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Australian Co-operative Glossary
Active member Democratic control Non distributing co-operative
Board of directors Demutualisation Not-for-profit organisation
Cardinal stakeholder group Directors Primary activity
Community buyout Distributing co-operative Private enterprise
Community enterprise Incorporated body Rules
Consumer co-operative Limited liability Shares
Co-operative Member Social business
Co-operative company Mutual Social enterprise
Co-operatives National Law Mutuality principle Stakeholders

Active member
An active member is a person who maintains a relationship with a co-operative, either by purchasing or supplying goods or services, paying an annual subscription (non-distributing co-operatives only), or having another form of relationship such as having a child enrolled at a child care co-operative or being a tenant of a housing co-operative. Once a member ceases to be active in accordance with the co-operative's rules, their membership is cancelled.
Board of Directors
Like other incorporated bodies, a co-operative is governed by a Board of Directors which is responsible for managing the business of a co-operative for the benefit of members. Also see Directors.
Cardinal stakeholder group
Is the stakeholder group that a business or an organisation is established to serve. In a for-profit company, the cardinal stakeholder group is its investor shareholders. In contrast, the cardinal stakeholder of a co-operative are the members who use of its services, whether they be consumers, parents, farmers, businesses or tenants. Also see Stakeholders.
Community buyout
A community buyout occurs when members of the public purchase an existing business that is threatened with closure. In Australia, community buyouts usually occur in small rural communities where a business provides an essential service such as a general store, post office, petrol station or hotel. A community buyout usually results in the formation of a community enterprise incorporated as a co-operative. Example of a community buyout.
Community enterprise
A community enterprise is a business that is owned, controlled and used by the people who live in a particular geographic area. Membership of a community enterprise is voluntary and open to the general public. It is a sustainable business that does not rely on charitable donations or subsidies for its continued existence. Most community enterprises in Australia are incorporated as co-operatives.
Consumer co-operative
A consumer co-operative is an enterprise that aggregates the purchasing power of individuals and families to provide cheaper prices for goods and services and/or to obtain goods and services that would otherwise be unavailable. Consumer co-operatives can either operate as a community enterprise or a buying group among individuals with a common need.
A co-operative can be described as an organisation which is owned and controlled by the persons who use its services. In Australia, it is an incorporated body registered under Co-operatives Natioanl Law.

A co-operative is a unique form of private enterprise that is based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity.

Self help, expressed through mutual action as a group, provides the motivation for self reliance and assuming responsibility for taking control of one's own affairs. Democracy and equity sustain the solidarity of the group by ensuring that no individual member can secure power or gain advantage to the detriment of other members.

In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility and caring for others.

Seven internationally recognised co-operative principles act as guidelines by which co-operatives put these values into practice, and form the basis of co-operatives legislation in Australia and other countries.

Co-operative company
A co-operative company is a taxation term which describes a company or a co-operative that is eligible to receive taxation benefits under Division 9 of the Commonwealth Income Tax Assessment Act. The term also referred to a small number of agricultural co-operatives in Victoria which were incorporated as companies because they were formed before Victoria's first co-operatives act in 1953.
Co-operatives National Law
Co-operatives National Law (CNL) is a uniform set of state/territory laws which replaces co-operatives legislation enacted under the 1996 Co-operatives Laws Agreement. CNL continues the main features of the former Victorian Co-operatives Act 1996 while removing remaining differences between state and territory legislation. More information.
Democratic control
Democratic control means the final authority to control the affairs of a co-operative rests with the members who use its services. Members elect directors and vote on major decisions such as appointing the auditor, amending the co-operative's rules, approving the sale of its main assets and winding up the co-operative. Democratic control is exercised by members at general meetings or by postal ballot.

Every member has one vote only, irrespective of the amount of capital contributed by them or their use of the co-operative's services.

The term demutualisation is often used in Australia to describe a change in corporate form; from a co-operative or building society to a company limited by shares (usually a public company). More information.
Directors are those persons with legal responsibility for providing direction and supervision of a co-operative. In some small co-operatives, directors may be referred to as "committee members". Directors are elected by members and a majority of directors must be active members. Co-operative directors have similar duties to those of company directors. They can only act at a properly convened board meeting except where they are delegated to perform a function authorised by the Board of Directors.
Distributing co-operative
A distributing co-operative can return surplus funds to members, and members can share in the assets of the co-operative upon winding up. Distributing co-operatives must have share capital. This type of co-operative is typically used for commercial activities such retail trade, agriculture, fish marketing and forestry services, manufacturing and wholesale trade. More information.
Incorporated body
An incorporated body is a legal person that has an existence separate from the persons (individuals or corporate bodies) who are its members. It has the legal capacity of a natural person (a human being), and has the power to hold property, enter into contracts, and sue and be sued in its corporate name. It has perpetual succession (it continues irrespective of changes in membership) and exists until action is taken to dissolve it.

An incorporated body is also described as a corporation, a corporate body, a body corporate or legal entity. Companies, co-operatives, incorporated associations and aboriginal corporations are all incorporated bodies.

Limited liability
Like other incorporated bodies, a co-operative has limited liability. This means that the co-operative is responsible for its debts, not the members who own the organisation.

Members are, however, liable for the amount, if any, unpaid on their shares, any charges payable by them in accordance with the rules of the co-operative and any debts they owe to the co-op. In certain circumstances such as insolvent trading, directors may be held personally liable for the debts of the co-operative if they are found to have breached their duties under law.

A member is a term used to describe a legal owner of a co-operative. In a co-operative with shares, a member can also referred to as a shareholder.
A mutual can be described as an organisation where there is a complete identity between the participants in the entity and its members, and the funding for and income of the entity is derived soley from its members. Mutuals can exist as incorporated associations, co-operatives or companies.

Credit unions and customer owned banks are mutuals - only depositors can be members, all depositors must be members and income is derived from investing member deposits. Similarly, housing co-operatives are mutuals - only tenants may be members, all tenants must be members and income is derived from tenants.

Many Australian co-operatives are not mutuals because they provide services to both members and non-members. For example, a co-operative which runs a retail outlet is not a mutual if some of its customers are not members. Similarly, a health care co-operative would not be mutual if it provides health services to both member and non-member patients.

Mutuality principle
The mutuality principle is a legal principle established by case law that applies to an organisation where a number of persons contribute to a fund created and controlled for a common purpose and for the mutual benefit of its members.

The principle is that taxable income must be derived by outside parties (a person cannot make a profit out of himself or herself). Any surplus arising from the use of that fund for the common purpose is not assessable as income, even if distributed to the contributors.

Typically, the mutuality principle has relevance with the activities between the organisation and its members (mutual activities), but not to activities with non members for payment (trading activities). The principle does not apply to dealings between an organisation and a member that goes beyond a mutual arrangement and are in the nature of trade.

Non distributing co-operative
A non distributing co-operative a is a not-for-profit organisation which can be formed with or without share capital. While a non-distributing co-operative can conduct commercial activities, it is prohibited under co-operatives law from distributing surplus funds to members from profits, asset revaluation or upon winding up. This type of co-operative is commonly used to provide health, social, housing, cultural and recreation services to its members. More information.
Not-for-profit organisation
A not-for-profit organisation is an incorporated body which is prohibited under law from distributing surplus funds from its activities to the owners (members) of the organisation, either from profits, asset revaluation or upon winding up. Profits are usually retained within the organisation to further its mission. Some not-for-profits distribute funds for charitable purposes.

Not-for-profit organisations include non distributing co-operatives, companies limited by guarantee and incorporated associations.

Primary activity
A primary activity is an activity that is related to the main purpose of a co-operative and is used as the basis for determining whether or not a member is an active member. All co-operatives must have at least one primary activity.
Private enterprise
A private enterprise can be described as business or an organisation whose membership records are not open to the general public. Private enterprises include proprietary companies, co-operatives and incorporated associations.
The rules are the constitution of a co-operative and are a collection of clauses that describe the internal structure of a co-operative. In Australia, the rules include active membership provisions, qualification for members and directors, conducting board and general meetings, resolving disputes, and how surplus funds will be distributed.

The rules constitute a contract between members, officers, directors and the co-operative, all of whom are all required under Co-operatives National Law to observe the rules. Sanctions apply for contravention of the rules including expulsion.

Co-operatives National Law allows co-operatives to raise money by issuing shares to members. A share is personal property and, subject to CNL, is transferable and capable of devolution by will. Both distributing and non distributing co-operatives can issue shares, however the latter cannot pay a dividend on shares held by a member.
Social business
A social business is a cause-driven corporation with social objectives. People and institutions invest in a social business purely for social purposes, not personal profit. Investors/owners can gradually recoup the money they invest in the enterprise, but cannot take any profits beyond that point. More information.
Social enterprise
Social enterprises are not-for-profit organisations which aim to enhance the social well being of individuals and families. While there is no universally accepted definition of a social enterprise, its key distinguishing feature is its social purpose combined with the entrepreneurial spirit of private enterprise.

In Australia, social enterprises can either be member benefit organisations, such as co-operative social enterprises, or organisations that provide social services to stakeholders who are not the owners of the enterprise, such as charities.

Stakeholders are those who have a stake in the achievements of an organisation or business. There are three broad stakeholder groups. The prime or cardinal stakeholder group are its legal owners (in a co-operative, its members). The second are those who have a business relationship with the organisation/business, such as bankers, suppliers, agents, staff, contractors and government. The third group is the community and includes volunteers, customers, clients and the general public.

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