We handle all types of municipal law, public affairs, real estate law, homeowner association law, estate planning and business law.

What happens when a member leaves a co-op association?

On Behalf of | Mar 20, 2024 | Condominiums & Cooperatives |

Running a cooperative (co-op) association requires hard work and dedication from all members. They share both the ownership and the responsibilities. This means their collective efforts directly impact the success of the cooperative

However, there may come a time when a member might decide to leave the co-op. In Texas, there are certain steps they need to follow to make sure everything goes smoothly.

The step-by-step process

When a member decides to leave or withdraw, the process proceeds as follows:

  1. Receive the offer: The member writes an offer to sell their membership certificates—which represent their ownership stake—to the co-op board of directors. This action formalizes their intention to withdraw and initiates the process.
  2. Wait for a response: After receiving the offer, the directors have up to 90 days to decide if they will buy the member’s share. This decision involves paying the member the ‘par value’ of the certificates. The ‘par value’ is the original cost of the certificates as stated in the co-op’s bylaws or the share certificate.
  3. Voting process: The directors will only purchase the shares if more than half of the association’s members agree with the purchase at a regular or special meeting. The leaving member can also participate in this vote.
  4. Reissue or cancel the shares: After purchasing the shares, the board will either reissue (redistribute to remaining members or new members) or cancel the shares (reduce the total number of shares in the co-op). For the latter, it signals the end of the leaving member’s ownership in the co-op.

It’s important for the association to carefully manage these steps when a member decides to leave. This ensures that all actions follow Texas law and its own bylaws.

Following rules regarding withdrawal

A well-managed withdrawal process benefits all parties involved:

  • The withdrawing member gets a fair return.
  • The remaining members avoid potential disruption to operations.
  • The cooperative maintains its financial stability.

It also provides protection from potential legal and financial liabilities, like disagreements over the repayment of the member’s investment.

Navigating these rules may require understanding the co-op’s bylaws and state laws, which can be complex. A legal professional can be beneficial in providing guidance based on the association’s specific circumstances.