AGO 1956 No. 220 - Mar 9 1956
CORPORATIONS ‑- AGRICULTURAL COOPERATIVE ASSOCIATIONS ‑- TERM OF CORPORATE EXISTENCE.
The life of an agricultural cooperative association is limited by statute to a term not exceeding fifty years, and the corporate existence cannot be prolonged by an amendment to the articles of incorporation providing for a term in excess of fifty years without remedial legislation.
- - - - - - - - - - - - -
March 9, 1956
Honorable Sverre N. Omdahl
Director of Agriculture
Old Capitol Building
Olympia, Washington Cite as: AGO 55-57 No. 220
By letter previously acknowledged you have requested the opinion of this office upon the following question:
"May an Agricultural Cooperative Marketing Association organized under the provisions of RCW 24.32 [[chapter 24.32 RCW]]for a period of not exceeding fifty (50) years extend its term of existence for another period of an additional fifty (50) years by amending its Articles of Incorporation?"
Your question is answered in the negative.
An agricultural cooperative association organized under the provisions of chapter 24.32 RCW is merely a corporation of a distinct type. RCW 24.32.010 (3). When property incorporated the association is endowed with various powers incident [[Orig. Op. Page 2]] to its corporate existence. RCW 24.32.050. One of the requisite steps for organizing such a corporation is the filing of proper articles of incorporation. RCW 24.32.070 provides in part:
"Each association formed under this chapter must prepare and file articles of incorporation, setting forth:
". . .
"(4) The term for which it is to exist, not exceeding fifty years;"
Thus, the term of corporate existence is limited by statute to a maximum period of fifty years.
The general rule applicable to the duration of corporate existence is well stated in 18 C.J.S. 469, Corporations, § 78, as follows:
"Corporations continue in existence until terminated by constitutional or statutory provisions, until the expiration of the corporate charter, or until legally dissolved.
". . . therefore a corporation will continue to exist, unless previously dissolved, during, but not beyond, the period to which its existence is limited by its charter or by a general constitutional or statutory provision. . . ."
This rule accords with the fundamental legal doctrine that corporations are created, and thereafter exist, only under the authority of the state. Such authority is ordinarily contained in the applicable incorporation statutes. The articles of incorporation must themselves be in conformity with the enabling incorporation laws. RCW 24.32.070. Hence, the legislature, in limiting the existence of agricultural cooperative corporations to a period not exceeding fifty years, is merely exercising its power to specify the longevity of any organization which depends upon state authority for its vitality.
[[Orig. Op. Page 3]]
Although provision is made in RCW 24.32.080 for amending the articles of incorporation, it is clear that shareholders or members cannot, by amendment, supersede, and in a sense repeal, the legislature's pronouncement that the corporation may exist for a period not exceeding fifty years. No agreement of shareholdersinter sese in the form of an amendment to the articles of incorporation can prolong the corporate existence for a period in excess of that permitted by the controlling state incorporation law. In the note appearing in 108 A.L.R. 59, the following statement is made at page 68:
"It has apparently been assumed that a general statute authorizing the amendment by a corporation of any of its articles of incorporation authorizes it, within the limits fixed by constitutional or statutory provisions, to extend by amendment the period for which it is limited in its articles, where the amendment is adopted before the period originally limited in the articles has expired." (Emphasis supplied.)
Thus, the life of an agricultural cooperative association, limited by its charter to a period, for example, of twenty years, could be extended by amendment for another thirty years inasmuch as the aggregate life of the corporation would not thus exceed a period of fifty years. But the amendment power may not be employed to extend the corporate existence for a greater time when the legislature has declared in unmistakable language that such corporations shall exist for a term "not exceeding fifty years."
We therefore conclude that the life of an agricultural cooperative association is limited by the enabling legislation to a period not exceeding fifty years and that such a limitation may not be avoided by an amendment to the articles of incorporation seeking to prolong the corporate existence for an additional period of fifty years, or, for that matter, to any period in excess of the original fifty years allowed by RCW 24.32.070 (4).
We hasten to add that if the legislature sees fit, it may pass an act permitting the renewal or extension of the existence of such corporations under whatever procedure and conditions it may specify. In the absence of such legislation our agricultural cooperative associations cease their existence upon the expiration of the fifty-year limitation.
[[Orig. Op. Page 4]]
The difficulties attending a statutory limitation upon corporate existence apparently are not unique with our incorporation statute for agricultural cooperative associations, for the following comment appears in Ballantine, Corporations, Rev. Ed., Callaghan & Co., Chicago, 1946, at page 45:
". . . A striking illustration is found in the fact that before 1929 the statutes of California required the articles of incorporation to state how long the corporation was to live and continue to exist as a corporation, not exceeding fifty years. The limit of life was an arbitrary two score years and ten. Then, unless its existence was renewed or extended by proper proceedings before that period had expired, it was dead forever. At the day set the corporation fell dead automatically by the wayside, its affairs must be wound up and a new corporation would then have to be created if those concerned wished to continue the business. There was no sense or policy in such an arbitrary limitation. This was changed by statute as to new corporations in 1929, but the limitation remained in the constitution that existing corporations, having started with a limited life, could not extend their existence for a greater period than fifty years. This was corrected by a California constitutional amendment in November 1930. It is easy for the management of a corporation to overlook a provision for a limited term of existence. Unfortunate consequences have followed such oversight by which the corporate term of existence has been inadvertently permitted to expire."
Agricultural cooperative associations have become recognized as an important and integral part of our state's economy. It seems imperative that the legislature adopt remedial legislation to insure that the business continuity of such associations is maintained.
[[Orig. Op. Page 5]]
We hope the foregoing analysis will prove helpful to you.
Very truly yours,
J. CALVIN SIMPSON
Assistant Attorney General