I used to answer this question with “We can’t think of a way our co-op could fail, other than a communist takeover of the USA or an asteroid strike”. Seriously, co-ops are very stable, especially those like ours that remain debt-free.
After being asked this question over and over, and feeling bad I didn’t have a better response, I asked our [now former] CEO, Philip Gleason, for clarification. He spoke with our co-op attorney, Randon Wilson, who has helped dozens of cooperatives over his very long, illustrious career. Here are the main takeaways:
Wilson has never once seen a co-op fail (and he’s in his 80s).
Our co-op can be dissolved in three ways:
a. By court order,
b. In bankruptcy,
c. By vote of the shareholders.
If the co-op were dissolved by the first 2 methods, shareholders would likely receive title to their lots and the co-op’s assets would be sold off (to pay our non-existent debts).
If the shareholders were to vote the co-op out of existence (which would be a giant Lose-Lose for everyone involved), it would create enormous problems for the individual shareholders. The county might decide we intentionally created a subdivision under the guise of a co-op and fine us daily for non-compliance to their subdivision laws. Also, the IRS would classify the title transfer as a “distribution in kind” with all sorts of unpleasant tax ramifications.
As members, shareholders have much more leverage as a group than they would individually.