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Australian Co-operative Glossary

Active member Democratic control Non-distributing co-operative
Board of Directors Demutualisation Primary activity
Cardinal stakeholder group Directors Private enterprise
Community buyout Distributing co-operative Public service mutual
Community enterprise Incorporated body Registrar of Co-operatives
Consumer co-operative Limited liability Rules
Co-operative Member Social business
Co-operative company Mutual Social enterprise
Co-operatives Act 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. More information.

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. More information.

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.

Co-operative

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 state or territory co-operatives law.

A co-operative is a unique form of private enterprise which 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.

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 refers to a small number of agricultural co-operatives in the Australian state of Victoria that are incorporated as companies because they were formed before Victoria's first co-operatives legislation in 1953.

Co-operatives Act

The Co-operatives Act is the legislation that regulates non financial co-operatives in Australia. Click here for links to the various state and territory Co-operatives Acts.

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.

Demutualisation

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

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

Also known as a trading 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 used for commercial activities such business services, buying groups, and agricultural, fish marketing and forestry services. More information.

Incorporated body

Is a legal person that has an existence separate from the persons who are its members. An incorporated body 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 and continues to exist 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 enterprise. Members are, however, liable for the amount, if any, unpaid on their shares, any charges payable by them in accordance with the co-operative's rules and any debts they owe to the co-operative. 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.

Member

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.

Mutual

A mutual is an organisation where there is a complete identity between the participants in the enterprise and its members; where the funding for and income of the entity is derived soley from its members. Mutuals can exist as incorporated associations, co-operatives or companies. Not all co-operatives are mutuals.

Mutuality principle

The mutuality principle is a taxation term that applies to an entity where persons contribute to a fund created and controlled for a common purpose and for the mutual benefit of its members.

Any surplus arising from the use of that fund for the common purpose is not assessable as income, even if distributed to the contributors. The principle is that taxable income must be derived by outside parties (a person cannot make a profit out of himself or herself). Typically, the principle has relevance with the activities between the entity and its members (mutual activities), but not to activities with non members for payment (trading activities).

Non-distributing co-operative

Also known as a non trading co-operative, a non-distributing 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 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 social, cultural and recreation services to its members. More information.

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 is a business or an organisation whose membership records are not open to the public. Private enterprises include proprietary companies, co-operatives and incorporated associations.

Public service mutual

Also known as a public sector mutual, a public service mutual is a government owned company which is contracted to deliver government services to the public. More information

Registrar of Co-operatives

Is a statutory officer created under Australian co-operatives legislation who is charged with the responsiblily for the administration of the legislation. The Registrar is usually is a senior state/territory government official. More information.

Rules

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. In a formal sense, the rules constitute a contract between members, officers, directors and the co-operative, all of whom are all required to observe the rules.

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 that 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.

Stakeholders

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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