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Australian Co-operative Glossary
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.
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
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.
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
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.
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 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. Not all co-operatives are mutuals.
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.
More information.
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.
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.
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.
Shares
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
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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