Bylaws — Proposed Changes Index

§ 5.3.2 permits equal allocation of net profits as an alternative to proportional-to-patronage allocation, but C.R.S. § 7-58-1004 defaults to proportional distribution and equal allocation requires documented justification. More critically, under IRC § 704(b), the allocation method must produce "substantial economic effect" — a test that depends on capital accounts moving in tandem with allocations on a deterministic basis, not a discretionary one. Board discretion to choose between equal and proportional without member consent undermines both the statutory default and the partnership tax spine.

§ 5.3.3 correctly allocates losses in proportion to positive capital account balances (IRC § 704(b) alternate test), but the asymmetry with § 5.3.2 creates structural tension.

§ 1.10.1 allows the Board to suspend a patron member "effective immediately" on grounds (a) bylaw/policy violation, (b) criminal conduct, or (c) disruption to operations — without any prior notice or opportunity to respond for grounds (a) and (c), which are broad and subjective. Owner-members have equity and governance rights; deprivation without process is procedurally thin even if not legally void.

§ 2.7.1 requires quorum to be "present and in person," but § 2.1 expressly permits meetings by electronic or telecommunications means. The plain reading of § 2.7.1 would exclude electronic attendees from quorum, making any hybrid or remote meeting unable to achieve quorum regardless of attendance — an operational and legal inconsistency for a distributed cooperative.

Schedule A currently contains unfilled placeholders for Share Price ($[…]) and Membership Dues (yearly: $[…]). The Bylaws cannot be effective with blank financial terms. Additional gaps: effective date in the title block, initial Board composition under § 3.2.2, and Secretary signature on the Certificate.

§ 4.8 bars Director-members from receiving "any salary or other compensation as an employee." Overbroad as written: it could prohibit guaranteed payments for services under IRC § 707(c), which are the correct compensation mechanism for member-partners, not employment wages. The second paragraph of § 4.8 re-opens the exception in a way that contradicts the first paragraph, creating ambiguity about which path applies.

§§ 1.9.3 and 1.11.1 give the Board up to five years to redeem a withdrawing member's equity. Five-year windows are calibrated for agricultural cooperatives holding significant retained patronage. For a $100 share plus capital-account balance, five years is disproportionate and creates a mismatch with the Membership Agreement's 90-day redemption language. C.R.S. § 7-58-1101(1) gives members an unconditional right to dissociate; indefinite delay of redemption may conflict with that right.

§ 18.2 imposes broad confidentiality with no standard exceptions: no public-domain carve-out, no prior-knowledge exception, no independent-development exception, no required-disclosure exception (subpoenas, regulatory requests), no exception for describing one's own membership in professional contexts, and no carve-out for legal counsel. This is more restrictive than most employment NDAs and may conflict with the Cooperative's public benefit transparency obligations under C.R.S. § 7-58-104.

The Preamble's conflict hierarchy places Bylaws above the ULCAA, which implies that Bylaws can override non-waivable ULCAA provisions. C.R.S. § 7-58-110 makes certain ULCAA provisions mandatory — they cannot be varied by agreement. Additionally, the Preamble cites the PBCA (Public Benefit Corporation Act), which governs benefit corporations organized under Title 7, Article 101, not limited cooperative associations organized under Title 7, Article 58.

Note: the Articles of Organization themselves cite both ULCAA and PBCA in the formation preamble, while establishing ULCAA as the governing statute above PBCA. The proposed changes align the Bylaws' hierarchy with the hierarchy the Articles already establish, and ground the public benefit obligation in ULCAA § 7-58-104 — the LCA-specific public benefit provision — rather than in PBCA.

The fallback "may be allocated equally" in § 5.3.2 is permissive — it leaves the allocation undefined in the period before a Patronage Plan is adopted. IRC § 704(b) requires that the allocation default be determinate (not discretionary) for capital accounts to move in lock-step with allocations. A permissive fallback fails the substantial economic effect test.

§ 4.8's first paragraph correctly routes member compensation to § 707(c) guaranteed payments. The second paragraph reopens compensation through a separate exception that, as drafted, is broader than the first paragraph allows. The two paragraphs are in conflict: a reader following the second paragraph could conclude that W-2 compensation is available in contexts the first paragraph forecloses.

§ 5.1.5 correctly allocates liquidating distributions according to positive capital account balances — the IRC § 704(b) alternate test requires this. Art. XIV § 14.3 then provides a second distribution tier: residual assets distributed equally to current members and members who left within the prior three years. This breaks the IRC § 704(b) substantial economic effect chain. Capital accounts that moved with allocations throughout the entity's life must govern the final distribution; adding an equal-distribution tier after capital accounts are zeroed creates a tax phantom — members have paid tax on allocation but receive a distribution computed on a different basis.

§ 1.1(c) defines "Community Participants" as members with access to programming, but the ULCAA recognizes only two statutory member categories: patron members and investor members. Community Participants as described fit neither cleanly. If treated as patron members, they must have patronage allocated to them; if treated as investor members, their governance rights are different. § 1.1(c) leaves governance rights to Board discretion, which is insufficiently defined for a membership class.

§ 11.5 waives all rights to seek remedies in court, not merely the right to a jury trial. This is a broader waiver than a standard jury waiver and removes access to Article III or state court adjudication entirely. When the Board itself is the adverse party, the member has no neutral adjudicator — the dispute resolution process runs entirely within the entity. This is distinguishable from commercial arbitration clauses because the arbitrator here is not a neutral third party.

Article XII sets voting thresholds for amendments to the Articles of Organization. Amendments to the Articles of Organization are a state-law filing matter governed by ULCAA procedures — the Bylaws cannot change the statutory procedure. As drafted, Article XII creates confusion about whether a bylaw amendment is also needed in parallel to the statutory filing, and whether the thresholds are additive to or substitutive of ULCAA requirements.