Co-operative Capital Units (CCUs): Empowering Australian co-operatives with flexible funding solutions

11 August 2023

Co-operative Capital Units (CCUs) provide an innovative way for Australian co-operatives to raise and manage capital while maintaining their democratic principles. For many years, the BCCM advocated for universal access to Co-operative Capital Units (CCUs) and the removal of red tape on capital raising through the adoption of nationally harmonised legislation regulating co-operatives by all states and territories in Australia. This was achieved in 2020 with Queensland adopting Co-operatives National Law, bringing it into line with other Australian states and territories.

CCUs represent a unique financing instrument that enables co-operatives to raise funds from their members as well as external investors, providing them with a financial stake in the co-operative’s success. Before the availability of CCUs, co-ops were largely limited to debt finance (whether through member shares, offers of debentures or from banks).

CCUs are similar to Mutual Capital Instruments (MCIs), which have been available for mutuals and co-operatives registered under the Corporations Act 2001 since 2019.

CCUs offer co-operatives several benefits as a means of raising capital. In particular, by allowing co-ops to raise equity capital from external investors, CCUs mean they can expand their financial resources beyond their member base. At the same time, CCUs do not entitle holders to a vote in co-op general meetings, leaving control in the hands of members.

Further, CCUs offered to members can encourage members to become more actively engaged in the co-operative’s affairs because they have a direct financial stake.

Finally, there is flexibility for the terms of issue of CCUs can be designed to suit the co-operative and investors – other familiar types of terms of issue can be adapted by the co-op, or a new form of investment structure can be developed. New issuances of CCUs or multiple classes of CCUs are also possible as a co-op grows.

There are situations where CCUs are particularly useful, such as when a co-op wishes to undertake a capital-intensive project, during a stage of rapid growth or to better manage the capital of retiring members (as the value of a retiring members’ shares can sometimes be returned as CCUs rather than cash) In these situations, CCUs may be a useful alternative or complement to bank finance or retained earnings.

Haystacks Solar Garden has is one powerful example of how flexible CCUs can be. Based in New South Wales, Haystacks Solar Garden enables individuals to invest together in community-owned solar power installations that can be used to generate discounts on their individual power bills. This is a useful model for renters, who often can’t access the financial benefits of rooftop solar that many Australian homeowners enjoy.

Haystacks Solar Garden issued CCUs to its members to raise the funds to build its solar power infrastructure The CCUs entitle each member who decided to make a CCU investment to receive rebates on their power bills, rather than a direct financial return from the co-op.

While CCUs are valuable in various situations, co-operatives need to assess their specific needs and circumstances to determine if CCUs are the most suitable financing option. In some cases, bank finance, member shares or another option may be the way to go. If your co-operative is interested in implementing CCUs, the BCCM can provide valuable assistance, guidance and referrals to trusted advisors. The BCCM also has the leading online resources for co-ops considering CCUs, such as information about raising finance and our Capital Builder. BCCM members have access to further member-only resources.

As the co-operative movement in Australia continues to thrive, the innovative utilisation of CCUs will undoubtedly play a pivotal role in shaping its future.