SB2922 SD1

SECTION 1. The legislature finds that cooperative enterprises are vital to the State's economic, cultural, and agricultural resilience; however, existing cooperative statutes are outdated, fragmented, and do not adequately serve emerging cooperative models. The State currently relies on four sector‑specific statutes — chapter 421 (agricultural cooperative associations), chapter 421C (consumer cooperative associations), chapter 421H (limited-equity housing cooperatives), and chapter 421I (cooperative housing corporations), Hawaii Revised Statutes — in addition to the general corporation law codified in chapter 414, Hawaii Revised Statutes. This patchwork framework increases legal complexity and formation costs, creates uncertainty regarding tax and regulatory treatment, and limits access to cooperative-specific financing and technical assistance. It also prevents worker-owned, multi-stakeholder, service, and platform cooperatives from organizing as cooperatives under state law, forcing them into corporate forms that do not recognize cooperative principles or democratic governance and profit-sharing based on member patronage.

The legislature further finds that the State has numerous successful cooperatives. As of 2023, the State is home to forty-seven federally insured credit unions serving approximately 869,628 members, with total assets of $15,239,670,466. Kauaʻi Island Utility Cooperative achieved 57.9 per cent renewable energy generation in 2023 while maintaining the lowest residential electricity rates in the State. Agricultural cooperatives such as the Hawaiʻi ʻUlu Cooperative, Molokai Livestock Cooperative, and Kamuela Vacuum Cooling Cooperative strengthen food security and sovereignty, restore degraded lands, and expand access to local products. Each year, new cooperatives form to support water and energy projects, housing, and diversified agriculture, helping to reduce reliance on imports and keep wealth circulating within the islands.

The legislature additionally finds that modern cooperative forms — such as worker-owned and multi-stakeholder cooperatives — are being used across the United States and internationally to improve economic resilience, job quality, and community wealth. In these models, workers, producers, consumers, and community stakeholders may all be members of a single cooperative, aligning interests across the value chain in sectors including food systems, renewable energy, childcare, health care, and social services. Worker-owned cooperatives have been shown to provide more equitable wages, retain profits locally, and prioritize job retention during economic downturns. Flexible cooperative statutes in other states, such as Colorado's Uniform Limited Cooperative Association Act and California's cooperative law, allow cooperatives to form for any lawful purpose, accommodate both patron and worker ownership, and give cooperatives authority to design membership and governance structures consistent with cooperative principles while maintaining democratic member control.

A comprehensive cooperative statute will reduce legal complexity, lower barriers to formation, and support business succession, innovation, local and employee ownership, high‑quality jobs, cooperative food systems, flexible housing models, and community-rooted resilience.

Accordingly, the purpose of this Act is to broaden existing law to clarify that cooperative associations may include consumer cooperatives, multi-stakeholder cooperatives, producer cooperatives, and worker cooperatives.

SECTION 2. Chapter 421C, Hawaii Revised Statutes, is amended by adding five new sections to be appropriately designated and to read as follows:

"§421C- Election by existing cooperatives. Any cooperative association formed under chapter 421 or this chapter may elect to be governed by the provisions of this chapter upon approval by two-thirds of the members present and voting or by written ballot. The election shall be effective upon filing amended articles of incorporation with the director of commerce and consumer affairs.

§421C- Applicability of existing provisions. Except as otherwise provided, all provisions governing cooperative associations, including voting rights, patronage allocations, and limitations on returns on capital, shall apply equally to all cooperatives organized under this chapter.

§421C- Multi-stakeholder cooperatives. (a) A cooperative association electing multi-stakeholder cooperative status shall be owned by more than one class of members, which may include workers, consumers, producers, or other stakeholders, as set forth in the articles of incorporation and bylaws.

(b) Member classes shall be admitted pursuant to eligibility criteria set forth in the bylaws.

(c) Patronage shall be based on the respective contribution of each member class as specified in the bylaws, which may include labor contributed, goods or services purchased, or products marketed, processed, or services provided.

(d) Voting rights may be structured by member class; provided that member control is maintained on a one-member, one‑vote basis within each class or as otherwise provided in the articles of incorporation or bylaws.

§421C- Producer cooperatives. (a) A cooperative association electing producer cooperative status shall consist of members who are producers of goods or services.

(b) Membership eligibility shall be governed pursuant to criteria set forth in the bylaws.

(c) Patronage shall be based on the quantity or value of products marketed, processed, or services provided through the cooperative.

§421C- Worker cooperatives. (a) A cooperative association electing worker cooperative status shall be owned governed by its worker-members.

(b) Worker-members shall be admitted pursuant to criteria set forth in the bylaws.

(c) Patronage shall be based primarily on labor contributed to the cooperative, including hours worked, compensation earned, or other equitable measures specified in the bylaws.

(d) A worker cooperative may establish internal capital accounts reflecting patronage allocations and retained earnings."

SECTION 3. Chapter 421C, Hawaii Revised Statutes, is amended by amending its title to read as follows:

"CHAPTER 421C

[~~CONSUMER~~] COOPERATIVE ASSOCIATIONS"

SECTION 4. Section 421C-1, Hawaii Revised Statutes, is amended as follows:

1. By adding four new definitions to be appropriately inserted and to read as follows:

""Consumer cooperative" means a cooperative association organized primarily to provide goods or services to members as consumers.

"Multi-stakeholder cooperative" means a cooperative association that includes more than one class of members, which may include workers, consumers, producers, or other stakeholders, as defined in the articles of incorporation and bylaws of the association.

"Producer cooperative" means a cooperative association whose members are producers of goods or services and is organized primarily to process, market, distribute, or provide services related to members' production.

"Worker cooperative" means a cooperative association in which:

(1) The majority of the members are workers employed by the cooperative; and

(2) At least fifty-one per cent of the cooperative's workers are members."

2. By amending the definition of "association" to read as follows:

""Association" means a [~~consumer~~] cooperative association."

3. By amending the definition of "consumer cooperative association" to read as follows:

""[~~Consumer cooperative~~] Cooperative association" means a group enterprise, organized on a cooperative basis and incorporated under this chapter such that:

(1) Each member has one vote and only one vote, except as may be altered in the articles or bylaws of a secondary cooperative by provision for voting by member organizations;

(2) The maximum rate at which any return is paid on share or membership capital is limited; and

(3) The allocation or distribution of net savings after making provision for such separate funds as may be required or specially permitted by statute, articles, or bylaws, is made to member patrons or to all patrons, in proportion to their patronage; or is allocated in a manner which benefits the general welfare of all of the members of the association."

SECTION 5. Section 421C-2, Hawaii Revised Statutes, is amended to read as follows:

"[[]§421C-2[]] Purpose. An association may be incorporated under this chapter [~~only for the purpose of transacting any lawful business for its membership, the general public, or both.~~] for any lawful purpose, including but not limited to consumer cooperatives, worker cooperatives, producer cooperatives, and multi-stakeholder cooperatives."

SECTION 6. Section 421C-11.5, Hawaii Revised Statutes, is amended to read as follows:

"§421C-11.5 Articles. (a) Articles shall be certified and executed by each of the incorporators, if natural persons, and by the president and secretary of the association, before any officer authorized to take acknowledgments, and shall contain the following:

(1) The name of the association which shall contain the term "cooperative" or some abbreviation thereof notwithstanding section 421-5;

(2) The mailing address and zip code of its principal office, which shall be in the State, the street address of the association's initial registered office, and the name of its initial registered agent at its initial registered office;

(3) The purposes and powers of the association;

(4) The duration of the association;

(5) The number, names, and titles of the initial officers and directors, or similar officers;

(6) The names and addresses of the incorporators, and if organized with stock, a statement of the number of shares subscribed by each, which shall not be less than one, and the class of shares for which each subscribed;

(7) If organized with stock, the total authorized number of shares and the par value of each share, if any; and if more than one class of stock is authorized, a description of the classes of shares, the number of shares in each class, the relative rights, preferences, and restrictions granted to or imposed upon the shares of each class, and the interest‑dividends to which each class shall be entitled; and

(8) If organized without stock, whether the property rights and interest of each member are equal or unequal, and if unequal, the rule by which the rights and interest shall be determined.

(b) The articles may also contain any other provisions, consistent with law for regulating the association's business or the conduct of its affairs.

(1) Consumer cooperative;

(2) Multi-stakeholder cooperative;

(3) Producer cooperative; and

(4) Worker cooperative;

provided that the articles of incorporation shall specify any membership class structure and patronage basis applicable to the elected cooperative type."

SECTION 7. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 9 This Act shall take effect on July 1, 2050.

THE SENATE	S.B. NO.	2922
THIRTY-THIRD LEGISLATURE, 2026		S.D. 1
STATE OF HAWAII