A co-operative is a member-owned business structure with at least five members, all of whom have equal voting rights regardless of their level of involvement or investment. All members are expected to help run the cooperative.
A co-operative is a separate legal entity and members, directors, managers and employees are not liable for any debts incurred unless they are the result of recklessness, negligence or fraud.
A co-operative usually only allows a limited distribution of profits to members (some don’t allow any). This business structure encourages a democratic style of management and promotes the concepts of sharing resources and delegation to increase competitiveness.
In Western Australia, co-operatives must comply with the requirements of the Co-operatives Act 2009 (which was amended effective 1 January 2017) and be registered with the Consumer Protection division of the Department of Mines, Industry Regulation and Safety.
Advantages of a co-operative
- Generally inexpensive to register.
- All members must be active in the co-operative.
- Members have an equal vote at general meetings regardless of their level of investment or involvement.
- Other than directors, members can be aged under 18 years. These members cannot stand for office and don’t have voting rights.
Disadvantages of a co-operative
- As co-operatives are formed to provide a service to members rather than a return on investment, it may be difficult to attract potential members seeking a financial return.
- There is usually limited distribution of profits to members and some co-operatives may prohibit the distribution of any surplus.
- Members providing greater involvement or investment than others will still only get one vote.
- Requires ongoing education programs for members.
Other factors to consider
Rules for co-operatives
Specific rules (forming a contract) must be developed to register a co-operative. Find out more from the Department of Mines, Industry Regulation and Safety.