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Community Buyout - Case Study
Kaniva Community Co-operative Ltd

This is a case study of how one remote Australian community saved their town after a major oil company decided to decommission their only retail fuel outlet in 2004.

The Victorian town of Kaniva is located 400 km west of Melbourne on the Western Highway to Adelaide, and is the last town before the South Australian border. The nearest town is Nhill, 40 km to the east.

Like other Australian small rural towns, the continuing centralisation of services to larger towns and regional centres has had a great impact upon the distances Kaniva residents' face in travelling to access these services, particularly the elderly and infirm.

Community leaders feared that losing the town's only fuel outlet will increase the population drift from Kaniva to larger towns and regional centres, threatening businesses and jobs that are needed to sustain the long-term viability of the community.

Background

In mid 2002, an administrator was appointed to run Balgee Oil, a Ballarat based regional fuel distributor, which operated the Kaniva petrol station for Mobil Australia. In April 2004, after failing to find a buyer for the service station, the administrator decided to close the business.

The closure of the petrol station would have resulted in Kaniva's 900 residents having an 80km round trip to purchase fuel from the nearest outlet in Nhill.

In response to community concern, the Shire of West Wimmera brokered a deal between Scott's Petroleum of Mount Gambier and Mobil Australia to continue to have the petrol station remain open until a local buyer was found. Eighteen Kaniva residents and businesses formed a group to take the position of "buyer of last resort" if no buyer came forward.

Following a burglary at the petrol station in September 2004, Scotts Petroleum withdrew from the business. With no buyer coming forward, the group, acting on legal advice, formed a proprietary company, the Kaniva Community Roadhouse Pty Ltd (KCR), to buy the site. Members of the group contributed $82,000 towards the estimated $400,000 needed to purchase and retank the site and fund the business.

After reviewing the viability of the business, KCR entered into a contract to purchase the land and building. Mobil then signed an agency agreement with the company for the supply of fuel until settlement took place after the removal of the old fuel tanks later in the year.

Why form a co-operative?

The limitations of a proprietary company soon became apparent to KCR, which threatened to scuttle the project. Up to 200 Kaniva residents, businesses and community groups had previously offered to support the purchase of the fuel outlet, however, a proprietary company can have no more that 50 non employee shareholders.

With the prohibitive cost of forming an unlisted public company, the KCR board decided to explore the idea of forming a co-operative, which does not have the same restrictions as a proprietary company.

Seeking help

After receiving an urgent call for help, Co-operative Development Services Ltd director, Tony Gill, meet with the KCR board of directors and canvessed various options for forming a co-operative. The preferred option was to convert the company to a co-operative, however, due the anticipated time delay in deregistering the company, the board decided to form a new entity, with KCR to become a subsidiary of the co-operative, holding title to the site.

KCR engaged CDS in October 2004 to organise the registration of a trading co-operative. This involved holding meetings with the KCR board, drafting rules that met the specific requirements of the enterprise, preparing a disclosure statement which would satisfy Consumer Affairs Victoria and chairing a public meeting to form the co-operative.

Co-operative formed

Nearly 200 Kaniva residents attended the formation meeting on 7 December 2004 and pledged over $280,000 to the enterprise. The Kaniva Community Co-operative Ltd was subsequently registered on 14 December 2004.

After a setback upon the removal of the old fuel tanks, the petrol station was reopened in May 2005 as a community enterprise.

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