Co-operative operative Matters 5 th November 2007 International Baccalaureate (IB) Programme Unit: Business and Management Verdala International School - Malta Rolan Micallef Attard Certified Public Accountant & Co-operative Consultant email: rolan@yesitmatters.com web: http://www.yesitmatters.com 1 Co-operative operative statistics Source: http://www.ica.coop/coop/statistics.html 2 1
Maltese Co-ops 60 years of legal structure 61+ live societies & growing 5,000 Members (1 in 80 of the population) Source http://www.coopsboard.org http://www.coopsboard.org Picture courtesy of NASA 3 What is a Co-operative 1844 - The Rochdale Equitable Pioneers Society A coco-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointlyjointly-owned and democraticallydemocratically-controlled enterprise. enterprise. 4 Source: International Co-operative Alliance (ICA) 2
The Co-operative operative Model The co-operative operative model can be applied to any business and social activity 5 Types of Co-operatives operatives Producer, wholesale and retail co-operatives agriculture, fisheries, producer organisations, shops, hotels Workers' co-operatives orchestras, transport (buses & taxis), professional services, cleaning services Consumer co-operatives supermarkets, utilities, co- operative banks, housing co- operatives Social co-operatives child-care, care, health care, schools, burial, sports, cultural, voluntary work 6 3
Producer, wholesale, retail co-ops ops Timber Finland 9,000,000+ turnover Metsäliitto Cooperative - the parent company of the Metsäliitto Group. At the start of the 20th century forest owners realised they could increase their bargaining power by joining forces to sell their timber, enabling them to improve their forest management methods, and thus raise the quality of privately owned forest resources in Finland. 7 Workers co-operatives operatives Financial, Industrial & Distribution sectors Basque area - Spain 82,000 workforce 13,000,000+ Turnover A business organisation competing in international markets with the use of democratic methods in its organisation and with special emphasis on job creation, the promotion of its workers in human and professional terms and a commitment to the development of its social 8 environment 4
Consumer co-operatives operatives Bookshop University of Sydney 1,000,000+ members Profits are returned to members in discounts and special offers Every member is eligible to vote at the annual general meeting Every member may stand for election on the Board 9 Social co-operatives operatives Health care info Canada Not-for-profit and to share promotion information among the community Members participate in policy making and attend the AGM Members receive Health information services Membership fee $25 (or what one can afford!) 10 5
The Seven International Co-operative operative Principles The co-operative operative principles are guidelines by which co- operatives put their values into practice 1. Voluntary and open membership 2. Democratic member control 3. Member economic participation 4. Autonomy and independence 5. Education, training, and information 6. Co-operation operation among co-operatives operatives 7. Concern for community Also in: Arabic, English, French, Japanese and Spanish http://www.ica.coop/coop/principles/coopidentitylanguages.pdf 11 1. Voluntary and Open Membership Co-operatives operatives are voluntary organisations,, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination. 12 6
2. Democratic Member Control Co-operatives operatives are democratic organisations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the members. In primary co-operatives operatives members have equal voting rights (one member, one vote) and co- operatives at other levels are also organised in a democratic manner. 13 3. Member Economic Participation Members contribute equitably to, and democratically control, the capital of their co- operative. At least part of that capital is usually the common property of the co- operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their co- operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; operative; and supporting other activities approved by the membership. 14 7
4. Autonomy and Independence Co-operatives operatives are autonomous, self-help organisations controlled by their members. If they enter into agreements with other organisations,, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative operative autonomy. 15 5. Education, Training and Information Co-operatives operatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their co- operatives. They inform the general public - particularly young people and opinion leaders - about the nature and benefits of co-operation. operation. 16 8
6. Co-operation operation among Co-operatives operatives Co-operatives operatives serve their members most effectively and strengthen the co- operative movement by working together through local, national, regional and international structures. 17 7. Concern for Community Co-operatives operatives work for the sustainable development of their communities through policies approved by their members. 18 9
Start-up Society registers with Registrar of Co-operatives operatives In Malta: Co- operatives Board 19 Minimum number of members Depends on country s legislation (in general three or more) In Malta: Five or more 20 10
Members control 21 Liability of members Decision making at members level is usually based on one-man man- one-vote principle Limited to investment placed into co-operative operative (corporate veil rule-of of- law applies) 22 11
Committee of management (board of directors) is elected democratically at an AGM by the members Governance 23 Depending on country s legislation the society may create a Two- tier system and appoint a supervisory board solely to supervise management Supervisory organ 24 12
Mainly from owners finance, issuing of shares and pooling of limited resources. Mostly new equity originates from internal operations especially from retained patronage refunds Investment 25 Maximum % shareholding Depends on legislation In Malta: No member may own more than 40% of shares 26 13
Accounting and auditing requirements depend on national legislation and thresholds. Accounts may also be open for public inspection (in certain cases in abridged format) Accounts and audit 27 Distributed by way of patronage to members in proportion to the volume of business or other transactions done by them with the society. Usually limited dividends are paid. Statute may prohibit any form of distribution e.g. social co-ops. ops. Profit distribution 28 14
Usually a portion of profits before distribution is placed in a common fund (not-for for- distribution) known with the name of Legal Fund e.g. 15% of profits p.a. (capped) In Malta: 20% p.a. (capped) Common fund 29 A co-operative operative has a potential perpetual existence. Members and their co- operative are legal and distinct entities. Continuity 30 15
Transferability of ownership Possibility to transfer membership but usually member obtains ONLY par value of share and does not benefit from asset appreciation. (Usually share transfers are highly restricted if no open market exists). Transfer of shares between members are rare. 31 Usually a co- operative is liquidated and the net assets (if any) are distributed on winding-up according to the principle of disinterested distribution, that is to say to another co- operative pursuing similar aims or general interest purposes. Yet country s legislation may vary this rule. Winding-up 32 16
SCOOPS http://www.scoops.org.mt 33 Reference International Co-operative operative Alliance - http://www.ica.coop ICA Member Organisations - http://www.ica.coop/members/index.html Members shares in co-operative operative entities and similar liabilities - http://www.iasplus.com/interps/ifric002.htm Statute for a European Co-operative operative Society - http://ec.europa.eu/employment_social/labour_law/docs/regulation1435_2003_en.pdf Co-operatives operatives Board - http://www.coopsboard.org APEX - http://www.apex.coop SCOOPS - http://www.scoops.org.mt YesItMatters.com - http://www.yesitmatters.com/html/co-operatives.html operatives.html Galea F. (2002). Koperattivi: Twaqqif u Tmexxija.. Malta: Co-operatives operatives Board Co-operative operative Societies Act, Cap. 442 - http://docs.justice.gov.mt/lom/legislation/english/leg/vol_13/chapt442.pdf apt442.pdf Co-operatives operatives Lecture for International Baccalaureate Programme Business and Management http://www.yesitmatters.com/vis_rma_coops_5thnov2007.pdf Differences between various types of business organisations - http://www.yesitmatters.com/cooperatives_vs.pdf 34 17
Whilst great care has been taken in the preparation of this presentation entation material, details may have been omitted which may be directly relevant. Reference R to the standards, authoritative material and official pronouncements should therefore be made, and specific advice sought in respect to any particular matter. No responsibility for loss occasioned to any person or entity acting g or refraining from action as a result of any occurrence in this material can be accepted by the presenter or any of his associated firms. 35 18