is a compilation from A Manual
Co-ops and Boards of Directors prepared in 1993 by O. Grant
Simons, a member of the Escapees RV Club, and a member of Kofa
His insights into human perceptions combined with a clear
understanding in the unique qualities that comprise Escapee Co-ops
across the United
is frank, refreshing and
enlightening. It is an
excellent read. This compilation is to
provide you, the member or potential member, better insight into the thoughts,
aspirations and strategies that has resulted in the creation of SKP
Ko-op Retreat Inc.
almost a decade, the SKP
co-ops have been fumbling, stumbling, with members grumbling
because there is little or no guidance available to assist the
members, directors and leaders of co-ops. Expertise
is gained from experience or study.
Most persons chosen as directors have never experienced the
government of a corporation, much less, a nonprofit corporation.
publication is the first extensive effort to provide any compiled
form of direction for boards of directors and leaders in the
co-ops. As a member of
a co-op for almost nine years, I have experienced the aches and
pains that are destined to befall every co-op.
It is hoped this publication will be used by every co-op as
a 'springboard' to launch each director and co-op leader on a
search for addition training materials resulting in making the
co-op a utopian place of caring and sharing, as they were intended
is no written source of information for co-op directors except
for a few tidbits from National.
succession of directors in co-ops has, from the beginning,
been a case of the 'blind leading the blind.'
new directors coming on the boards don't have the foggiest
idea of what they are suppose to do.
directors don't want to make a mistake so they 'go along' with
the 'old' directors.
or directors too often react to pressure from one or two
individual 'noisy' members, resulting in rule by the minority.
board meetings, directors hesitate to vote in the minority
because they will be criticized.
are reluctant to debate issues lest they be called
'argumentative' or 'difficult.'
are elected for their popularity but as soon as they become
directors, the members begin taking pot shots at them either
because of the decisions they did or did not make.
relationship between the members and the board is 'we' and
they' as though the members and the directors are on opposite
are reluctant to ask for help or admit they might have been
wrong because of the criticism that would result.
publication is not going to cancel these facts overnight.
It will however, give those who volunteer to represent
members, the confidence they need to stand up to the many
arguments and criticisms that come from uninformed members.
often, directors are chosen because they have great personalities
and are well liked, NOT because of their qualifications as
cannot be expected to understand what is required of a director if
the directors don't know either.
Therefore it stands to reason that if voters don't know
what a director is suppose to do, the most popular person will be
selected. When it
comes to the co-op board of directors, qualifications seem
assured that, almost without exception, when you begin to accept
and implement the information in this publication, you will be
criticized and argued with almost immediately.
Why? Because of
the four underlying issues which run through this publication.
member can receive no income and make no profit, however
member does not own any part of the co-op (or it's money).
members, not the board, govern the co-op.
can't beat the system, it can't be done.
co-op was conceived as a
means for members of the Escapee Club to develop RV parks for the
exclusive use of its members and their guests.
Financing was solicited who in turn were guaranteed, first,
that they were able to lease the lot in the park when it was
developed, and second, that if they changed their mind, could get
a full refund and third, that at any time after the park was
completed the person could terminate their lease and get a 100%
refund of what was paid 'out of pocket' for the lease plus any
assessment they may have paid.
of this method of development, an erroneous belief that the co-ops
were co-operatively 'owned' came into being.
The reality is that the co-ops are co-operatively governed,
but not co-operatively owned.
H. Oleck in his book, 'Nonprofit Corporations,
Organizations and Associations' states,
'a nonprofit organization is,
by definition, one that nobody owns, in that nobody is supposed to
get from it any personal profit.'
contention, hostility and anger in the co-ops that has resulted
from this misunderstanding is hard to overcome because, as Mr.
Oleck further remarks,
'As in all human activities, a
number of people (estimated at 5%) always seem willing to evade or
violate the rules or laws of decent society in order to obtain
personal power or wealth.'
In new concepts, there are new
uses for old words. One
such word used is often misunderstood and, therefore, deserves an
explanation is the word 'assessment.'
assessment is an amount of money paid equally by every member for
durable improvements made to the park such as a swimming pool,
laundry, fencing etc. and is added to the value of a lease or
assessment is not to be confused with costs of upkeep such as
painting, re-surfacing roads, attorney fees or other items
considered to be 'expenses.'
The generally accepted use of
the term 'co-op' cannot be applied to the
co-op. The concept of
co-op does not include commercialism as part of its purpose which
and operate an RV park for use by members at a lesser cost that
can be achieved by rental or ownership; to
provide a place where visiting members of the Escapees club
can park - on a space available basis while in or traveling
through the area; to provide opportunities for fellowship and
recreation in a community of people with common interests.'
There is nothing unique about
a corporation buying land and developing an RV park such has been
done by the co-ops. Nor
is it unusual for a corporation to enter into leasing agreements
with persons for the use of their property.
co-op park is unique because:
The cost of the lease is
determined, not by prevailing markets but by dividing the
development costs by the number of sites available to be leased.
The cost of a lease can increase only by 'assessment' of
the members wherein each is required to pay an equal share for
additional durable assets or improvements to the park or by board
a member terminates, a full refund is made to that member of
the 'out of pocket' monies paid by the member for the lease
and any subsequent amounts paid for durable park improvements
spent for personal improvements to the leasehold is refunded
less any depreciation, as determined by the committee
appointed for that purpose.
(leaseholders) make their leasehold available to the
corporation for renting to non-member members of the Escapees
Club and guest of members.
This provides income for the corporation which is
divided on a 60/40 basis.
For example, 60 percent of the income benefits all
members in the rental pool by a reduction of their annual fee.
Forty percent of the income benefits the corporation and all
members as a whole.
The Corporate Status:
co-ops are organized as nonprofit corporations wherein all members
have voting rights. Most
members have not experienced membership in a corporation,
particularly a nonprofit corporation where they are responsible
for their own government through the democratic process of debate
A common misunderstanding in
co-ops is that, because they are small and the emphasis is on the
social aspects of life in the park, that a co-op is not really a
true business like bigger organizations.
co-op corporations are small but the laws governing corporations
do not accommodate a difference in size.
Every 'nonprofit' or 'for profit' corporation, large or
small, must abide by the law or suffer the same penalties if they
fail to do so.
As mundane as definitions
usually are, they are sometimes the only key to understanding.
Black's Law Dictionary defines a corporation as:
corporation is an entity created by law that is separate and
distinct from the members who comprise it.
What, exactly, does this
corporation is an entity created by law.'
the corporation as a 'person' for whom the board of directors is
responsible. It could
be said that, because the corporation is an 'unnatural' person, it
has no soul or brain, therefore, the law provides for that soul
and brain by requiring a board of directors to conduct the
business affairs of the corporation.
entity) that is separate and distinct from the members who
members of a corporation are not part of the corporation but are
separate from it. Their
tie to the corporation is the board of directors.
The board is the only mechanism permitted by law that can
conduct the business affairs of the corporation.
are not part of the corporation; nor do they own any part of it.
Nonprofit corporations must be
'non-stock' corporations by law in most states.
Members cannot own any part of a 'non-stock' corporation.
parks are 'non-stock' corporations.
Non-stock, nonprofit corporations are not 'owned' and
cannot be owned by any one. The
money, or income, that finances the development can come from any
source as determined by the organizing board of directors.
In the case of
co-ops, the money was obtained from members of the Escapee
Club who wished to become members of the 'co-op.'
The money was not given 'in trust' but as development
capital the corporation could spend to accomplish the purpose
stated in their
articles of incorporation. Once
the funds are delivered, the donor has no further claim.
The Nonprofit Corporation:
Nonprofit organizations have
existed since history began. Subject
to revision by the lawmakers both federally and by the states,
some have become very complicated, detailed, and restrictive while
at the same time are more lenient in some parts of the country
than in other states. The
laws in every state define a 'nonprofit' corporation.
The wording will vary but each definition is distinct and
absolute in three basic precepts.
means that no part of the income or profit shall be
distributed to any corporate member.
nonprofit corporation may make a profit but that profit must
be used to benefit all members according to the purposes
stated in the articles of incorporation
nonprofit corporation may compensate members and officers for
expenses incurred in service to the corporation.
It is clear that the
corporation is permitted to make a profit provided none
of the profit is distributed to any individual member.
Corporations may have:
Until recently, Escapees Inc had no members.
We 'Escapees' were members of the 'Escapees Club' only.
who do not have voting privileges.
At present, Escapees Inc. is this type.
Your membership card says, 'a member of Escapees, inc.
which is the corporation we call 'National.'
who have voting privileges.
The members of the co-ops have full voting privileges with no
member has equal voting power.
Most nonprofit corporations do
not establish small, closed communities such as the co-ops.
The intimacy of the co-ops tends to generate a proprietary
attitude among members which can work for good or bad.
A proprietary attitude can create loyalty, support,
fellowship, caring and sharing attitudes and many other desirable
qualities. Yet, it can
also generate selfishness, greed, dissension, distrust, jealousy,
controversy and even legal confrontations.
The existence of bad attitude
can usually be traced back to a lack of good or proper leadership
at the board level. It
also leads to decisions being made by the members which are
influenced more by personal interests of an individual or a
'faction' of individuals rather than a rational consideration for
the good of the membership as a whole.
Whether the attitudes of the members is productive or
counter-productive depends on the leadership given by the board of
When members become emotional,
demonstrative or irresponsible, a board must remain firm in its
resolve to represent and work for the good of the whole
membership. A board
cannot afford to bend to the will of a 'noisy minority.'
Co-op members, like anyone else, like to make money.
They are taught all their lives to make a profit from any
opportunity that presents itself.
As a result, many co-op members cannot (or will not)
believe that it is unlawful for a co-op member to make a profit -
no matter how small. To
avoid controversy and attempts to circumvent the law, the board
need to continuously remind those members that the law must
be adhered to and explain the requirements of nonprofit law.
To be a member of a
Co-op, a person must be a member of Escapees Inc and then enter
into a lease or membership agreement with the corporation.
It may come as a surprise to many members that this
agreement is contractual in nature.
Universally, members must abide by the lease or membership
agreement, articles of incorporation, bylaws, rules and
to do so is a breach of contract not only punishable
according to the terms of the documents, but could be brought to
court as a breach of contract.
The 'waitlist' of persons desiring to become members is,
believe it or not, a viable contract that would stand up in any
Members are the core of and
the only reason for the existence of the co-ops.
It is from the members-at-large that directors, officers,
committee members, and all the volunteers necessary to the ongoing
purpose of the co-op are recruited.
The members determine the destiny of the co-op and the
authority of the board. The
relationship between the members and the board is the most
important element in the life of a co-op. A successful and
harmonious relationship will be one of unity - not 'we' and 'they'
board as leaders bear the responsibility for making this
relationship become and continue to be a reality.
Members are accorded specific
rights via the bylaws and articles of incorporation.
They also have rights under state and federal law.
The co-op corporation too has rights as well.
It is best, if there is a question or even a suspicion that
the rights of the individual or the co-op might be violated, the
matter be referred to a 'grievance' committee before any
action is taken which might affect those rights - not afterwards.
A difficult action for a board to undertake is the
involuntary termination of a member.
Bear in mind, although the member does not own any part of
the corporation, they still have rights which are protected by the
courts as 'property' right.
Members are naturally
concerned about what happens to the co-op because it is, for them,
at least a part-time home. It
is important the board make every effort to keep them informed as
to the business affairs of the corporation by providing copies of
minutes of board meetings, annual meetings and periodic financial
statements. In fact,
the statutes are universal that the records of co-ops are to be
open for inspection by any member at any reasonable time, and that
they may make copies as they desire.
Statutes also include civil penalties for officers who
interfere with this right.
'Officers of a corporation may
be designated by such additional titles as may be provided in the
articles of incorporation or bylaws' (Arizona
'Regular' meetings of the
board of directors may be held with or without notice as
prescribed in the bylaws' (
'.... unless the articles or
bylaws otherwise provide.' (Arizona
Statutes sometimes demand, but
all expect that nonprofit corporations will have bylaws.
Statutes provide directions for nonprofit corporations that
will protect the rights of the members and the public.
Statutes demand nonprofit corporations bylaws include many
'parliamentary rules.' These
include notice of meetings, methods of voting, election of
directors, number of directors, duties of officers, records to be
kept, quorum for board or member meetings, procedures to amend
articles; and on.
Many states define bylaws as
'the code or codes of rules adopted for the regulation or
management of the affairs of the corporation irrespective of the
name or names by which such rules are designated.'
In layman's terms, bylaws can be described as the
'instructions for the conduct of the business and activities of
the corporation.' By
comparison, co-op rules are 'instructions for the conduct or
behavior of the members as related to the park.
An axiom to remember is:
Put only in the articles and bylaws the minimum information
required by statute plus the specifications that are important
enough to be carved in stone!
Other Controlling Documents:
Bylaws are not the only
'rules' which govern or regulate nonprofit organizations.
There are others and their effect depends on a 'hierarchy'
or order of precedence in which each is superceded by the other
beginning with constitutional law.
The hierarchy is:
Note: The lease, or membership agreement is the basic contractual
transaction between the corporation and the member.
It cannot be emphasized enough that the wording and
conditions expressed in that document must be consistent with all
other governing documents.
The board is comprised of
volunteer members of the co-op.
These volunteers are placed in nomination by the
'elections' committee because they volunteer to serve, not because
they have special qualifications to fill the position of director.
They are, for the most part, elected on a basis of
popularity and affability, because the members have no criteria by
which to determine their fitness for the position.
Often times, some members volunteer simply to fulfill the
need to complete a roster of candidates. The likelihood that
successive generations of members will be less naive than the
present generation is suspect.
It is because of this condition that the information
contained herein and in other pages of the co-op website was
information can establish the 'norm' by which the co-ops can
perpetuate the thinking of the originators as time goes on.
Although there are exceptions,
directors who have served the co-ops:
mostly retired persons.
diligent and concerned about the co-op.
never served on a board of directors.
little about bookkeeping and accounting
not understand the concept of nonprofit corporations.
dubious about their ability to read and understand the
statutes regarding nonprofit corporations.
no administrative experience in a corporation.
elected without having been told of any qualifications
necessary for the job or personal risks involved.
their own ideas as to how the organization should be run.
it difficult to admit they don't know what they are suppose to
do so are reluctant to seek advice.
they are totally protected from personal liability because
they are 'indemnified.'
not comprehend or are willing to accept the 'servant',
'stewardship' or 'trustee' role of the board.
difficulty relating statutory regulated business with a
Contrary to the majority
opinion, the board of directors is the board of directors of the corporation
but does not govern the co-op.
The members govern the co-op with the administrative
assistance of the board. The
co-op is the park, the improvements, the social life, the members,
activities and surroundings but it is not the corporation.
It is essential that a
corporation have members but a corporation must have a
board of directors for two reasons:
law requires it;
a board of directors, a corporation could not function for any
purpose because a corporation, as such, has no soul or mind.
The board performs that function.
The board does not have the authority to govern the
corporation or the actions of the members except as permitted by
the articles of incorporation and/or bylaws.
Board of directors often assume the members are responsible
to the board when the exact opposite is true.
The courts have established that:
board of directors or trustees of a corporation are merely its
managing agents for the purposes of its business, they have no
power unless specifically authorized by the members.'
(from Corpus Juris Secundum)
The board is delegated by the
members to perform the business necessary for maintenance of the
corporation, its property and the park in general and other
business as defined in the law, articles of incorporation and/or
bylaws of the corporation.
Actions that affect members
should always be approved by the membership.
The board may recommend matters to members that are not
part of the 'business affairs' of the corporation, but the board
may not always implement those matters except as provided by the
articles of incorporation or bylaws.
For example, consider 'rules'
which relate to the social conduct of the members.
Rules are necessary because people have the tendency to
overstep their bounds of mutual respect.
But, rules are not part of the 'business' of the
of 'rules' is a responsibility of the members - not the board.
The board must, however, determine whether or not any of
those rules would violate the civil or property rights of any
member because, should that happen, the corporation - not the
members - would become involved in the litigation that would
result. Properly, the
board should only suggest rules to the membership for their
Bylaws are the instructions for running the corporation;
Rules are the instructions for the behavior of the members.
Rules & Regulations:
No discussion of bylaws can be
complete with reference to 'rules'.
Rules, like bylaws, seem to proliferate in co-ops to the
extent of being ridiculous. Why
is it that commercial parks, membership parks, state and federal
parks can publish less than a page of 'rules' when it takes pages
to regulate the behavior of people in a co-op that is suppose to
be a 'caring-sharing' group of people?
The words 'rules' and
'regulations' are often confused.
In a co-op, their use is to differentiate between the types
of 'members.' In
co-ops, there are two types of members - those who are members of
Escapees Inc. and members who are 'leaseholders' in a specific
rules generally apply to all members of Escapees Inc, members of
the co-op, and their guests. Regulations
apply only to members of a co-op who are leaseholders.
But, as long as there are
going to be rules, it is important that the authority to make
rules be firmly established by provisions in the bylaws.
There are three schools of thought as to who should have
the authority to make the rules that govern behavior.
board makes all the rules.
board makes all the rules but they must be ratified by the
board recommends rules to the members.
'Rules' regulate the behavior
and conduct of the members but do not regulate the conduct
of the business of the corporation.
Therefore, it makes sense that the members make their own
rules and furthermore, that the members be required to enforce
them. A co-op that
requires the board (or of all ridiculous things, the manager) to
enforce rules is not only unfair and an imposition upon them but
is a clear cut case of passing the buck!
If members are to govern, they
must accept the responsibilities that go with governing.
Sometime since the birth of
co-op, the identity and principals of 'nonprofit' and 'tax exempt'
got mixed up. At one
time, someone made the statement that 'if you are 'nonprofit', you
can be 'tax exempt.' Sounds
great, doesn't it? Tax
exempt, hooray, we don't have to pay any taxes!
The description, 'Nonprofit'
does not denote status. 'Nonprofit'
or 'not for profit'
identifies the type of business to be carried on by the
corporation cannot lose its 'nonprofit' designation, nor can it
change that designation except through a dissolution process.
'Tax exempt' is a corporation
status that can be applied for through the Internal Revenue
Service. There is a
classification for which the co-ops can qualify for tax exemption.
That classification is that of a 'social club' and is
described and defined under the
code 501(c) (7).
However, just because a co-op is described and defined under this
IRS section does not mean it has been granted tax exempt status.
There is a big difference
between 'tax exempt' and 'nonprofit'.
A corporation can be 'nonprofit' without being 'tax exempt'
but cannot be 'tax exempt' without being 'nonprofit.'
A nonprofit corporation must meet certain criteria in
addition to being 'nonprofit' in order to be awarded 'tax exempt'
Because co-ops end the year
with essentially zero taxable income, it would appear that, in
most cases, to be 'tax exempt' would be more of a burden than a
blessing because of the additional restrictions placed on tax
exempt organizations. All
co-ops are 'nonprofit' corporations of which none hold 'tax
As said before, the
corporation and the members are separate entities.
So it is with money. The
corporation has its money and the members have theirs.
co-op, the members pay the
corporation for their membership privileges and provide money to
the park. Therefore,
co-op corporation, being a nonprofit organization, must refund to
the members any unexpended income which has the effect of lowering
the member's annual fees which is another of their benefits.
Some co-op members insist
that, because the organization is a 'co-op', all the assets,
including the money, belong to the members.
The truth is that none of the co-op's money or assets belongs to the
The corporation may owe some money to the members
but even then, the money does not belong to the members until they
are paid! Remember,
all their lives, members have been taught that profit-making is
one of the most important goals in a capitalistic society.
There is nothing wrong with that unless they mistakenly
expect to make a profit from being a member of a nonprofit
nonprofit corporation is not a money making device for the benefit
of its members, and it may not sell stock or pay dividends.'
(Parliamentary Law and Practice, H. Oleck, Cami Greene)
co-op, the board needs to continually remind the members of the
separation between the members and the corporation to prevent the
member's 'proprietary syndrome' from resulting in actions by the
member's that could jeopardize the organization.
This includes the value of gifts, donations, and income
from the collection of fees and penalties received from any
source. Can it be said
more plainly than, 'nonprofit, means members cannot make a
means nonprofit for the members but does not prohibit the
corporation from making a profit.
But there is a catcher here.
Any profit the corporation makes must be used to the non-cash
benefit of the members. Failure
to adhere to these basic understandings may jeopardize the
corporation in the threat of involuntary dissolution by the
There are three transactions
co-op which would most likely result in a profit to a member.
amount added to the value of a membership as a result of
acquisition of assets paid for by fund raising activities or
by donations or gifts from any source.
member's share of the rental pool being applied to the coming
year's annual fees that was greater than the member had
paid as annual fees the previous year.
from invested corporate funds being added to the value of a
membership or in any way distributed to any member.
Corporate income is money or
value received by the corporation from any source.
It can be used to pay for operation expenses, social
activities, improvements to the park, or establish dedicated funds
for future use by the corporation for major asset replacements due
to deterioration or depreciation.
Co-op corporation income is derived from a number of
maintenance fees paid by members.
from invested funds.
from lots in the rental pool
for leases received from incoming members which exceeds the
amount the corporation owes to the departing member.
fees and penalties
other income the corporation might legally receive.
Please note that none of the
above listed sources include income received by the fund raising
organizations are formed to provide benefits of some kind
(but not income) for their members or others.
Perhaps the thing that bothers most co-op members is that
the benefit they receive cannot be a cash benefit!
Aside from the rights and
privileges and pleasures of being in a community of kindred souls
by belonging to a co-op, there are economic benefits.
The cost of membership can be kept at a minimum so each
successive member can acquire a membership for payment that is
much less than a comparable membership in a commercial,
condominium, housing association or for-profit co-op
members govern the organization so their rental (annual fees)
is determined by their own action and not the landlord.
If they set the fees too high and there's something
left at the end of the year, they get a refund of their
share of what's left. That's
a pretty good benefit!
who participate in the rental pool receive a refund of
all or a portion of the annual fees they paid for the current
year. That's a
pretty good benefit!
So, why can't a co-op member
make a profit? The
answer is simply that, because the co-ops are nonprofit
corporations, the law forbids it.
Corporation income is exactly that - corporation income,
not member income or profit.
Your board of directors are your front line to the smooth
operation of the co-op.