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• General
• Class and payment
• Disclosure for first issue
• Additional Shares
• Bonus shares
• Beneficial and non-beneficial interests
• Sale or transfer
• Purchase and repayment

General

Shares may only be issued to active members, and each member has one vote irrespective of the number of shares held. (Part 6, s145, 175)

The share capital of a co-operative varies in amount according to the nominal value of shares that are subscribed to from time to time (s145).

Class and payment

A co-operative may have more than one class of shares providing the co-operative principles are complied with.

At least 10% of the nominal value must be paid before a share is allotted. (s145, 146)

Shares must not be issued at a discount, and only a trading co-operative may issue shares at a premium. (s147, 148)

Disclosure for first issue

A trading co-operative must provide a current disclosure statement to a person who is not already a shareholder before the person becomes bound to acquire shares.

For recently formed co-operatives, an approved formation meeting disclosure statement under s17 may be used if the statement is still current.

A disclosure statement, for the purpose of the first issue of shares to a person, stops being current if:

• there has been a change in the rights or liabilities attaching to any class of shares;
  
• there has been a significant change in the financial position or prospects of the co-operative; or
  
• any of the next financial, directors' or auditors' reports become available (s144). Footnote 2: The next reports become available when copies are sent to members pursuant to the applied Corporations Act provisions (S 314, 315 of Corporations Act as modified for co-operatives).

Because these financial and other reports are required to be prepared on an annual basis, this last point means a disclosure statement would have a life of about 12 months.

Except where a formation disclosure statement may be used, a disclosure statement (Form 57) must be filed with CBS, containing:

• the rights and liabilities attaching to shares;
  
• a copy of the last annual report (unless it has been given or made available to intending members under s72);
  
• any significant change since the last annual report about the financial position and prospects; and
  
• any information CBS requires. See page 19 of policy pdf.

Within 14 days of a disclosure statement ceasing to be current:

• CBS must be notified in writing; or
  
• a current disclosure statement must be filed with CBS. (s144, 144A) CBS may exempt a trading co-operative from a requirement of s 144 or 144A. See page 22 of the policy pdf.

In summary, a trading co-operative that proposes the first issue of shares to a new or existing member must file a current disclosure statement with CBS, and include in it any further information that CBS asks for, before the statement is provided to the intending shareholder. This filing process needs to be repeated at least each 12 months, subject to any new memberships and currency of the statement.

Some Corporations Act provisions apply for an offer or invitation of shares to persons who are not already shareholders (s145A):

Application money to be held in trust
The application money received for shares offered under the disclosure statement must be held on trust until the shares are issued or the money returned, and must not be accessed by the co-operative until after the shares are allotted. Depositing any application money received into a trust account with a financial institution would satisfy this requirement.

Restrictions on advertising and publicity
This controls advertising and promotion in order to encourage subscribers to rely on information provided in a disclosure statement, rather than information supplied through any advertisements or other promotion.

Consent of person to whom a statement attributed
A disclosure statement may only include a statement of, e.g. an expert, if the person consents and the disclosure statement refers to that consent.

Circumstances where any minimum subscription condition not met
If a disclosure statement states that the shares will not be issued unless applications for a minimum number of shares are received or a minimum amount is raised, the shares must not be issued until that condition is fulfilled. If it is not fulfilled within four months after the disclosure statement date, the money received must be repaid by the co-operative.

Additional Shares

If authorised by its rules, members of a trading co-operative may be required to take up or subscribe for additional shares in accordance with a proposal approved by special resolution. The proposal must:

• be accompanied by a disclosure statement approved by CBS explaining the purpose of the funds to be raised;
  
• show the total number of additional shares to be issued and the basis on which they are to be apportioned among members, and;
  
• disclose that a member may give notice to the board, before the passing of the special resolution, that the member resigns on it's passing. (s150) See page 23 of the policy pdf

Bonus shares

The rules of a trading co-operative may authorise the issue of bonus shares out of assets sold at a profit or asset revaluation reserves. Each issue requires approval by special resolution, must be fully paid, and the nominal value of issues during any 12 month period must not exceed 20% of the nominal value of issued share capital immediately before the issue. (s151, 152)

Notice of a proposal must be accompanied by certain particulars including any acquisitions of shares in the co-operative by each of the directors or their immediate relatives in the preceding three years, and certification by two directors that the issue would not be imprudent and that they know of no circumstances why the issue should not take place. (s153)

Beneficial and non-beneficial interests

A person must advise a co-operative of beneficial and non-beneficial interests in shares of the co-operative and of changes in those interests. The register of members must record any beneficial or non-beneficial share holdings. (Division 4)

Sale or transfer

A share in a co-operative cannot be sold or transferred except on death of a member, or to a person appointed to administer the estate on incapacity of the shareholder, or with the board's consent to a person who it is reasonably believed will be an active member.

No sale or transfer must be consented to by the board if it would result in the nominal value of the shares exceeding 20% of the nominal value of the share capital of the co-operative. The rules may specify a lower percentage. (Division 5)

Purchase and repayment

A co-operative's rules may authorise:

• the repurchase of shares at the request of a member; and
  
• the repayment, with the member's consent, of the whole or any part of the amount paid up on any share when the amount is not required by the co-operative.

The total amount of these transactions in any financial year is limited to the sum of:

• 5% of the nominal value of the issued share capital of the co-operative at the end of the previous financial year; and
  
• any additional share capital subscribed for during the year.

The members may by special resolution exempt the co-operative from the limitation in respect of a particular financial year. Footnote 3: The amount would not exceed the nominal value of the share.

The repurchased amount may be less than the nominal value if it is the net shareholder's equity per share as disclosed in the books of the co-operative, or in accordance with the rules of the co-operative.

The shares may not be purchased or amounts repaid in cases of potential or actual insolvency.(s171) This section does not apply if the member has resigned or has been expelled from the co-operative or the member's membership has been otherwise cancelled.

Footnote 3: The amount would not exceed the nominal value of the share

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