RUS Bulletin 1780-20

UNITED STATES DEPARTMENT OF AGRICULTURE

Rural Utilities Service

RUS BULLETIN 1780-20 

RD-GD-2020-109

SUBJECT: Bylaws 

TO: RUS Water and Environmental Programs Staff. 

OFFICE OF PRIMARY INTEREST: Water and Environmental Programs. 

AVAILABILITY: This Bulletin is available on the Internet at 

http://www.rurdev.usda.gov/RDU_Bulletins_Water_and_Environmental.html 

PURPOSE: This bulletin is issued to outlay the Bylaws for purposes for 

which a corporation is formed, and the powers which it may exercise are set 

forth in the articles of incorporation of the corporation.

DISCLAIMER: The contents of this guidance document does not have the force and effect of law and is 

not meant to bind the public in any way. This document is intended only to provide clarity to the public 

regarding existing requirements under the law or agency policies.
RUS Bulletin 1780-20

BYLAWS

of

ARTICLE I

General Purposes

The purposes for which this corporation is formed, and the powers which it may exercise are 

set forth in the articles of incorporation of the corporation.

ARTICLE II

Name and Location

Section 1. The name of this corporation is the

. 

Section 2. The principal office of this corporation shall be located in the City (Village) or

, County of State of

. 

ARTICLE III

Seal

Section 1. The seal of the corporation shall have inscribed thereon the name of the 

corporation, the year of its organization and the words, "Corporation Not For

Profit, ." 

Section 2. The secretary of the corporation shall have custody of the seal.

Section 3. The seal may be used for causing it or a facsimile thereof to be impressed or 

affixed or reproduced or otherwise.
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ARTICLE IV

Fiscal Year

The fiscal year of the corporation shall begin the day of

in each year.

ARTICLE V

Membership

Section 1. Membership will be limited to those who obtain the organization's services, acquire 

a tangible interest in its assets in proportion to the business done with the organization and have 

a voice in its management.

Section 2. Every person (which word as used herein includes any legal entity) who is a record 

owner of a fee or undivided fee interest, or having a substantial possessory interest, in a property 

served by the water system may become a member of the corporation upon signing such 

applications and agreements for the purchase of water as may be provided and required by the 

corporation and upon the payment of such connection fee as may be imposed by the board of 

directors provided that only one membership at a time may be held for each property served. A 

single membership may be issued to all persons owning or having a substantial possessory 

interest in the property. Only one membership may be held with respect to property at one time. 

The board of directors shall cause to be issued appropriate certificates of membership, provided 

that membership shall not be denied because of the applicant's race, color, creed, sex, age, 

marital status, or national origin. Membership may be denied if capacity of the corporation's 

water system is exhausted by the need of its existing members, or, if the proposed use of the 

applicant is such that it would interfere with existing uses previously authorized by the board of 

directors.

A. A substantial possessory interest is one where the person or persons have a legal right 

to control and occupancy of a property but do not have the legal or the equitable 

ownership of the property. It may be under a lease or similar right to possession.

(1) Before membership is allowed to one or more persons claiming such an 

interest, the corporation will endeavor to obtain the application for membership from 

the owner of such property.

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(2) Where membership is granted to one or more persons having a substantial 

possessory interest, the corporation, as a condition to the membership, may require 

such applicant to post such collateral or bond as the directors determine necessary 

to fully protect the corporation from any additional risk that may be involved to the 

corporation by reason of the lack of legal ownership in the applicant.

Section 3. Each member shall have only one membership for each property served, 

regardless of the number of service connections the member may obtain to serve the property. 

Each membership certificate shall represent one vote. When more than one person holds the 

interest in a property served, the vote shall be exercised by the person in whose name the 

certificate is registered or by such person as the several persons may designate, but in no event 

shall more than one vote be cast with respect to any property.

Section 4. Membership shall be transferable but the transfer will be effective only when noted 

on the books of the corporation. Such transfer will be made only to a person who obtains a 

qualifying interest in the property. A member will transfer membership in the corporation to a 

successor in interest as part of the transaction whereby the member disposes of any interest to 

said property. The secretary, upon request, will make note of such transfer upon the records of 

the corporation but need not issue a new certificate to the successor in interest of the previous 

existing member.

Section 5. When membership in the corporation is not transferred, it shall terminate upon the 

disposition or other termination of the member's interest in the property, regardless of whether or 

not the certificate is surrendered to the corporation. Membership also may be terminated by 

action of the board of directors where the use of the property is changed so as to materially 

increase the amount of water consumed to the prejudice of other existing members or to the 

prejudice of the orderly operation of the system.

Section 6. Termination of membership will not result in forfeiture of the former member's 

rights and interest in the organization's assets and the former member will not be precluded from 

receiving a proportionate share of any subsequent distribution of such assets by the organization.

Section 7. The termination of the membership of any member shall not disqualify for 

membership any other person who has or obtains an interest in the property of the terminated 

member and who otherwise meets the requirements of these bylaws.
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Section 8. In the event a member's property interest is divested other than by voluntary 

means, such member's membership will pass to the trustee, receiver, executor, or the like who 

will be entitled either in person or through a designated representative to exercise all of the rights 

incident to such membership, but subject to such duties and liabilities also applicable to the 

membership. The trustee, receiver, executor, or the like, may terminate such membership by 

written notice to such effect delivered or mailed to the secretary of the corporation. Upon the 

final disposition of such property rights, the owner thereof shall be entitled to membership in like 

manner as if the membership had been transferred to the owner by the original member as set 

forth in Section 4 above.

Section 9. Upon the transfer of a membership, the corporation will not look to the successor 

in interest for the payment of any past due amounts. The corporation will seek collection only 

from the individual who incurred such charges or assessments or from the property itself if a 

judgment lien had been duly perfected against such property.

ARTICLE VI

Membership Certificates

Section 1. This corporation shall not have capital stock. Membership in the corporation shall 

be represented by membership certificates. Such certificates shall represent the right to use and 

enjoy the benefits of the corporation's water supply system upon the payment of necessary 

assessments, if any, and of reasonable charges based upon such use, provided such use and 

enjoyment are consistent with the rules, regulations, and contracts affecting the same as may 

from time to time be prescribed by the board of directors.

Section 2. A membership certificate shall be issued to each holder of fully paid membership, 

numbered consecutively in accordance with the order of issue, and bear on its face the following 

statement:

This membership certificate is issued and accepted in accordance with and subject to the 

conditions and restrictions stipulated in the articles of incorporation and bylaws and amendments 

to the same of the Water 

Association.
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ARTICLE VII

Meetings of Members

Section 1. The annual meeting of the members of this corporation shall be held at the City 

(Village) of , County of , State 

of , at o'clock .m., on the 

in of each year, if not a Sunday or legal holiday, or if a 

Sunday or legal holiday on the next business day following. The place, day, and time of the 

annual meeting may be changed to any other convenient place, day, and time in the county by 

the board of directors giving notice thereof to each member not less than ten (10) days in 

advance thereof.

Section 2. Special meetings of the members may be called at any time by the action of the 

board of directors and such meetings must be called whenever a petition requesting such 

meetings is signed by at least ten percent of the members and presented to the secretary or to 

the board of directors. The purpose of every special meeting shall be stated in the notice thereof, 

and no business shall be transacted thereat except such as is specified in the notice.

Section 3. Notice of meetings of members of the corporation, both regular and special, shall 

be given by notice mailed by first-class mail to each member of record, directed to the address 

shown upon the books of the corporation, not less than ten (10) nor more than forty (40) days 

prior to such meeting. Such a notice shall state the nature, time, place and purpose of the 

meeting, but no failure or irregularity of notice of any annual meeting, regularly held, shall affect 

any proceedings taken thereat.

Section 4. The presence at a meeting of members entitled to cast in their own right or by 

proxy percent of the total number of votes shall constitute a quorum. All proxies shall 

be in writing and filed with the secretary. Such proxies may be general or restrictive. Proxies 

shall be revocable and shall not be valid beyond 11 months, nor after termination of the 

membership by cessation of the member's interest in the property.

Section 5. Directors of this corporation shall be elected at the annual meeting of the members 

as provided in Article VIII, Section 1. No cumulative voting shall be allowed.

Section 6. The order of business at the regular meetings and so far as possible at all other 

meetings shall be:
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1. Calling to order and proof of quorum

2. Proof of notice of meeting

3. Reading and action on any unapproved minutes

4. Reports of officers and committees

5. Election of directors

6. Unfinished business

7. New business

8. Adjournment

ARTICLE VIII

Directors and Officers

Section 1. The board of directors of this corporation shall consist of five members, all of whom 

shall be members of the corporation. The directors named in the articles of incorporation shall 

serve until the first annual meeting of the members and until their successors are elected and 

have qualified. At the first annual meeting of the members, one director shall be elected for a 

term of one year; two directors for a term of two years; and two directors for a term of three 

years. At each annual meeting thereafter, the members shall elect for a term of three years the 

number of directors whose terms of office have expired. Each director shall hold office for the 

term for which elected and until a successor shall have been elected and qualified.

Section 2. The board of directors shall meet within ten (10) days after the annual election of 

directors and shall elect a president and vice-president from among themselves and

secretary-treasurer who need not be a member of the board of directors, each of whom shall hold 

office until the next annual meeting and until the election and qualification of a successor unless 

sooner removed by death, resignation, or for cause.

Section 3. If the office of any director becomes vacant by reason of death, resignation, 

retirement, disqualification, or otherwise, except by removal from office, a majority of the 

remaining directors, shall by a majority vote, choose a successor who shall hold office until the 

next regular meeting of the members of the corporation, at which time the members shall elect a 

director for the unexpired term or terms.
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Section 4. A majority of the board of directors shall constitute a quorum at any meeting of the 

board. The affirmative vote of the majority of the directors at a meeting at which a quorum is 

present shall be the act of the board.

Section 5. Compensation of officers may be fixed only at any regular or special meeting of 

the members of the corporation. Directors shall receive no compensation for their services as 

such.

Section 6. Officers and directors may be removed from office in the following manner: Any 

member, officer, or director may present charges against a director or officer by filing them in 

writing with the secretary of the corporation. If presented by a member, the charges must be 

accompanied by a petition signed by ten percent of the members of the corporation. Such 

removal shall be voted on at the next regular or special meeting of the members and shall be 

effective if approved by a vote of a majority of those voting if a quorum is present. The director 

or officer against whom such charges have been presented shall be informed, in writing, of such 

charges at least twenty days prior to the meeting, and shall have the opportunity at such meeting 

to be heard in person or by counsel and to present witnesses; and the person or persons 

presenting such charges shall have the same opportunity. If the removal of a director is 

approved, such action shall also vacate any other office held by the removed director in the 

corporation. A vacancy in the board thus created shall immediately be filled by a vote of a 

majority of the members present and voting at such meeting. A vacancy in any office thus 

created shall be filled by the board of directors from among their number so constituted after the 

vacancy in the board has been filled.

ARTICLE IX

Duties of Directors

Section 1. The board of directors, subject to restrictions of law, the articles of incorporation, 

and these bylaws, shall exercise all of the powers of the corporation, and, without prejudice to or 

limitation upon their general powers, it is hereby expressly provided that the board of directors 

shall have, and are hereby given full power and authority in respect to the matters as hereinafter 

set forth to be exercised by resolution duly adopted by the board:
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A. To approve membership applications and to cause to be issued appropriate certificates 

and to permit the connection of properties to the system in the future in cases involving 

proposed construction or may issue such certificates prior to the commencement of the 

proposed construction.

B. To select and appoint all agents or employees of the corporation, remove such agents 

or employees of the corporation, prescribe such duties and designate such powers as may 

not be inconsistent with these bylaws, fix their compensation and pay for faithful services.

C. To borrow from any source, money, goods, or services and to make and issue notes 

and other negotiable or nonnegotiable instruments evidencing indebtedness of the 

corporation; to make and issue mortgages, deeds of trust, pledges of revenue, trust 

agreements, security agreements and financing statements and other instruments 

evidencing a security interest in the assets of the corporation; and, to do every act and 

thing necessary to effectuate the same.

D. To prescribe, adopt and amend, from time to time such equitable uniform rules and 

regulations as, in its discretion, may be deemed essential or convenient for the conduct of 

the business and affairs of the corporation and the guidance and control of its officers and 

employees, and to prescribe adequate penalties for the breach thereof.

E. To order, at least once each year, an audit of the books and accounts of the 

corporation by a competent public auditor or accountant. The report prepared by such 

auditor or accountant shall be submitted to the members of the corporation at their annual 

meeting, together with a proposed budget for the ensuing year. Copies of such audits and 

budgets shall be submitted to such parties as may be required by other agreements.

F. To fix and alter the charges to be paid by each member for services rendered by the 

corporation to the member, including connection or reconnection fees where such are 

deemed to be necessary by the directors, and to fix and alter the method of billing, time of 

payment, manner of connection, and penalties for late or nonpayment of the same. The 

board may establish one or more classes of users. All charges shall be uniform and 

nondiscriminating within each class of users.
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G. To require all officers, agents, and employees charged with responsibility for the 

custody of any of the funds of the corporation to give adequate bonds, the cost thereof to 

be paid by the corporation, and it shall be mandatory upon the directors to so require.

H. To select one or more banks to act as depositories of the funds of the corporation and 

to determine the manner of receiving, depositing, and disbursing the funds of the 

corporation and the form of checks and the person or persons by whom the same shall be 

signed, with the power to change such banks and the person or persons signing such 

checks and the form thereof at will.

I. To levy assessments against the members of the corporation in such manner and upon 

such proportionate basis as the directors deem equitable, and to enforce collection of such 

assessments by the suspension of water service or other legal methods. The board of 

directors shall have the option to suspend the service of any member who has not paid 

such assessment within 30 days from the date the assessment was due, provided the 

corporation must give the member at least 15 days' written notice at the address of the 

member on the books of the corporation of its intention to suspend such service if the 

assessment is not paid. Upon payment of such assessments, any penalties applicable 

thereto, and a reconnection charge, if one is in effect, service will be promptly restored to 

such a member.

ARTICLE X

Duties of Officers

Section 1. Duties of President. The President shall preside over all meetings of the 

corporation and the board of directors, call special meetings of the board of directors, perform all 

acts and duties usually performed by an executive and presiding officer, and sign all membership 

certificates and such other papers of the corporation as may be authorized or directed to sign by 

the board of directors, provided the board of directors may authorize any person to sign any or all 

checks, contracts, and other instruments in writing on behalf of the corporation. The President 

shall perform such other duties as may be prescribed by the board of directors.

Section 2. Duties of the Vice-President. In the absence or disability of the President, the

Vice-President shall perform the duties of the President; provided, however, that in case of death, 

resignation, or disability of the President, the board of directors may declare the office vacant and 

elect a successor.
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Section 3. Duties of the Secretary-Treasurer. The Secretary-Treasurer shall keep a complete 

record of all meetings of the corporation and of the board of directors and shall have general 

charge and supervision of the books and records of the corporation. The Secretary-Treasurer 

shall attest the President's signature on all membership certificates and other papers pertaining 

to the corporation unless otherwise directed by the board of directors. The Secretary-Treasurer 

shall serve, mail, or deliver all notices required by law and by these bylaws and shall make a full 

report of all matters and business pertaining to the office to the members at the annual meeting 

or at such other time or times as the board of directors may require. The Secretary-Treasurer 

shall keep the corporate seal and membership certificates issued and affix said corporate seal to 

all papers requiring a seal. The Secretary-Treasurer all keep a proper membership certificate 

record, showing the name of each member of the corporation and date of issuance, surrender, 

transfer, termination, cancellation, or forfeiture. The Secretary-Treasurer shall make all reports 

required by law and shall perform such other duties as may be required by the corporation or the 

board of directors. Upon the election of a successor, the Secretary-Treasurer shall turn over to 

the successor all books and other property belonging to the corporation that the Secretary 

Treasurer may possess. The Secretary-Treasurer shall also perform such duties with respect to 

the finances of the corporation as may be prescribed by the board of directors.

ARTICLE XI

Benefits and Duties of Members

Section 1. The corporation will install, maintain and operate a main distribution pipeline or 

lines from the source of the water supply and service lines from the main distribution pipeline or 

lines to the property line of each member of the corporation, at which points, designated as 

delivery points, meters to be purchased, installed, owned, and maintained by the corporation 

shall be placed. The cost of the service line or lines from the main distribution pipeline or lines of 

the corporation to the property line of each member shall be paid by the corporation. The 

corporation also may purchase and install a cutoff valve in each service line from its main 

distribution line or lines, such cutoff valve to be owned and maintained by the corporation and to 

be installed on some portion of the service line owned by the corporation. The corporation shall 

have the sole and exclusive right to use of such cutoff valve. However, the provisions of this 

section shall not be construed to require the acquisition or installation of meters or cutoff valves 

where the directors determine under the circumstances of the system and the nature of the 

membership that the use of either or both devices is impractical, unnecessary to protect the 

system and the rights of the membership, and/or economically not feasible.
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Section 2. Each member will be required, at the members expense, to have dug a ditch for 

the connection of the service line or lines from the property line of the member to member's 

dwelling or other portion of the member's premises, and to purchase and have installed the 

portion of the service line or lines from the member's property line to the place of use on the 

member's premises. The member will maintain such portion of such service line or lines which 

shall be owned by the member, at the member's own expense. The corporation may, if the board 

of directors so determines, purchase the pipe for and install such portion of such service line or 

lines, the cost of which will, however, be paid by the individual members. In addition, each 

member shall pay such connection charge, if any, as may have been imposed by the board of 

directors before such member will be entitled to receive water from the system.

Section 3. Each member may be permitted to have additional service lines from the 

corporation's water system in the discretion of the board of directors upon proper application 

therefore and the tender or payment not to exceed the then existing connection charge. The 

approval by the board of directors of additional service lines to an existing member may be made 

conditional upon such provisions as the board of directors determines necessary to protect the 

interests of other members and to allow for the orderly expansion and extension of the system. 

Each service line shall connect with the corporation's water system at the nearest available place 

to the place of desired use by the member if the corporation's water system has sufficient 

capacity to permit the delivery of water through a service line at that point without interfering with 

the delivery of water through a prior service line. If the corporation's water system is inadequate 

to permit the delivery of water through a service line installed at such place without interfering 

with the delivery of water through a prior service line, then such service line shall be installed at 

such place designated by the corporation.

Section 4. Each member may be permitted to purchase from the corporation, pursuant to 

such agreement as may from time to time be provided and required by the corporation, such 

water as is needed for domestic, commercial, agricultural, industrial or other purposes as a 

member may desire, subject, however, to the provisions of these bylaws and to such rules and 

regulations as may be prescribed by the board of directors. Each member shall be entitled to 

have delivered, through the member's service lines, only such water as may be necessary to 

supply the needs of each member, including the member's family, business, agricultural or 

industrial requirements. The water delivered through each service line may be metered 

separately, irrespective of the number of service lines owned by a member.
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Section 5. In the event the total water supply shall be insufficient to meet all of the needs of 

the members or in the event there is a shortage of water, the corporation may prorate the water 

available among the various members on such basis as is deemed equitable by the board of 

directors, and may also prescribe a schedule of hours covering use of water for commercial, 

agricultural or industrial purposes by particular members and require adherence thereto or 

prohibit the use of water for commercial, agricultural or industrial purposes; provided, that if at 

any time the total water supply shall be insufficient to meet all of the needs of all of the members 

for domestic, livestock, commercial, agricultural or industrial purposes, the corporation must first 

satisfy all of the reasonable needs of the members for domestic purposes before supplying any 

water for livestock purposes and must satisfy all of the needs of all of the members for domestic 

and livestock purposes before supplying any water for commercial or industrial purposes; and, 

provided further, that where a member has more than one service line, the corporation may cut 

off the flow of water to the nondomestic service lines until such time as the supply of water from 

the system is sufficient to meet the needs of all of the members for domestic and livestock 

purposes. During such periods of shutoff of additional service lines there shall be no minimum 

fee charged to the members having such additional service lines and the cost, if any, of resuming 

the flow of water to such additional service lines shall be borne by the corporation.

Section 6. The board of directors shall, with the consent of the Rural Utilities Service, so long 

as it shall either hold any obligations or insure any financing of the system, prior to the beginning 

of each calendar year, determine the flat minimum monthly rate to be charged each member 

during the following calendar year for a specified quantity of water, such flat minimum monthly 

rate to be payable irrespective of whether any water is used by a member during any month, the 

amount of additional charges, if any, for additional water which may be supplied the members, 

and the amount of penalty for late payments, and shall fix the date for the payment of such 

charges. A member to be entitled to the delivery of water shall pay such charges at the office 

designated by the corporation at or prior to the dates fixed by the board of directors. The failure 

to pay water charges duly imposed shall result in the automatic imposition of the following 

penalties.

A. Nonpayment within ten days from the due date will be subject to a penalty of ten (10) 

percent of the delinquent account, which percent may be changed at the discretion of the 

board of directors.
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B. Nonpayment within thirty days from the due date will result in the water being shut off 

from the member's property without any notice thereof to such delinquent member. Upon 

the payment by the delinquent member of past due water charges, penalties thereon and 

any reconnection charge, such member shall be entitled to resumption of the water supply. 

During the time of such suspension of water to a member, such member shall have no 

right to vote in the affairs of the corporation.

Section 7. The board of directors shall be authorized to require each member to enter into 

water users agreements which shall embody the principles set forth in the foregoing provisions of 

these bylaws.

ARTICLE XII

Distribution of Surplus Funds

Section 1. It is not anticipated that there will be any surplus funds or net income to the 

corporation at the end of the fiscal year after provisions are made for the payment of the 

expenses of operation and maintenance and the funding of the various reserves for depreciation, 

debt retirement, and other purposes, including those required by the terms of any borrowing 

transaction. The occurrence in subsequent fiscal years of surplus funds or net income above the 

requirements of the corporation as above mentioned, including, if any, a reserve for 

improvements and extension of the facilities shall be taken into consideration by the board of 

directors in determining the water rates to be charged the members.

Section 2. The organization will provide services substantially at cost. Dividends shall not be 

paid on the basis of membership or shares of stock in the organization. All funds from whatever 

sources remaining at the end of the year in excess of those needed to meet current losses and 

expenses will be distributed to members in proportion to the amount of business done by them 

during the year subject to concurrence of the Rural Utilities Service or will be retained for such 

purposes as retiring indebtedness incurred in acquiring assets, expanding the organization's 

services, maintaining reserves for necessary purposes or reducing subsequent year's water 

rates. However, the organization will maintain records from which each member's rights and 

interest in the retained funds and assets acquired with such funds in proportion to the member's 

business with the organization can be determined at any time. Required records for this purpose 

include financial records that show the organization's revenues from all sources for each year 

and records, such as bills or receipts, showing the amount of each member's business annually 

with the organization.
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Section 3. Upon dissolution, after paying off all debts and obligations, members and former 

members will be entitled to receive their equitable share of all the proceeds remaining to the 

extent practicable as reflected by the records.

ARTICLE XIII

Amendments

These bylaws may be repealed or amended by a vote of the majority of the members present 

at any regular meeting of the corporation, or at any special meeting of the corporation called for 

that purpose, except that so long as any indebtedness is held by or guaranteed by the Rural 

Utilities Service, the members shall not have the power to change the purposes of the 

corporation so as to decrease its rights and powers under the laws of the State, or to waive any 

requirement of bond or other provision for the safety and security of the property and funds of the 

corporation or its members, or so to amend the bylaws as to effect a fundamental change in the 

policies of the corporation without the prior approval of the Rural Utilities Service in writing.

We certify that the foregoing bylaws were duly adopted by the members on

, , that the same are in full force and have not been amended.

Given under our hands and the seal of the corporation, this day of

, .

Secretary-Treasurer

President