PEOPLE MEETING COMMON ECONOMIC, SOCIAL AND CULTURAL NEEDS TOGETHER
Co-ops are businesses that create value to share among their members and their communities. They are the original ‘social enterprises’. In a co-op, ownership and control is shared equally amongst members who use their co-op. Members of a co-op are people, other businesses, employees or other community stakeholders who work together to achieve a common purpose or outcome. Better buying power, sharing the costs of running a business, better jobs, education and health care are all value outcomes that can be achieved through co-operatives.
All co-operatives around the world are guided by the same seven principles:
- Voluntary and open membership
- Democratic member control
- Member economic participation
- Autonomy and independence
- Education, training, and information
- Co-operation among co-operatives
- Concern for Community
Co-operatives are flexible: distributing vs non-distributing
There are two types of co-operative: ‘distributing co-operatives’ and ‘non-distributing co-operatives’.
A distributing co-operative can distribute any and all of its annual profits to active members. This can incentivise members to strive for the co-op’s commercial success. A distributing co-operative must have share capital and members must own the minimum number of shares specified in the co-op rules.
A non-distributing co-operative can’t share profits with members. All profits must further the co-op’s purpose. It does not need to issue any shares to members, but this isn’t prohibited. Non-distributing co-operatives meet the ‘not for profit’ definition for Australian taxation purposes.
Types of members
Co-operative members must be active. This ensures co-operatives have a social as well as financial mission.
Members jointly purchase programs and services, improving value for money and access to expert advice.
The members of a worker co-operative are the employees of the co-operative. This empowers employees with a stake in the organisation’s decision-making process.
Smaller businesses can group together in producer-owned co-operatives (also known as enterprise co-operatives) to share supply chain costs to reach markets that would otherwise be dominated by large investor-owned firms.
Multi-stakeholder co-operatives formally allow for governance by representatives of two or more “stakeholder” groups within the same organisation, including consumers, producers, workers, volunteers or general community supporters.
Co-operative legal structures
Members aren’t liable for debts
Co-operatives are incorporated bodies, so members are not liable for the co-operative’s debts. The co-operative it is a limited liability entity. The co-op is a separate legal identity, so it can buy, own or sell property itself.
A co-operative is an incorporated body, with a board of directors who manage the business of the co-operative and are accountable to members.
One member, one vote
Co-operatives are defined as democratic organisations controlled by their members, who each have one vote, no matter how many shares they hold. They will subscribe to the seven international co-operative principles.
To meet the definition of a co-operative, a group may incorporate under any of the following Australian incorporation acts:
- The Co-operatives National Law
- Every state and territory has its own co-operatives legislation. The same or consistent legislation is in place in every state and territory except Queensland. The Co-operatives National Law (CNL) is most appropriate because the co-operative principles are baked into the legislation. Under other incorporation acts these principles must be inserted using the co-operative’s constitution, which can be precarious for members.
- Incorporated Associations legislation
- Each state and territory has a different associations act
- Corporations Act 2001 (Cth)
- Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth)
- Legal Models Comparison Matrix
The Co-op Advantage
Why are co-ops different?
Co-operatives focus on delivering their mission to their members, rather than maximising return to investor shareholders through profit distribution and capital growth. This means co-ops can pursue
Co-operatives help Australia maintain a fair economy
- Provide competition and choice for consumers in a wide range of market
- Treat customers fairly and honestly
- Share the benefits of business and wealth
- Provide quality employment and independence for Australians
- Provide services to communities that are valued and needed
Provide competition and choice for consumers in a range of markets
Co-operatives and mutuals are good for the markets that they operate in. Their presence means that there is a permanent competitive pressure on profit maximising firms, keeping prices lower for everyone. In financial services
Businesses that plan for the
long term rather than short term
Without the need to respond to
Their success is clearly shown by the longevity of mutual businesses, many of which have traded continuously for over 100 years.
Businesses that treat customers fairly and honestly
Research consistently shows that the public trusts co-operatives and mutuals more than other types of business. This is because they have been established to serve their customers or members, rather than investing shareholders. This means that not only do they have an
Share the benefits of business and wealth throughout the country
Co-operatives and mutuals are successful businesses that share their profits
Provide employment opportunities for Australians
Co-operatives provide employment opportunities in all parts of Australia – sometimes a co-op is the largest employer in town.
Provide services to communities that are valued and needed
Housing, human services