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• Debentures
• Deposits
• Compulsory loans
• Subordinated debt
• Charges
• Receivers, and other controllers of property
• Distribution of surplus or reserves
• Major transactions

Debentures

A debenture includes a document of undertaking by a co-operative to repay money lent to it, e.g. subordinated debt under s257. It may be secured by property.

The holder is a creditor with the right to recover the debt on a winding up in priority to shareholders. (s4, 257)

Non-members
Before an offer of debentures can be made to non-members, a Corporations Act style prospectus must be registered by CBS. (s258) See page 34 of the policy pdf.

Members and employees
If debentures are to be issued only to members or only to members and employees, a disclosure statement must first be approved by CBS. (s259) See page 35 of the policy pdf.

Deposits

A debenture does not include a passbook or other document that contains terms and conditions for deposits and enables further deposits and withdrawals to be made. (Reg 5) Therefore, there are separate provisions for deposits.

Authorisation
A co-operative authorised by its rules immediately before commencement of the Act, and with continued authorisation, may accept money on deposit from members and employees. The co-operative may only take deposits from other persons if the person had a deposit at commencement of the Act, and for as long as the person continues as a depositor.

Disclosure statement
A deposit taking co-operative must provide a depositor with a copy of a disclosure statement each year, which has been registered by CBS and is not more than 12 months old. (s2543 and Reg 19) See page 32 of the policy pdf.

Compulsory loans

If its rules allow, a trading co-operative may require its members to lend to the co-operative, for a term not exceeding 10 years.

Any proposal needs approval by special resolution, accompanied by a disclosure statement approved by CBS. (s262) See page 37 of the policy pdf.

Subordinated debt

A co-operative may incur subordinated debt, where the creditors' claims in a winding-up rank after other creditors but before shareholders. (s257)

Charges

Division 2 translates the charges provisions of the Corporations Act. (Schedule 3)

A charge is a form of debt that gives a creditor security interest and priority rights over the property of the charge. Charges include a fixed charge over some assets or a floating charge over other the whole or part of the property, business or undertaking of a co-operative.

Charges must be registered with CBS so that potential creditors are aware of their existence, and registered charges are subject to special rules relating to priorities.

Footnote 5: A special resolution passed by means of a special postal ballot (or, if exempted under s312 of the Act, a special resolution pursuant to the applied winding up provisions).

Receivers, and other controllers of property

Division three translates provisions of the Corporations Act relating to receivers, and other controllers of property of co-operatives. (Schedule 4) It deals with the manner in which a co-operative's management is replaced and control over all or part of its assets is given to a receiver or other controller.

A controller includes a person who has control of co-operative property under a charge, e.g. a mortgagee in possession. A secured creditor under power of a charge generally appoints a receiver. Appointment may be made because of a court order.

Distribution of surplus or reserves

The rules of a trading co-operative may authorise it to apply a part of its surplus or reserves to members by:

• a rebate on business done with the co-operative
  
• issue of bonus shares on the basis of business done with the co-operative or shares held by the member or
  
• issue of a dividend (limited to 20%) for shares held by the member.

Any rebate or dividend may, with the consent of the member, be applied as:

• the issue of bonus shares or
  
• a loan to the co-operative. (s268 and Reg 21)

Major transactions

Major transactions, including an acquisition or disposal of substantial assets, must be approved by special resolution by means of special postal ballot. An approved disclosure statement must accompany the proposal. (s195 and 270)

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