Membership rights and responsibilities - co-operatives

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Definition

A member of a co-operative can be:

  • someone who has signed the application for registration
  • someone admitted by the co-operative under its rules
  • members of a merged co-operative
  • a corporation (if allowed by the co-operative rules)
  • a 'minor' (if the co-operative rules do not have age restrictions). A minor cannot hold office, be a director, or vote, unless their membership is joint with someone who has these rights.

The minimum number of members allowed in a co-operative is:

  • two co-operatives (in the case of a co-operative group)
  • five active members, or a lesser number if approved by the Registrar.

It is an offence for a director of a co-operative to knowingly operate with less than the minimum number of members.

Register of members

Under the Co-operatives National Law, a co-operative must maintain a register of its members. The register must include:

  • the name and address of each member
  • the date the member was admitted by the board to the co-operative
  • if the co-operative has share capital, a statement for each member that shares are held for, stating:
    • the number of shares held beneficially and non-beneficially
    • the identifying number of each share held
    • the date on which the shares were allotted
    • the amount paid or agreed to be considered as having been paid on the shares.
  • the date and circumstances when a member's membership was cancelled (if applicable)
  • a statement of the shares and the date they were purchased or forfeited
  • the date of the repayment of share capital or the date of disposal and the name and address of the person or body the share capital was repaid to (if there was a conversion to a co-operative without share capital).

Members have the right to inspect this register and make a copy of entries free of charge, unless the co-operative requires a fee for copying.

Ending a membership

A membership can end if the:

  • membership was cancelled due to inactivity. For more information, view the Cancellation of inactive memberships section below
  • member is expelled or resigns under the rules of the co-operative
  • member becomes bankrupt or insolvent (unless the rules state otherwise)
  • member dies
  • contract of membership is cancelled due to misrepresentation or mistake - for example, if the parties enter into a contract that has an error, the membership can be terminated due to the misrepresentation
  • corporation is deregistered (if the member is a corporation).

The co-operative rules must outline when members can be expelled or suspended, and the rights and responsibilities of expelled and suspended members.

Note: The rules may require that a member's expulsion or suspension must be decided through a special or ordinary resolution. If the rules are silent on this, then the member's expulsion or suspension must be decided through an ordinary resolution.

Cancellation of inactive memberships

The co-operative rules must include 'active membership provisions', which outline what a member must do to be considered 'active'. It is the board's responsibility to decide whether or not a member is active.

Notification of intention to cancel membership

The board must give the inactive member at least 28 days' notice of their intention to cancel the membership. There is no requirement for the board to inform the remaining members.

The board must declare a membership cancelled if:

  • the whereabouts of a member is not known, and has not been known for at least three years (or a shorter time if stated in the co-operative rules)
  • the member is currently inactive, and has not been active at any time during the last three years (or a shorter time if stated in the co-operative rules).

Failure to cancel a membership due to the above reasons incurs a maximum penalty of $2,000.

The board must not declare a membership cancelled due to inactivity if:

  • the co-operative is insolvent
  • the co-operative is under administration
  • a compromise or arrangement is being administered in relation to the co-operative
  • the co-operative is in the process of being wound up
  • a receiver of any property of the co-operative is currently in place
  • a co-operative with intention of becoming a company has sent the Registrar a copy of the minutes of the co-operative that show the intended change.

The board can by ordinary resolution (majority vote) defer the cancellation of a membership for up to one year.

If a member believes the cancellation of their membership was unreasonable, they can appeal the decision by applying to the Victorian Civil and Administrative Tribunal (VCAT) To apply, visit the VCAT website.

Rights and liabilities of members

A member can only exercise their rights once:

  • their name appears in the register of members
  • they have paid for their membership, or acquired a share or interest as required by the rules.

If a person wants to become a member, they have the right to a copy of:

  • the co-operative rules
  • all relevant special resolutions that have been passed by the co-operative (excludes special resolutions for an amendment of the rules)
  • the most recent financials
  • any fees or regular subscriptions to be paid. If this is not provided, and the person becomes a member, they are not required to pay entry fees or regular subscriptions.

If a co-operative has share capital, the member is liable for:

  • any unpaid amounts on the shares they hold
  • any charges payable to the co-operative as required by the rules. (This is also a requirement if the co-operative does not have share capital).

A member may also have liabilities regarding any trade or other business they conduct with the co-operative, including fines imposed by the co-operative.

Fees and regular subscriptions

The co-operative rules may require members to pay entry fees and regular subscription, and also repay these fees and subscriptions when their membership ends. If the rules do not provide for repayment, the entry fees and subscriptions do not have to be paid back.

The regular subscription amount may be based on the:

  • value of the business the member has with the co-operative, or
  • on profits earned by the co-operative.

Fines

If the rules allow, a co-operative may fine a member for breaching its rules. The rules must also state the maximum fine that can be imposed.

A fine must not be imposed unless the member:

  • is given written notice stating the reason for imposing the fine
  • has had reasonable opportunity to appeal their case to the board in person or in writing.

 

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