What type of structure do you need?

PART TWO: FORMING A CO-OPERATIVE

What type of structure do you need?

There are two types of co-operatives – distributing co-operatives and non-distributing co-operatives. The following table describes the attributes of each.

	Distributing co-operative	Non-distributing co-operative
Additional capital from members	Members may have to purchase more shares or provide loans.	Members cannot be required to acquire more shares but may be required to lend to the co-operative.
Members	5 or more people or corporations to be active members (or 2 or more co-operatives or other entities for group co-operative) unless a lesser number is approved by the Registrar.	5 or more people or corporations to be active members (or 2 or more cooperatives or other entities for group co-operative) unless a lesser number is approved by the Registrar
Active member	Member must support an activity associated with the co-operative’s primary activity	Member must maintain relationship with co-operative’s primary activity or pay a regular subscription.
Upper limit of members	No upper limit on number of members	No upper limit on number of members.Board
Aim	Maximise returns to individual members; undertake commercial activities beyond the means of an individual person; members share in asset growth.	Undertake activities collectively, reducing the costs and increasing services to individuals.
Sectors	Usually economic. Includes wholesale, retail, transport, agriculture, manufacturing, property services, fish marketing, forestry services, community enterprises	Usually social. Includes agricultural produce handling, consumer, cultural or sporting clubs, professional organisations, child care, community services.
Able to make profit	Yes	No
Surplus	Maintain proportion to build capital of co-operative and share any remaining surplus among members depending on use	Cannot make distributions to members; surplus used to further the activities of the co-operative and/or donated to a charitable organisation.
Shares	Shares may be issued at a premium.	Shares may not be issued at a premium.
Bonus shares	Bonus shares may be issued to members from profits or on revaluation or sale of asset.	Bonus shares cannot be issued from asset revaluation or sale, or from profits.
Benefits to members	Dividends, rebates, reduced costs, enhanced services.	Lower charges for, or access to, services or products, shared equipment and business services.
Legal capacity	Same as natural person.	Same as natural person.
Disclosure statement	Disclosure statement required for formation and issuing shares and cooperative capital units (CCUs).	No disclosure statement at formation, unless required by Registrar.
Return to members on winding up	Share in assets; surplus funds distributed in proportion to share capital held.	Members may receive nominal value of shares; surplus funds distributed to another similar not-for-profit organisation approved by members.