PART TWO: FORMING A CO-OPERATIVE
Drafting the disclosure statement
Prospective members of the co-operative will need to know how much they are committed to contribute financially and what they will be liable to pay in the future.
A distributing co-operative’s formation disclosure statement must have enough information to ensure prospective members are aware of their financial involvement or liability as a member, including, where applicable:
- The estimated costs of the co-operative formation.
- The active membership provisions, including the type and minimum level of activity of members.
- The capital the co-operative needs at the time for formation.
- The rights and liabilities attached to holding shares.
- The co-operative’s projected income and expenditure for the first year of operation (if it’s a small co-operative, cash flow estimates are sufficient).
- Information about any pre-registration contractual obligations that were entered into.
If a non-distributing co-operative is required by the Registrar to have a disclosure statement, it must contain whatever information is required by the Registrar.
A distributing co-operative cannot advertise an offer of shares to people who are not shareholders in the co-operative without a current disclosure statement relating to the shares which has been approved and registered by the Registrar.
The draft disclosure statement must be submitted to the Registrar with the co-operative’s rules, and written notice of intention to apply for registration as a co-operative, before the formation meeting is held.
Distributing co-operatives must have a disclosure statement drawn up, approved by the Registrar and then presented at the formation meeting. The Registrar may exempt a co-operative if compliance would be inappropriate or impose an unreasonable burden.
If the draft disclosure statement for a non-distributing co-operative was not provided to the Registrar, and the Registrar gives written notice that one is required to be presented to the formation meeting, the notice will specify the time by which the draft disclosure statement must be submitted to the Registrar.
The Registrar is taken to have approved the formation disclosure statement at the end of the period of 28 days after it was submitted to the Registrar, unless, before then, the Registrar gives written notice that the Registrar has approved a different formation disclosure statement, is still considering the matter, or refuses to approve it.
Anyone who is not already a shareholder and who intends to buy shares in a co-operative must be given a current disclosure statement.
A new disclosure statement must be registered within 14 days if there is a change in the rights or liabilities attached to any class of shares, or there is a significant change in the financial position or prospects of a co-operative.
