> Co-operatives  > Operating as a co-operative  > Formation

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• Types of co-operatives
• Formation meeting
• Registration of co-operative
• Conversion

Types of co-operatives

Trading
A trading co-operative must have share capital, and have rules that authorise it to give returns or distribution on surplus or share capital.

Non-trading
A non-trading co-operative may or may not have share capital, and have rules that prohibit it to give returns or distribution on surplus or share capital. It may be an association of co-operatives, or federation of associations (of co-operatives).

It may engage in trade or commerce, but its members must not receive any financial benefit from trading, and profits are to be kept by the co-operative to further its primary activities. (Division 1)

Different obligations
The requirements are different depending on the type of co-operative, for example:

• A proposed trading co-operative must submit a draft disclosure statement to the Office of Consumer and Business Affairs before a formation meeting is due to be held. There is no disclosure statement requirement for a non-trading co-operative. (s17)
  
• The active membership provisions in rules of a trading co-operative must require a member to utilise an activity of the co-operative in connection with the carrying on of a primary activity. (s118, 120)
  
• The active membership provisions for a non-trading co-operative may be payment of a regular subscription to be applied in connection with a primary activity. (s121)
  
• A trading co-operative must provide an intending shareholder with a current disclosure statement. There is no equivalent obligation for a non-trading co-operative. (s144)
  
• A trading co-operative may issue shares at a premium, issue bonus shares and require members to take up additional shares. (s148 to 151)
  
• A co-operative must send members a copy of the full or concise report for a financial year. A non-trading co-operative may make the report available for inspection at the registered office. (Applied Corporations Act s314, 315)
  
• There are restrictions on takeover offers to purchase shares in a trading co-operative. (Part 11)
  
• A non-trading co-operative may give a written notice, as required under the Act, by publishing the notice in The Advertiser or a newspaper circulating in the area served by the co-operative. A trading co-operative may give a newspaper notice if the member's whereabouts are unknown or if CBS permits. (s451)

Formation meeting

Before a co-operative may be registered, a formation meeting must be held by at least five persons suitably qualified to be active members. (s16)

Disclosure statement and rules
A disclosure statement for a trading co-operative, and the rules for a trading or non-trading co-operative, must be approved by CBS and presented to a formation meeting.

The purpose of a disclosure statement to ensure that prospective members are adequately informed of the nature and extent of the person's financial involvement or liability as a member.

Drafts of the documents must be submitted to CBS at least 28 days (or shorter period if allowed by CBS) before the formation meeting is due to be held. (s17, 18)

The rules approved under s18 must be passed by two-thirds of the proposed members attending the meeting. (s16)

Approval of disclosure statement
CBS may give approval of a disclosure statement at any time before the formation meeting is held, with or without conditions. See page 6 of policy pdf.

A disclosure statement as submitted is approved unless at least five days before the formation meeting is due to be held, CBS gives written notice:

• of approval of a different disclosure statement; or
  
• that it is still considering the matter; or
  
• of refusal to approve the disclosure statement.

Approval of rules
The rules must include the matters specified in Schedule 1 to the Act, and be accompanied by a statement setting out any differences to the model rules referred to in s105.

CBS may:

• approve the rules as submitted; or
  
• approve different rules to those submitted; or
  
• refuse to approve the rules.

If the rules do not provide for any matter in the model rules, CBS may approve the relevant provisions of the model rules as rules of the co-operative. (s18, 102) See page 8 of policy pdf.

Registration of co-operative

Application for registration must be lodged within two months after the formation meeting, unless CBS extends this period. The application must be accompanied by two copies of the proposed rules, and a copy of the disclosure statement for a trading co-operative, signed and certified by the persons who acted as chairperson and secretary at the formation meeting. (s19)

Registration is straight forward if the rules were approved by CBS under s18 and the name is not likely to be confused with the name of another body corporate or registered business name.
(s20, 247, 248) See page 11 of policy pdf.

The incorporation of a co-operative takes effect on its registration by CBS. (s21)

Conversion

A trading co-operative may convert to a non-trading co-operative or vice versa, and a co-operative with share capital may convert to a co-operative without share capital or vice versa. (s28) See page 13 of policy pdf.

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