Nonstock Corporation Law and Legal Definition
A nonstock corporation is a non-profit corporation that does not have capital stock. An example of a nonstock corporation, among others, may include an educational organization, mutual insurance, or municipal corporation. It aims to provide a particular service to its members under a plan, and is not motivated by financial gain. Unlike a shareholder in a stock coropration, a member may withdraw, resign or abandon his membership from a nonstock corporation. Nonstock corporations are formed and dissolved according to state laws, which vary by state.
The following is an example of a state law dealing with nonstock corporations:
"2122. Classes of membership.
The bylaws of a nonstock corporation adopted by the members may vest in the board of directors the power to establish classes of membership and to fix the several rights and liabilities thereof.
§ 2123. Evidence of membership; liability of members.
(a) General rule.--Every member of record of a nonstock corporation shall be entitled to a written document evidencing his membership in the corporation. The document shall state:
- That the corporation is a nonstock corporation incorporated under the laws of this Commonwealth, unless the name of the corporation contains the word "mutual."
- The name of the person to whom issued.
- The class of membership, if any, held by the member.
(b) Notice of variation in rights.--If the membership of the corporation is divided into classes, the document shall set forth (or shall state that the corporation will furnish to any member, upon request and without charge) a full or summary statement of the special rights and without charge) a full or summary statement of the special rights and liabilities of membership between classes. If a membership is not fully paid or if the member is otherwise liable to assessment, the document evidencing the membership shall so state.
(c) Liability.--A subscriber to the minimum guaranteed capital of or member of a nonstock corporation shall not be under any liability to the corporation or any creditor thereof other than the obligations of complying with the terms of the subscription to the minimum guaranteed capital, if any, and with the terms of the document evidencing his membership. Otherwise, the members of a nonstock corporation shall not be personally liable for the debts, liabilities, or obligations of the corporation.
(d) Dissenters rights.--The document evidencing membership shall constitute a share certificate for the purposes of Subchapter D of Chapter 15 (relating to dissenters rights).
Voting rights of members.
Except as otherwise provided in a bylaw adopted by the members or in a written document evidencing membership, every member of record of a nonstock corporation shall have the right, at every meeting of members, to one vote."
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