What is a co-operative?

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Definition of a co-operative

A co-operative is a democratic organisation, owned and controlled by its members for a common benefit. Co-operatives are traditionally based on values of self-help, self-responsibility, equality and solidarity.

Members of a co-operative can benefit from economies of scale through the combined purchasing, distribution or marketing power or influence of the group. They share in the group’s investment and operational risks and losses, as well as its benefits.

Voting rights

Unlike private companies, co-operatives do not have a limit on membership numbers. Their ‘one member, one vote’ system also differs from public companies, where voting rights are linked to share ownership.

In a co-operative:

  • all members have equal status and voting rights
  • no member can hold more than 20 per cent of shares
  • all active members can nominate themselves as directors and elect directors
  • capital is used for the group’s common interest.

Regulation

Co-operatives are administered under the Co-operatives National Law, applied in Victoria by the Co-operatives National Law Application Act 2013. The Co-operatives National Law applies in Victoria, New South Wales, South Australia, Tasmania and the Northern Territory. The Australian Capital Territory, Queensland and Western Australia are yet to adopt the legislation.

Public register

We keep a public register of Victorian co-operatives, authorise their registration and enforce the Co-operatives National Law in Victoria. To search the public register for a registered co-operative in Victoria, view our Co-operatives and limited partnerships search page.

Note: The name of a registered co-operative always includes the word ‘Co-operative’, ‘Co-op’ or ‘Coop’ and ends with ‘Limited’ or ‘Ltd’.

What can a co-operative do?

Co-operatives can be involved in a variety of social and commercial activities. A co-operative may carry out any activity defined within its rules.

Co-operatives generally fall into four categories:

  • Consumer – buying and then selling goods to members at a competitive rate
  • Marketing – branding, marketing and distributing members’ products and services
  • Service – providing services to members, such as health, electricity or housing
  • Community – resource, information and skill sharing that encourages ownership and participation.

Distributing and non-distributing co-operatives

Co-operatives can be established as either a distributing or a non-distributing organisation. You need to specify the type of co-operative you wish to establish when it is formed.

Distributing co-operatives

A distributing co-operative (formerly known as a 'trading' co-operative) may distribute any surplus funds to its members.

It must have share capital and at least five active members. If less than five active members wish to form a co-operative, they must get permission from the Registrar.

A co-operative can distribute part of its surplus to members by way of bonus shares, dividends or rebates. When a distributing co-operative is formed, each member must buy the minimum number of shares stated in the co-operative's rules. If the co-operative is wound up, members receive a return on the capital they invest.

Non-distributing co-operatives

A non-distributing co-operative (formerly known as a 'non-trading' co-operative) will use surplus funds to support its activities. Funds are not distributed to members. Non-distributing co-operatives are likely to be more appropriate for a community organisation.

A non-distributing co-operative must also have at least five active members, but must not distribute surpluses to its members. It can have share capital, but this is optional. If the co-operative is wound up, members can only get back, at most, the original value of their shares in the co-operative’s capital.

Should you form a co-operative?

To successfully form a co-operative, you should be able to answer ‘yes’ to all or most of the following questions:

  • Will membership be voluntary and open to any person who would be able to maintain an active relationship with the co-operative?
  • Will the co-operative be run on the basis of one member, one vote? (If the co-operative is a co-operative group, each member organisation must be represented democratically)
  • Will financial decisions be made democratically?
  • Will surpluses be distributed only for developing the co-operative, benefiting members in proportion to their transactions within the co-operative, paying a dividend or supporting activities by members?
  • Will the co-operative be an autonomous, community-focused organisation, controlled by its members?
  • Will there be at least five members who are eligible as members under the co-operative’s proposed rules?
  • If you are forming a co-operative group, will it contain two or more member co-operatives?

Our involvement

We maintain the register of co-operatives in Victoria and assist with matters including:

  • registering co-operatives
  • receiving and processing:
    • annual reports
    • any changes, including to directors and the rules.

We do not conciliate disputes within co-operatives. For more information on resolving issues within your co-operative, view our Handling disputes in a co-operative page.

Where to next

Last updated: 17/11/2016

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