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Types of Australian co-operatives

Important Notice

The information below gives an overview of some common features and differences between the types co-operatives 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 law allows the formation of two types of co-operatives - 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 types 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 have an active relationship with the co-operative.
  Voting is attached to membership - 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, this type of co-operative is subject to a disclosure regime under Co-operatives National Law.

A distributing co-operative has the following characteristics -

  A member must support an activity associated with the primary activity of the co-operative, e.g. a dairy farmer is required to deliver an agreed quantity of milk to the co-operative in any given period to remain an 'active' member.
  A distributing co-operative must have a share capital.
  Disclosure statements are required for formation and issuing shares.
  Bonus shares can be issued to members upon asset sale or revaluation.
  Shares can be issued at a premium.
  Members may be required to subscribe to more shares or lend money to the co-operative.
  Surplus funds 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 from winding up is distributed to members in proportion to share capital held by a member.

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 of the co-operative, the co-operative is not subject to the disclosure regime that applies to a distributing co-operative.

A non distributing co-operative has the following characteristics -

  A member must maintain a relationship with the co-operative associated with its primary activity, e.g. a parent must have a child enrolled in a child care co-operative to be an 'active' member. Payment of a regular subscription by a member is also sufficient to establish 'active' membership of a non distributing co-operative.
  No disclosure statement required for formation or issuing shares unless required by the Registrar of Co-operatives.
  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-operative.
  Profits made from trading are reinvested in the co-operative and/or distributed to a charitable organisation.
  Surplus funds from winding up are distributed to another similar 'not-for-profit' organisation approved by members of the co-operative.

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