Co-operative

What is a co-operative?

As a registered legal entity, a co-operative differs from a company in that it requires at least five shareholders, each of whom hold equal voting rights. Co-operatives apply the concepts of sharing, democracy and delegation in order to benefit all members. Generally, all members are expected to participate and share the responsibility of running the organisation.

Co-operatives are regulated by Consumer Affairs Victoria (CAV).

If you’re unsure whether a co-operative is the right business structure for your business, use our step-by-step guide to help you decide.

Advantages of a co-operative

Advantages of co-operatives are:

Equal votes

All shareholders have an equal vote at general meetings regardless of their shareholding or involvement in the co-operative.

Lower debt risk

Shareholders, directors, managers and employees have no responsibility for debts of the co-operative unless those debts are caused recklessly, negligently or fraudulently.

Age of members

Members, other than directors, can be under 18, though these members cannot stand for office and do not have the right to vote.

Support

The Co-operative Federation of Victoria Ltd and Consumer Affairs Victoria (CAV) can provide you with assistance when establishing a cooperative.

More control

A co-operative is member owned and controlled, rather than controlled by investors. All members and shareholders have to be active in the co-operative.

Disadvantages of a co-operative

Disadvantages of co-operatives are:

Number of members

There must be a minimum of five members.

Limited profit distribution

There is usually a limited distribution of surplus (profits) to members/shareholders, and some co-operatives may prohibit the distribution of any surplus to members/shareholders.

Difficulty attracting members

As co-operatives are formed to provide a service to their members rather than a return on investment, it may be difficult to attract potential members/shareholders whose primary interest is a financial return.

One vote only

Even though some shareholders may have a greater involvement or investment than others, they still only get one vote.

Ongoing educational requirements

Co-operatives require ongoing cooperative education programs for members.