Consultation on Proposed Co-operative Regulations 2008

In commenting on the proposed Co-operative Regulations 2008, the Co-operative Federation of Victoria Ltd’s comments are made on a “without prejudice” basis due to the short period allowed for consultation and the closure date for submissions of 1 October 2008 – a 28 day consultation period. (p 14)

It is noted in the RIS that “No consultation has occurred in the development of the draft Regulations as they are essentially a replacement of the existing Regulations and anticipating widespread changes over the next few years reflecting the adoption of nationally agreed codes.” (p 14) There is an assumption, therefore, that satisfaction with the existing regulations is such that there would be few or no suggestions for different Regulations or the adoption of a different regulatory regime.

In August 2006, however, CFV was advised of the review process by Consumer Affairs Victoria and was invited to comment. In response, CFV did provide some preliminary observations to Consumers Affairs Victoria on 12 August 2006.  These are attached. It is puzzling, therefore, why it took two years for a RIS to essentially replace the existing Regulations.

CFV acknowledges that the RIS includes as an appendix a CFV brochure “What is a co-operative?”

The Federation appreciates the urgency with the Co-operatives Regulations 1997 due to expire under the Subordinate legislation Act 1994 on 29 September 2008, nonetheless the problem is not the expiry date but the late availability of the proposed Co-operatives Regulations 2008 and, therefore, our inability to appropriately consult with our members.

While CAV has welcomed comments on any information contained in the RIS, particularly including: how the nature and extent of the problem has been identified; the identified options; and on the assumptions and data that have been used to analyse the costs and benefits of the options. CAV has also stated that it welcomes alternative views on other potential options that would achieve the objectives and reduce the regulatory and administrative burden of the Regulations and on any alternative data or evidence in relation to the problem, the costs and the benefits of the option presented. Given the limited time period, this is an unrealistic invitation.

Nonetheless, it is important to engage on regulatory options and CFV’s comments, therefore, are predicated on a subsequent opportunity for co-operatives to be substantially involved in considering and debating future regulatory options such as those identified in the RIS - reduced information requirements, adopting additional provisions from the corporations law for application and a non-regulatory option. The RIS identified options are not, of course, exhaustive.

The RIS has already noted that there will be a future opportunity for such a discussion in stating “given the development of a national co-operatives scheme a broader review” of regulatory provisions “would seem appropriate.” (p 19)

It is noted that the proposed Regulations replace the existing Co-operatives Regulations 1997 and that the only substantial change is the deletion of six regulations concerning foreign co-operatives as these are now unnecessary following recent amendments to the Act and that the proposed fees are the same and to the same value except a new fee for submission for approval of terms of issue. Minimal change is preferable given the limited time for consultation. There is, however, no mention of the new Schedule 8 PRESCRIBED INFRINGEMENT PENALTIES at the end of the RIS document. CFV is interested in learning details of the prevalence of the offences listed, and what action has been taken in the past to discourage such offences.

The RIS states that the primary objectives of the proposed regulations are to:

·         Provide accountability while allowing flexibility in the operation of the co-operative;

·         Protect members and the public generally from inappropriate practices of co-operatives;

·         Improve the provision of information to members about their rights and obligations; and

·         Recover the costs of efficiently administering the Act and the proposed Regulations through cost-reflective and equitable fees.

The Introduction to the RIS includes many important observations and CFV wishes to comment on these.

Co-operative Philosophy and Principles

It is noted, for example, that: “The Act provides a regulatory framework for the establishment and operation of co-operatives. It also promotes co-operative philosophy principles, practices and objectives and ensures that co-operatives  be administered in an accountable manner, For example, Section 6 of the act sets out co-operative principles (see Box 1) and section 7 promotes the adoption of the principles in the formation and operation of co-operatives.” (p3)  It is subsequently stated: “In this respect it is important to ensure the regulatory environment is conducive with reducing barriers to becoming a co-operative and reducing costs in order to enable co-operatives to work better.” (p 7) The promotion of co-operative principles, practices and objectives must inform the Act and Regulations and, therefore, the objectives of any regulatory reform. It is debatable, however, that the Act promotes co-operative principles when it allows a practice to depart from these principles. Division 4 Registration of proposed co-operatives 20 Registration of a co-operative 2 © states, for example, if a proposed co-operative “is not designed to function entirely in accordance with the co-operative principles, the Registrar must be satisfied that there are special reasons why the co-operative should be registered under the Act.” The Act and the Regulations should require the adoption of co-operative principles, practices and objectives.

Victoria’s Co-operatives Act is not necessarily consistent with co-operative principles and practices and amendments to the Act on 24 April 2008 remedied some of these in allowing the Registrar to exempt small co-operatives from having their accounts audited by a registered company auditor and providing for mutual recognition of co-operatives registered in different States and Territories by removing the need for a co-operative to register separately in each State and Territory. (p 16) CFV has argued for the exemption and, indeed, believes that it should be further improved with small co-operatives automatically exempt and simply required to advise the Registrar of their exemption status and not have to seek an exemption from the Registrar.

Active Membership

The RIS offers some interesting observations on active membership in co-operatives.”Part 6 of the Act requires that rules have active membership provisions and the board of a co-operative is required to cancel the membership of an inactive member. However, the active membership provisions hinge on participation in the primary activities of the co-operative rather than on whether the member attends meetings of the board or takes any notice of the board’s management of the co-operative. Since members cannot lose their membership through not attending meetings and may assume that other members will watch the board, there is a risk that there will be insufficient scrutiny of board performance. This risk may have a principal-agent element since the independent directors act as agents of members.” (p 10)

While active membership is more than member use of the co-operative, members primarily join a co-operative to use its services and not to participate in meetings of the co-operative. Co-operative democracy is a critical influence in joining a co-operative but member ownership and control has to have an economic goal.

It is incorrect to assume in the RIS that in some way active membership equates with members attending meetings of the board of the co-operative. This may be possible in small co-operatives but is unrealistic for most co-operatives. Members of a co-operative elect most or all of the board from the membership and the board is expected to govern in the interests of the membership without other members attending board meetings. Other members do not expect to attend nor should they be expected to attend board meetings. Active participative membership is more properly determined by attendance at general meetings of a co-operative. Indeed, the South East Housing Co-operative Ltd, based in Dandenong, has an active membership provision that requires its members to attend three member meetings each year.

Co-operative Education

The RIS notes that “a request for funding for capacity-building education activities for all co-operatives was recently made by Department of Justice. The bid was not successful but the committee that considered the application suggested that the bid should be resubmitted in the next round of applications for budget initiatives.” 9 p 18) This is a puzzling statement as CAV did not consult CFV on the provision of any capacity-building education activities for all co-operatives  despite a history of discussion on co-operative education between CFV and  CAV and our continuing involvement in co-operative education with the UK Co-operative College.

In September 2005 Mervyn Wilson, the Chief Executive Officer and Principal of the UK Co-operative College, came to Australia, his visit made financially possible by Co-operatives WA inviting him to address their annual conference. After the annual conference, he came to Victoria and between 26 – 28 September 2005 was involved in a series of meetings with the Co-operative Federation of Victoria Ltd. This included a meeting on Monday 26 September with David Cousins, Director, CAV, and Robert Larocca, Acting Chief of Staff, Office of the Minister for Consumer Affairs.

The first Co-operative Identity Workshops were held in August and September 2006 for Murray Goulburn Co-operative Co Ltd (Victoria) and Capricorn Society Limited (WA). The worksjhops were presented by Chris Cooper, Director of Learning and Development at the UK Co-operative College. The Co-operative Identity Workshops have introduced a new and significant dynamic to Australia’s co-operative movement. The Co-operative Federation of Victoria’s partnership with the UK Co-operative College together with the College's accreditation of CFV director, Graeme Charles, brings their proven Co-operative Identity Program within the reach of more co-operatives - a different kind of learning for a different kind of business.

The aim of the Co-operative Identity Programme is to ensure that participants understand how the distinctive nature of a Successful Co-operative Business can be a marketing advantage and how Co-operative Values and Principles add value and improve business performance through an ongoing co-operative education program and integration within business plans and strategies.

 

The Learning Objectives of the Co-operative Identity Programme are to:

·      Define the difference between a Co-operative and other types of businesses.

·      Share a common understanding of Co-operative Values and Principles

·      Identify the key elements for a co-operative education programme for members, employees and other stakeholders

 

By the end of the Co-operative Identity Programme participants are able to:

·      Define the significant difference between a Co-operative and other businesses.

·      Share a common understanding of Co-operative Values and Principles

·      Understand why co-operatives need Members and the importance of multi-stakeholder policies.

·      Examine ways in which the co-operatives can apply values and principles and use them to drive the business forward.

·      Identify an ongoing co-operative education program to create and maintain co-operative value.

The Co-operative Federation of Victoria Ltd has also developed an online co-operative education module course for co-operatives called Understanding Co-operatives. This work has been supported by the Gardiner Foundation and Murray Goulburn Co-operative Co Ltd. The module has been developed for Murray Goulburn and is available to members of Murray Goulburn through the Members Area of the Murray Goulburn web site.

In reference to indigenous co-operatives, the RIS notes that: “…a capacity development approach through the provision of information, education and training for boards and members of co-operatives has been demonstrated to be an effective strategy to achieve higher levels of compliance with reporting obligations.” (p 18)  Compliance, however, should be an additional benefit of information, education and training for boards and members and not the purpose of this information, education and training.

Co-operative education is an essential characteristic of co-operative philosophy and practice but broader-based than the implied outcome in the RIS – an increasing number of co-operatives submitting annual reports. Co-operative education should also be provided internally within the co-operative sector rather than externally by Government and this is consistent with co-operative values and principles.

We note the quotation in the RIS (p8) of the recommendation by the Ombudsman “That CAV institute procedures to ensure that co-operatives are providing, and participating in, training of a suitable standard.”

 

CFV believes that any education programmes offered to co-operatives should be carried out only after consultation with CFV; and be provided by trainers who have satisfied CFV that they really do understand the philosophical and practical differences between training suitable for co-operatives and training suitable for other forms of corporate entity. CFV should therefore be involved in preparation of any funding application for provision of such training, and recommends that CAV devises a way of strongly persuading co-operatives to utilise that training BEFORE they get into the type of situation that provoked the Ombudsman’s recommendation.

 

Independent Directors

 

Page 10 of the RIS contains the following statement: “Part 9 of the Act requires that the business of a co-operative be managed by a board of directors, elected by the members of the co-operative. A person is not qualified to be a director unless he or she is a member (“member director”) or an employee of the co-operative (“independent director”). This is incorrect.  The meaning of that section of the Act is that an independent director MAY be an employee of the co-operative, but does NOT have to be an employee of the co-operative and is usually not an employee but an individual independent of the co-operative who possesses skills needed to complement those of the other directors.

 

Staff Resourcing

 

Page 12 of the RIS states that “the total efficient costs (direct and indirect) of administering the

proposed Regulations - $54,535 - need to be recovered.” Are we correct in assuming that this means that the entire resource devoted to co-ops within the Registry amounts to 0.5 FTE staff?

 

The basis of this figure is questionable in the context of proposed capacity-building education for co-operatives. The cost of this initiative would add to the cost of administering the Regulations and increasing compliance levels would also add a further cost.

 

Staff resourcing within the Registry of Co-operatives has been a matter of concern for some years. While there is reference to the workload of staff there is no reference to the turn around time.  The Co-operative Federation of Victoria Ltd is also disappointed that the practice of the Registrar issuing an annual report was discontinued in the 1990’s.

 

Number of Co-operatives

 

Page 14 of the RIS contains the statement “The number of co-operatives on the register appears to have stabilised over the last five years or so, at around 750 co-operatives, after a decline of about 16per cent over the numbers on the register 5 years earlier. The reduction from 1997 to 2002 was due to the Registrar canceling the registration of co-operatives that no longer existed.” Can we assume that since 2002 little or no effort has been made to continue that scrutiny? Limited staffing limits the capacity for scrutiny.

 

Exemption Possibilities

 

Page 18 of the RIS contains a heading “Compliance threshold” which suggests the possible

consideration of the fact that a threshold of $30,000 ......would exempt approximately 450 of the 750co-operatives from certain requirements of the regulations, etc., etc. CFV is NOT in favour of exempting small co-operatives from keeping registers and annual reporting. As already known, CFV did request exemption from annual audits which in some cases were costing around 10% of a small co-operative’s total annual income!

 

Conclusion

 

The Co-operative Federation of Victoria Ltd recognises that continuation of the existing regulations is inevitable but there a need for a more rigorous and open discussion of the regulatory options. Education has been correctly identified in the RIS as important ingredient for co-operatives but this need goes far beyond improving compliance outcomes and co-operative education needs to be broad-based and in the context of co-operative values and principles. The Co-operative Federation of Victoria Ltd has been working with the UK Co-operative College to bring a  co-operative education program to co-operatives throughout Australia.

 

 

 

 

 

 

 

 

 

 

 

Appendix

The preliminary observations provided by CFV on 12 August 2006: Co-operatives Regulations 1997

The Co-operative Federation of Victoria Ltd welcomes the review of Co-operative Regulations 1997 and is pleased to provide these preliminary observations. We would welcome the opportunity for a more detailed discussion as and when appropriate.

Victoria has a large co-operative sector operating in diverse industries such as child care, dairy produce, health, housing, herd improvement, media, retailing and taxis.

Co-operatives are member-owned and controlled businesses – distinct from companies, associations and other forms of incorporation because of their purpose, their democratic structure, participative ownership and members are obligated to be active members.

 

A necessary precondition to regulation of co-operatives is a commitment by the Government to the development and growth of co-operatives. An appropriate co-operative legislation and regulation framework are critical to the development of co-operatives in Australia.  It is recognised that Government has four critical functions with respect of co-operatives:

·         Legislation

·         Regulation

·         Dissolution/liquidation

·         Monitoring

This role of the Government should be based on the following principles:

·         Minimum government involvement

·         Maximum deregulation

·         Maximum democratic participation

Specific co-operative legislation and regulation is necessary as a condition for protecting the unique character of co-operatives. Co-operative law should be sufficiently detailed to prevent the state or others from changing the character of co-operatives.  It is critical, therefore, to distinguish co-operatives from:

·         Investor-owned companies

·         Non-profit organisations

·         Charities

·         Other forms of self-help

It is also a necessary and suitable means of maintaining an appropriate balance between the independence and autonomy of co-operatives and the powers of the state.

ILO Recommendation No 193 and the 1995 ICA Statement on the Co-operative Identity (ICA Statement) imply that co-operatives be granted legal person status by legislators.

Increasingly, the focus of all country-specific legislation is shifting from national parliaments to international mechanisms which will lead to the harmonisation of law at regional and worldwide levels. This equally applies to co-operative legislation.

The ILO has developed guidelines as a check list of items to be considered when amending or developing co-operative law:

 

Hagen Henry

Guidelines for Cooperative Legislation

Second Revised Edition, 2005

International Labour Organisation

Governments throughout Australia are committed to the principle of competitive neutrality. Critical to this is neutrality in legislation and regulation. It is, therefore, a matter of concern that all co-operatives are required to have their accounts audited. This is an onerous requirement for small co-operatives and, indeed is a disincentive, to the formation of co-operatives. Small associations, however, are not required to have their accounts audited. Competitive neutrality requires that small co-operatives should also not be required to have their accounts audited. We suggest that the trigger point for requiring Co-ops to have an audit should be similar to that required of “prescribed associations” in the Associations Incorporation Act 1981.

Co-operatives Act 1996

The Co-operatives Act 1996 came into being after a review of the preceding legislation. The Act contains core provisions that are consistent with legislation in all States and Territories other than Western Australia.

The Corporations Law, administered by Federal Government, exempts from its operation, societies, associations or unions registered under the various Co-operative Acts of the States and Territories.  Victoria’s Co-operatives Act 1996 Division 4 Applications of Corporations Law 8 (1) The provisions of the Corporations Law (other than the provisions of the Corporations Law mentioned in sub-section (2) are excluded from applying under their own force to co-operatives.

There are specific inclusions from Corporations Law in Division 4 Applications of Corporations Law 8 (2). In addition, Victoria’s Co-operatives Act 1996 borrows from the Corporations Act in a number of key areas – financial reporting, audit responsibility, director and officer duties, voluntary administration and winding up.

Division 4 Applications of Corporations Law 8 (2) (a) also specifies that provisions of the Corporations Law could be provided for in regulations and (9) (1) specifies that the regulations may adopt, with or without specified modifications, a provision of the Corporations Law for application in relation to co-operatives.

The Co-operatives Act 1996 does protect the character of co-operatives but the strength of the Victorian Government’s commitment is questionable when it amended the Housing Act 1983 in 2004.

The Housing Act 1983 provides for the registration of housing associations and housing providers:

• Under Schedule 7, 1 (2) housing associations must be a company limited by shares or by guarantee.
• Under Schedule 7, 1 (3) a registered housing provider must be a company limited by shares or by guarantee or a co-operative or an incorporated association.

Part V111 - The Registrar and Rental Housing Agencies Division 2 provides for a Registrar of Housing Agencies.

Division 8 Powers of Registrar clause 129 (2) of the Housing Act specifies that “This Division applies despite anything to the contrary in the Co-operatives Act 1996 and the Associations Incorporation Act 1981."

Clause  131 (1) provides for the Registrar to recommend appointments to the governing body of a registered agency after consultation with the governing body and after considering any nominations made by the governing body. The Registrar may recommend the appointment of one or more persons whom the Registrar considers to be qualified to the governing body. According to 131 (3) "An appointment made under this section has effect as if it had been made in accordance with the constitution or rules of the registered agency" and (5) "This section applies despite anything to the contrary in the constitution or rules of the registered agency."The Registrar, therefore, can impose any number of directors on a co-operative - even a majority.

These provisions in the Housing Act 1983 are inconsistent with co-operative values and principles and is in contradiction with Australia's membership of the International Labour Organisation (ILO).

The 4^th co-operative principle endorsed by the International Co-operative Alliance (ICA) in 1995 affirms as follows: “Cooperatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their cooperative autonomy.”

The ILO adopts Conventions and Recommendations. By 2003, the ILO had adopted 185 Conventions and 194 Recommendations. Conventions are binding. Recommendations are non-binding guidelines - to guide national policy and practice.

The ILO Recommendation on the Promotion of Co-operatives Recommendation No 193 was adopted by the ILO in 2002.  This included an endorsement of the ICA's co-operative principles.

While non-binding, Australia is obligated to the ILO in respect of the recommendation to submit the text to legislative bodies, to report on resulting action and measures taken or planned to give effect to the provision.

The provisions in the Housing Act 1983 are unacceptable because:

• Government should promote and strengthen co-operatives. This provision weakens housing co-operatives. 
• Government should recognise co-operatives are independent and autonomous organisations. This provision denies co-operative independence and autonomy.
• Government should encourage co-operatives to respond to their member needs. This provision assumes that government will determine member needs.
• Government should provide a legal framework consistent with co-operative values and principles. This provision undermines co-operative values and principles.

Victoria's Housing Act 1983 is not acceptable and should be amended consistent with ILO Recommendation No 193.

 

The regulative options

There are three broad options for the Victorian Government in reviewing the Co-operatives Regulations 1997:

 

1. Develop new regulations to replace the current regulations when they lapse in 2007. New regulations would enable the regulatory objectives of the Act to be achieved.

 

2. Do nothing and allow the current regulations to lapse in 2007 and the Act would be left to operate and apply without supporting regulations. This would necessitate amendments to the Act as the Act depends on the regulations to provide guidance to co-operatives. Co-operatives would have to develop their own procedures and reporting formats to comply with the Act. There would be an increased risk of breaching the law and an increased potential for co-operatives to be mismanaged.

 

3. Rely on the sector to self-regulate. This would depend on the capacity and willingness of co-operatives to work together to develop and monitor common specific standards for record keeping, audits, keeping registers, procedures for postal ballots and information to be included in explanatory statements and financial disclosure documents. This is unlikely.

The Co-operative Federation of Victoria Ltd supports 1 but emphasises the importance of a resourced consultation with Victoria’s co-operative sector.

Assessing the Options

The criteria used to assess the regulatory options are critical to their development. It is proposed that the following or similar criteria should apply:

 

1. The effectiveness of the option in providing for sound financial management.
2. The extent to which the proposed option provides appropriate and effective machinery to facilitate and assess member control and participation.
3. The cost effectiveness of each option in terms of costs and benefits to the government, co-operatives and the community.
4. The extent to which the option contributes to the overall efficiency of the regulatory system.

 

Regulation Aims

In developing new regulations the government should aim to:

1. Ensure directors of co-operatives are accountable for their decisions and actions.
2. Facilitate active control and participation by members in co-operatives.
3. Facilitate co-operative philosophy, principles and practices.

 

The review needs to ensure that revised regulations maintain consistency with the Corporations Act 2001 subsequent to the 01 July 2004 reforms under the Corporate Law Reform Program (CLERP9) provided this is consistent with co-operative philosophy, principles and practices.

Review Scope

The NSW Government has recently revised its co-operatives regulations and there are some differences between NSW’s Co-operative Regulations 2005 and Victoria’s Co-operative Regulations 1997.

 

New South Wales Co-operatives Regulation 2005	Victoria Co-operatives Regulations 1997
Part 2 Rules and Fines	Part 2 Rules and Fines
Part 3 Active Membership	Part 3 Active Membership
Part 4 Shares and Voting	Part 4 Shares and Voting
Part 5 Management and administration of co-operatives	Part 5 Management and administration of co-operatives
Part 6 Funds and Property	Part 6 Funds and Property
Part 7 Application of Corporations Law	NO
Part 8 Restrictions on acquisition of interests in co-operative.	Part 7 Restrictions on acquisition of interests in co-operative.
Part 9 Merger, transfer of engagements and winding up.	Part 8 Merger, transfer of engagements and winding up.
Part 10 Arrangements and reconstruction.	Part 9 Arrangements and reconstruction.
Part 11 Foreign Co-operatives	Part 10 Foreign Co-operatives
Part 12 Supervision and protection of co-operatives.	Part 11 Supervision and protection of co-operatives.
Part 13 Administration of Act	Part 13 Administration of Act

 

Active Membership

 

New South Wales Co-operatives Regulation 2005	Victoria Co-operatives Regulations 1997
Part 3 Active Membership	Part 3 Active Membership
Active membership explanation	NO
Factors and considerations for determining primary activities.	Factors and considerations for determining primary activities.
Supply or purchase of goods and services.	NO
Register of cancelled memberships.	Register of cancelled memberships.

 

 

Management and Administration of Co-operatives

 

 

New South Wales Co-operatives Regulation 2005	Victoria Co-operatives Regulations 1997
Part 5 Management and administration of co-operatives	Part 5 Management and administration of co-operatives
Prescribed authority.	Prescribed authority.
Requirements for financial records and financial statements.	NO
Registers to be kept by co-operatives.	Registers to be kept by co-operatives.
Inspection of registers etc	Inspection of registers etc
Notice of appointment etc of directors and officers.	Notice of appointment etc of directors and officers.
Annual Report	Annual Report
Advertising change of name of co-operative.	Advertising change of name of co-operative.

 

Foreign Co-operatives

The National Working Group (convened by the Ministerial Council on Consumer Affairs) has proposed the replacement of the foreign registration system with a mutual recognition system. Each jurisdiction will be responsible for incorporating the mutual recognition scheme into its legislation.

It would be preferred for Victoria’s co-operative legislation to be amended before the new regulations are due to come in on 30 September 2007.

Consultation

There should be an adequate period for consultation to enable the preparation of submissions and adequate consideration of these submissions.

 

The RIS should be released at the latest in May 2007 with submissions closure date by end of July 2007 and publishing and gazetting of the new regulations on 30 September 2007.

 

With the release of the Regulatory Impact Statement, the Government should invite comment through:

·         Advertisements in newspapers including rural newspapers.

·         Publication of a notice in the Victorian Government Gazette.

·         Distribution of the RIS to all registered co-operatives in Victoria.

·         Distribution of the RIS to a range of organisations including CPA Australia, Chartered Secretaries Australia, National Institute of Accountants, Australian Consumers Association and the Victorian Council of Social service.

 

 

 

 

Co-operative Federation of Victoria Ltd

 

Mission and Objects

Mission

To develop and promote the co-operative movement as a means of satisfying the economic and social needs of people.

Objects.

1.       Help improve the performance of member co-operatives in the provision of services to their members.

2.       Make representations to government on legislation and policies to facilitate the development of co-operatives.

3.       Promote co-operatives to the public.

4.       Facilitate and promote the formation of co-operatives.

5.       Educate co-operative members and the community at large in co-operative principles and practices.

6.       Facilitate co-operation between co-operatives.

 

 

International Co-operative Alliance

 

Co-operative Values and Principles

Co-operatives are unique businesses that are based on explicit values and principles. These are articulated in the International Co-operative Alliance's Statement on the Co-operative Identity adopted in 1995.

Definition

A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.

Values

Cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness, social responsibility and caring for others.

Principles

The cooperative principles are guidelines by which cooperatives put their values into practice.

Ist Principle: Voluntary and Open Membership

Cooperatives are voluntary organizations, 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.

2^nd Principle: Democratic Member Control

Cooperatives are democratic organizations 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 membership. In primary cooperatives members have equal voting rights (one member, one vote) and cooperatives at other levels are also organised in a democratic manner.

3^rd Principle: Member Economic Participation

Members contribute equitably to, and democratically control, the capital of their cooperative. At least part of that capital is usually the common property of the cooperative. 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 cooperative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership.

4^th Principle: Autonomy and Independence

Cooperatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their cooperative autonomy.

5^th Principle: Education, Training and Information

Cooperatives provide education and training for their members, elected representatives, managers and employees so they can contribute effectively to the development of their cooperatives. They inform the general public – particularly young people and opinion leaders – about the nature and benefits of cooperation.

6^th Principle: Cooperation among Cooperatives

Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.

7^th Principle: Concern for Community

Cooperatives work for the sustainable development of their communities through policies approved by their members. 

Author: International Co-operative Alliance, 1995

The ICA is the international non-government organisation which unites, represents and services co-operatives worldwide. It was established in London, UK, in 1898. It has more than 250 member organisations from over 100 countries and represents more than 760 million individuals.