Important Notice
The information below gives an overview of some common features and
differences between the classes of co-operative that can be registered in
Australia. It does not
cover the whole of the
Co-operatives National Law.
The information is not a substitute for
professional advice and
should not be relied on as legal advice.
Introduction
Australian
Co-operatives National Law
allows the formation of two classes of
co-operative - a
distributing
co-operative
and a
non distributing
co-operative,
in recognition that co-operatives can provide both economic and
social benefits to people.
Common features of both classes of co-operatives
Legal capacity of a natural person.
Can conduct commercial activities.
Can own subsidiary companies.
Minimum of five members over 18 years of age.
Members can be individuals and/or corporations.
Members have
limited liability.
Members must support an activity related to the
primary activity
of the co-operative.
Voting is attached to membership, not shareholding - one member one vote.
Members elect a board of directors to manage the business of the co-operative.
Directors have fiduciary and common law duties.
Annual General Meetings are held once a year.
Annual financial reports are available to members.
Distributing co-operative
A
distributing
co-operative (previously known as a
trading
co-operative) is formed to undertake a commercial venture where
members can share in profits made from trading and the asset growth of the
co-operative. This type of co-operative is popular with primary producers,
other small businesses and
community enterprises.
Because a
distributing
co-operative
can provide a
pecuniary benefit to members, it is subject to a
disclosure regime under
Co-operatives National Law.
A
distributing
co-operative has the following characteristics -
It must have
share capital.
Shares can be issued at a premium.
Disclosure statements are required for formation and issuing shares.
Bonus shares can be issued to members upon asset sale or revaluation.
Members may be required to subscribe to more shares or lend money to the
co-op.
Surplus funds arising from trading can be distributed to members by way of -
a
limited dividend
on
shares
held,
bonus shares and/or
a rebate in proportion to the business done by
the
member with the co-operative.
Surplus funds arising from winding up is distributed to members in proportion
to the share
capital held by a member in accordance with the co-operative's
rules.
Non distributing co-operative
A
non distributing
co-operative (previously known as a
non trading
co-operative) is a
not-for-profit organisation
which can be formed
with or without shares. While a
non distributing
co-operative can conduct commercial activities, it is prohibited under law to
distribute surplus funds to
members from profits, or upon winding up (except share capital if solvent).
As members of a
non distributing
co-operative receive no pecuniary benefit from their ownership, the
co-operative is not subject to the disclosure regime that
applies to a
distributing
co-operative (except as directed by the Registrar of Co-operatives).
A
non distributing
co-operative has the following characteristics -
Can be formed with or without share capital.
No disclosure statement required for formation or issuing shares.
Shares cannot be issued at a premium.
Bonus shares cannot be issued either from asset revaluation or sale, or from
profits.
Members cannot be compelled to acquire more shares or lend money to the
co-op.
Profits made from trading are reinvested in the co-operative and/or distributed
to a charity.
Surplus funds from dissolution are distributed to another
not-for-profit
organisation approved by members of the co-operative.