, if signed on behalf of the enterprise or foreign enterprise; or

  (3) five days after the process, notice, or demand is deposited by the Secretary of State for delivery by the U.S. Postal Service, if postage is prepaid to the address of the principal office on file with the Secretary of State.

  (e) The Secretary of State shall keep a record of each process, notice, and demand served pursuant to this section and record the time of and the action taken regarding the service.

  (f) This section does not affect the right to serve process, notice, or a demand in any other manner provided by law. (Added 2011, No. 84 (Adj. Sess.), § 1, eff. April 20, 2012.)