Core Functions and Processes of Co-operative Governance

Summary

The goal of this fact sheet is to review the core operating functions necessary to maintain a co-operative governance structure, and to provide guidance in complying with co-operative legislation and regulations. This document has been prepared to give general guidance to directors, officers and managers of co-operatives, and should be used with The Co-operatives Act, 1996 and Regulations, and appropriate legal, technical, and managerial advice and support.

GENERAL REQUIREMENTS

MEETINGS

Membership Meetings
Within four months of incorporation, a co-operative must hold its first general meeting. All members are entitled to attend and vote at this meeting. Normal business includes adoption of bylaws, election of directors, and appointment of an auditor.
A co-operative must hold an annual general meeting each year no later than six months after its fiscal year end. A suggested agenda includes:

- Minutes of the previous annual meeting;
- Reports by the president, treasurer, manager and committees;
- Auditor's report;
- Election of directors;
- Resolutions;
- Amendment of bylaws; and
- Any other business that the board or membership want to raise.

Subject to the bylaws and the Act, the directors may, at any time, call other general membership meetings to conduct the general business of a co-operative. The directors may also call a special meeting of members. A special meeting must be held on receipt of a written request which specifies the purpose of the meeting and is signed by members as follows:

- For a co-operative with 1,000 or more members, the lesser of 5 per cent of the membership or 300 members, but in no case fewer than 100 members;
- For a co-operative with fewer than 1,000 members, 10 per cent of the membership; and
- For a co-operative with a delegate structure, at least 25 per cent of the delegates.
- A special meeting may only deal with the matters specified in the notice of meeting.

Board of Director Meetings
As soon as possible after incorporation, an interim board meeting should be held so directors can discuss day-to-day operating policies, appoint officers, establish banking and financial arrangements, etcetera.

Regular board meetings are normally held on an established schedule, often monthly, with pre-determined dates being desirable. The president may call a meeting of directors at any time. The president must call a directors meeting within two weeks of receiving a written request from at least two directors, unless the articles or bylaws of the co-operative provide otherwise.

Committee Meetings
When the amount of work required to direct the affairs of a co-operative grows beyond what the board of directors can handle, the board may decide to appoint committees to which tasks can be assigned. There are two types of committees: standing and special. Standing committees function more or less on a permanent basis to handle ongoing requirements. Examples include administration, finance and member relations committees. Special or ad hoc committees are normally appointed on a short term basis to study unique issues or items of business, report findings, make recommendations to the board on actions to be taken, and/or to implement board decisions. Numbers and types of committees can vary from co-operative to co-operative.

Notices and Quorums
Notice of meetings is required unless the articles or bylaws provide otherwise. A co-operative must provide a period of notice and means of giving notice of membership meetings that is sufficient to ensure each member, delegate or preferred shareholder has reasonable opportunity to attend the meeting and exercise his or her right to vote.

This provision allows co-operatives to tailor the length of notice and manner of giving notice to their unique circumstances. For example, co-operatives with small memberships may notify members by telephone or hand delivery, and may be able to call meetings with minimal notice.

Most co-operatives state in either their bylaws or policies that notice for all general meetings must be given no fewer than 10 days in advance, and also require that notice be mailed to all members entitled to attend, or inserted in at least two issues of a newspaper circulated in the area served by the co-operative, and posted in a place that is prominent and accessible to members.

The notice of any special meeting is required to specify the reason the meeting is being called.

Requirements for meeting location, notice and timing for board meetings are determined by boards or set out in the bylaws of individual co-operatives.

A quorum is the fixed minimum attendance necessary for the transaction of business at a meeting. For annual general meetings or special meetings of the membership, a quorum is the lesser of 15 members or 10 per cent of the membership. For a meeting of delegates, a quorum is 50 per cent of delegates. A quorum for meetings of the board of directors is a majority of directors. The bylaws of a co-operative may provide for a quorum that exceeds these requirements.

CO-OPERATIVE DOCUMENTS AND RECORD KEEPING

A co-operative is required to prepare and maintain certain organizational records at its registered office or at another place in Saskatchewan designated by the directors. This includes the registered copies of a co-operative's Articles of Incorporation and bylaws, amendments to these documents, and any other corporate documents. The minutes of all meetings of the membership, directors and committees should also be kept at this location.

It should be noted that any change of address to the registered office must be filed with the Registrar of Co-operatives within 15 days of the change. If the registered office is named in the bylaws, the bylaws must also be amended and these amendments filed with the Registrar.

Members, their agents and their legal representatives are entitled to examine and obtain copies, without charge, of all of these records and documents with the exception of the minutes of meetings of the board of directors. Following are the key attributes of these documents.

Articles of Incorporation
Articles of Incorporation set out a co-operative's legal name, financial structure, number of directors, purpose or objectives, and any restrictions on business. The articles may only be amended by a special resolution which requires a majority of at least two-thirds of the votes cast at a general meeting. Members must receive not fewer than 10 days' notice of the intention to propose the special resolution at such a meeting. Proposals to amend the articles may be presented by the board or by any member of the co-operative. Amendments must be filed in the prescribed form together with the prescribed fee, and approved by the Registrar.

Bylaws
Bylaws set out the basic rules and guidelines, within the Act, under which a co-operative is governed and operated. Except where the Act or the bylaws provide otherwise, members may, by simple majority at any annual or special meeting called for this purpose, make, amend, repeal, replace or confirm any bylaws. Bylaws come into effect when two copies of the bylaw, certified to be true by the president and secretary of the co-operative, are filed with the Registrar of Co-operatives with the prescribed fee, and approved by the Registrar.

Minutes
Minutes are the permanent record of the decisions and actions undertaken at all meetings of a co-operative. Co-operatives are required to maintain minutes of all membership, board and committee meetings. Minutes should reflect decisions, not opinions, and be written so that an absent member reading them can have a clear understanding of the business conducted at the meeting. The secretary or secretary/treasurer is normally responsible for recording and maintaining minutes of all meetings.

The following guidelines suggest a format which will aid the secretary in preparing the minutes.

Introduction :

- The type of meeting (board, special, annual, etcetera);

- The name of the co-operative;

- The date, time and location of the meeting;

- For board and committee meetings, the names of members present and absent;

- If the president and/or secretary was absent, the substitute's name; and

- Any comments or actions arising out of the minutes of the last meeting.

Body:

- The agenda and items of business therein. The agenda can then be attached to the minutes to form a complete package.

- All motions except ones which were withdrawn. When recording a motion, include the exact wording of the motion as adopted or otherwise disposed of; the disposition of the motion, and any primary or secondary amendments; and the name of the person making the motion.

- All points of order and appeals, whether sustained or lost, and reasons given by the chair for rulings.

Conclusion:

- The time of adjournment; and

- The date and time of the next meeting.

Minutes should be signed by the secretary or the person who took the minutes, and the chairperson.

When a director is not present at a meeting of directors or a committee of directors at which a vote on a resolution is taken, the absent director is considered to have cast an affirmative vote and consented to the resolution unless, within 14 days after becoming aware of the proceedings, the director delivers or sends by registered mail a written dissent to the registered office of the co-operative.

The secretary, on receiving the written dissent, shall certify the day, time and place it is received and keep it with the minutes of the meeting at which the resolution was passed.

Other Documents
Other documents that should be retained at the registered office include a register of directors setting out the names, addresses and occupations of all persons who are or have been directors of the co-operative and the dates on which each person became and ceased to be a director; a register of members stating their names arranged in alphabetical or numeric order and their latest address known to the co-operative; and a register of shareholders with their names arranged in alphabetical or numeric order, the number and type of shares held, and their latest address known to the co-operative. In addition, copies of every certificate and order issued by the Registrar to the co-operative (such as the certificate of incorporation) should be retained at the registered office.

FINANCIAL REQUIREMENTS, RECORDS AND REPORTING

To maintain a successful business operation, a co-operative must maintain accurate records of its financial operations, monitor and evaluate its past performance, and develop and implement budgets. A co-operative must comply with all financial requirements set out in The Co-operatives Act, 1996.

FINANCIAL RECORDS

Accurate and timely financial records are essential to the successful financial management of any co-operative. These include records of all revenues and expenditures, cash flow, and capital purchases. These records should support the preparation of a monthly financial statement which should include comparisons to budget projections for review by the board.

BUDGETS

A budget is a financial planning and management document that projects future financial requirements and performance of a co-operative. Normally, co-operatives prepare three types of budgets: operating, cash, and capital.

Operating budgets are usually developed for each fiscal year, and project revenue, expenditures and savings or losses. To obtain maximum benefit from an operating budget, co-operative boards and management should compare actual income and expense statements against budgeted projections on a regular basis throughout the year. When actual results fall short of projections, corrective action should be taken.

Cash budgets are also prepared at the beginning of each fiscal year. The cash budget predicts monthly bank balances using estimated receipts and expenses. This is important because the timing of revenues and expenses do not always coincide, and cash budgets provide a basis for identifying borrowing requirements or opportunities for investing short term surpluses of operating capital.

Capital budgets are developed to support long term planning and management of a co-operative. These budgets address the co-operative's requirements for land, buildings, equipment and other capital purchases, and should include an assessment of costs and benefits of all proposed capital expenditures together with an analysis of alternate investments or strategies.

Potential sources of capital include retained savings, additional member equity, member loans, sale of securities, and other forms of financing.

FINANCIAL REPORTING

Appointment of an Auditor
At the first general meeting of a co-operative and at each succeeding annual meeting, members must appoint, by ordinary resolution, an auditor who is independent of the co-operative and is a member of a recognized accounting professional association or approved by the Registrar. A vacancy in the position of auditor may be filled by the board until the next annual general meeting.
 
Co-operatives with more than 300 members are required to have an audit committee comprised of at least three directors. This committee is responsible for reviewing financial records and all statements prepared in conjunction with the audit.

Some co-operatives, in unique circumstances and subject to the provisions of the Act, may resolve not to appoint an auditor.

The Audit and Audit Report
After the fiscal year-end of a co-operative and before its annual meeting, the auditor must examine all records relating to its financial activities, report on the accuracy and correctness of these records, and prepare a statement of the co-operative's financial position including statements of revenue, expenditures and surplus or losses, plus a balance sheet setting out assets, liabilities, members' equity and/or reserves.

Annual Return
Each year, about 30 days before a co-operative's year-end, the Registrar will send an annual return form. The form, requesting the names of the directors, officers, auditor and other information, must be filed with the Registrar within 30 days after the annual meeting together with a copy of the co-operative's audited financial statement that has been signed by one director. The required filing fee must also be paid. Co-operatives whose articles or bylaws provide that earnings may be distributed to members are not required to file financial statements.

For additional information contact Saskatchewan Regional Economic and Co-operative Development toll free at 1-800-265-2001.  We also invite you to visit or contact us through our web site on the Internet at http://www.recd.gov.sk.ca

Prepared by: Saskatchewan Regional Economic and Co-operative Development