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Classes of Australian co-operatives

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.

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