Becoming Cooperative

What is a cooperative?

The cooperative is formed and registered under the provisions of the Cooperatives Act 1999 (Tas). It is a form of incorporation commonly used by trading and agricultural groups in industries such as dairy, rice and fishing. The cooperative is an option for organisations wanting to apply the cooperative principles. The principles are found in Schedule 2 of the Cooperatives Act 1999 (Tas).

Voluntary and open membership

Cooperatives are voluntary organisations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.

Democratic member control

Cooperatives are democratic organisations controlled by their members, who actively participate in setting their policies and making decisions.

Men and women serving as elected representatives are accountable to the membership. In primary cooperatives members have equal voting rights (one member, one vote) and cooperatives at other levels are organised in a democratic manner.

Member economic participation

Members contribute equitably to, and democratically control, the capital of their cooperative. At least part of that capital is usually the common property of the cooperative. They usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing the cooperative; benefiting members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership.

Autonomy and independence

Cooperatives are autonomous, self-help organisations controlled by their members. If they enter into agreements with other organisations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their cooperative autonomy.

Education, training and information

Cooperatives provide education and training for their members, elected representatives, managers and employees so they can contribute effectively to the development of their cooperatives. They inform the general public, particularly young people and opinion leaders, about the nature and benefits of cooperation.

Cooperation among cooperatives

Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.

Concern for the community

While focusing on member needs, cooperatives work for the sustainable development of their communities through policies accepted by their members. A cooperative can be formed by five persons (including corporations) and is a body corporate. A registered cooperative is not materially different from a company, except that it is subject to more and different restrictions. A cooperative is subject to the same tax liability as a company operating under similar articles and principles. It is different to a company in the sense that its main purpose is not the profit of its members but the advancement of the cooperative’s activities.

Trading and non-trading cooperatives

There are two types of cooperatives, namely trading cooperatives and non-trading cooperatives. Trading cooperatives are able to distribute surpluses of the cooperative to members by way of bonus shares, dividends or rebates. Non-trading cooperatives on the other hand are able to trade -despite the misleading name – but cannot distribute profits to members or shareholders.

Trading Cooperatives

Trading cooperatives require a minimum of 5 members and in order to register must lodge a number of documents including a disclosure statement and the Rules of the proposed cooperative. Both of these documents must be first approved at a formative meeting. Other requirements which must be addressed at this meeting, include the signing of the Cooperative’s application for membership, the election of Directors and the authorisation of a person to register the Cooperative with Consumer, Building and Occupational Services (CBOS). All relevant documents must be lodged along with a filing fee.

The disclosure statement, which must be addressed at the formation meeting, is a means by which members of the proposed cooperative are adequately informed of their financial involvement and liability in the cooperative. A draft of the disclosure statement must be provided to CBOS at least 28 days before the formation meeting is held. Upon receipt of the disclosure statement, CBOS will either approve the draft statement or suggest proposed amendments. Occasionally the statement will be refused. If approval is granted, CBOS will provide notice in writing to the person who submitted the statement.

The major areas that must be considered in any disclosure statement include:

• the rights and liabilities attached to shares (including the capital required for the cooperative);
• the nature of the proposed membership of the cooperative including details of active membership requirements and objects;
• details of how the cooperative will perform its activities;
• particulars of how the cooperative will be managed, which will include: details of proposed directors; proposed directors’ interests in any contract with the cooperative; day-to-day management; responsibility for accounting and financial functions of the cooperative; and the name of auditor together with written consent to appointment.

Detailed financial information will include:

• details of start up funding showing internal and external source of funds;
• property and assets;
• trading stock;
• market research;
• estimated costs of formation;
• any contracts required to be entered into by the cooperative;
• proposed contacts which the cooperative will assume once formed;
• projected cash flow budget in the format provided or by annexure; and
• projected income and expenditure statement in the format provided or by annexure.

Non-trading Cooperatives

Non–trading cooperatives require at least five members as well as a draft set of rules. These rules must be provided to CBOS at least 28 days prior to the initial meeting. The proposed non-trading cooperative must also complete an Application for Approval of Proposed Rules for a Cooperative and along with the prescribed fee and a copy of the draft rules submit to CBOS.

If CBOS is satisfied with the Draft Rules they can then be put to the initial meeting. The proposed rules must be passed by two-thirds of the proposed members attending the meeting.

Other requirements that must be complied with at this meeting include that proposed members must sign the Application for Membership of a Proposed Cooperative and a person must be authorised on behalf of the Cooperative to apply to CBOS for registration.

Once the application has been lodged with CBOS a certificate of registration will be issued to the cooperative.