Co-operatives Info-Guide

This Info-Guide is a document designed to help you navigate through the different government programs, services and regulations which deal with cooperatives and identify those of interest. The selected items provide a helpful overview. This list is not exhaustive. Further information on each item can be obtained by contacting the organization directly or by contacting the Canada/Nova Scotia Business Service Centre at 426-8604 or 1-800-668-1010 or visiting our Web site; http://www.cbsc.org/ns.

TABLE OF CONTENTS

1.        What is a Co-operative?
2.        The Legal Status of a Co-operative
3.        The 7 steps in Forming a Co-operative
4.        Business Plan of a New Co-operative
5.        How to Incorporate Federally
6.        How to Incorporate Provincially
7.        Taxation
8.        Additional Information
9.        Additional Info-Guides

Co-operatives blend the attributes of traditional businesses and non-profit organizations. Their operation is unique in that they combine economic and social objectives in their business pursuits.

1. WHAT IS A CO-OPERATIVE?

It is an enterprise, or business, owned by an association of persons seeking to satisfy common needs (access to products or services, sale of their products or services, employment, etc.).

This association includes one or more kinds of users or stakeholders in the enterprise, such as:

• consumers who use the enterprise to acquire products or services (such as a retail housing, health-care or day-care co-operative);
• producers (such as independent entrepreneurs, artisans or farmers) who use the enterprise to process and market the goods or services they have produced, or to buy products or services necessary to their professional activities; or
• workers who use the enterprise to secure their employment and control their working conditions.

Co-operatives operate democratically (one person, one vote) through two bodies: general meetings of the members or delegates; and, the board of directors, at least two-thirds of whom are members elected at a general meeting. The delegate structure may reflect the size of the organization or the distance covered by the co-operative and include more than one delegate for each organization or territory represented.

The co-operative's start-up capital usually comes from co-operative shares purchased by members. Federal co-operatives, however, can raise capital by issuing investment shares to members or non-members.  Each member's liability is limited to the amount of his or her share in the capital. Each member has only one vote regardless of his or her capital contribution.

Purpose of a Co-operative:   Co-operatives are addressing citizens' needs by providing services such as: helping farmers market their products and buy farm supplies, providing communities with financial services and retail goods, as well as providing communities with utilities (gas, electricity, fire fighting services, etc.). Co-operatives are also a tool in addressing a broad range of socio-economic pressures, such as unemployment, youth employment, access to health care and value-added industries in rural communities.

Values:  Co-operatives are based on the values of self-help, self-responsibility, democracy, equality, equity, and solidarity. In the tradition of their founders, co-operative members believe in the ethical values of honesty, openness, social responsibility, and caring for others.

Principles:  The co-operative principles are guidelines by which co-operatives put their values into practice.

Advantages

Disadvantages

• possibility of conflict between members;
• longer decision-making process;
• participation of members required for success;
• extensive record keeping necessary;
• less incentive to invest additional capital.

• a provincial co-operative statute setting out its corporate form and mode of operation; (more information can be obtained from the Nova Scotia Department of Economic Development - Co-operatives Branch http://www.gov.ns.ca/snsmr/coop/default.asp
• or the Canada Co-operatives Act when the co-operative has a place of business in at least two provinces.

The degree of supervision and guidance offered to co-operatives varies from province to province. A number of provincial governments have special programs to assist co-operative development. In most provinces, each Credit Union or Caisse Populaire is inspected yearly to ensure that it is complying with the applicable acts and by-laws. There are ordinances governing the organization of co-operatives in the Yukon and the Northwest Territories.

The federal statute and some provincial statutes recognize two kinds of co-operatives:

• co-operatives that get their financing from the sale of shares to members;
• co-operatives that get their financing from loans from members.

Incorporation of a co-operative can be a very complex matter and you may require legal assistance. For more information, you may also visit the Corporations Directorate's Web site at the following address: http://strategis.gc.ca/epic/internet/incd-dgc.nsf/en/home

3.        THE 7 STEPS IN FORMING A CO-OPERATIVE

Phase I - Develop the co-operative business idea
Step 1: Assemble a group of interested people
Step 2: Conduct a feasibility study

Phase II - Coordinate the pre-co-operative's activities
Step 3: Hold an organizing meeting
Step 4: Conduct a viability study

Phase III - Organize and start-up the co-operative
Step 5: Organize the association
Step 6: Organize the enterprise

• plan the operation of the enterprise;
• plan and organize the enterprise's start-up financing;
• recruit and train the enterprise's staff;
• ensure the legality of the enterprise's operations.

Step 7: Hold the initial general meeting

4.        BUSINESS PLAN OF A NEW CO-OPERATIVE

A business plan is a document providing a complete description of the co-operative enterprise you wish to form. It describes in details the products or services that will be produced or sold, the organization of work and the management approach, the results of the market study and the marketing plan, the characteristics of the paid and unpaid human capital (the members), equipment and material needed, financing requirements and the financing plan.  

Content of a business plan
1.   Summary of the business plan
2.   Brief description of the co-operative
3.   Analysis of the co-operative's market
4.   Description of products and services
5.   Marketing plan
6.   Operations
7.   Management and organization
8.   Timetable of activities
9.   Projected financial statements
10  Financing plan
11. Attachments

5.        HOW TO INCORPORATE FEDERALLY

The Canada Cooperatives Act governs the incorporation of federal cooperatives. Cooperatives are business organizations owned by the members who use their services. They are a separate legal entity which may enter into contracts in their corporate name. Generally, each member of a cooperative is entitled to one vote. Surpluses are shared by members in proportion to the degree they use the services. The members elect the board of directors and decide what should be done with any profit that is generated in the coop.

To apply for incorporation, at least three persons, or one or more federation, must send the Director, appointed under the Canada Cooperatives Act, the following:

• Articles of Incorporation, Form 3001
• Notice of Registered Office, Form 3003
• Notice of Directors, Form 3006
• A declaration signed by all the applicants that, after incorporation, the cooperative will be organized and operated and will carry on business on a cooperative basis.
• If the proposed cooperative is a non-profit housing cooperative or a worker cooperative, a declaration signed by all the applicants that the cooperative will be in compliance with either Part 20 or 21 of the Canada Cooperative Act. Part 20 includes specific provisions applicable to non-profit housing cooperatives and Part 21 includes specific provisions applicable to worker cooperatives.
• A name search report, specifically a Canada-biased NUANS report. The name must not be confusing with other names, including corporate names, and it must include the word "co-operative", "cooperative", "co-op", "coop", "coopérative", "united" or "pool" or another grammatical form of any of those words.  This report costs $61.24 ($55 + HST).
• The required incorporation fee for cooperatives can be found at the Corporations Directorate - Cooperatives  - Fee Schedule  http://strategis.ic.gc.ca/epic/internet/incd-dgc.nsf/vwGeneratedinterE/h_cs02143e.html. The fee is currently $250, not including the name search fee.

Under the Canada Cooperatives Act, by-laws are not required to be sent to the Director.

Publications offered by the Corporations Canada:

• Amalgamation Kit (for cooperatives that want to amalgamate to form a single cooperative);
• Amendment Kit (for incorporated or continued cooperatives that want to amend their existing articles under the Canada Cooperatives Act);
• Continuation Kit (for cooperatives currently incorporated under Canadian legislation other than the Canada Cooperatives Act that wish to continue or move into the Cooperatives Act);
• Incorporation Kit (to incorporate a cooperative under the Canada Cooperatives Act).

      Corporations Canada
      Industry Canada
      9th Floor, Jean Edmonds Tower South
      365 Laurier Avenue West
      Ottawa ON K1A 0C8
      Tel.: (613) 941-9042
      Fax: (613) 941-0601
      Toll-Free: 1-866-333-5556
      E-mail: corporationscanada@ic.gc.ca
      Web site:http://corporationscanada.ic.gc.ca/epic/internet/incd-dgc.nsf/en/home?OpenDocument

Note: The Canada Cooperatives Act came into force on December 31, 1999. The Canada Cooperatives Act replaced the Canada Cooperative Associations Act on that date. The new Act modernizes the corporate governance rules relating to non-financial co-operatives and is partly modeled on the Canada Business Corporations Act. The legislation provides co-operatives with greater flexibility in responding to the demands of the competitive domestic and global marketplace. Cooperative principles and values are set out clearly in the Act. Any actions a Cooperative takes must be consistent with these principles.

6.        HOW TO INCORPORATE PROVINCIALLY

The following forms are for use with existing or new co-operatives in the province of Nova Scotia. If you are unsure of which forms to use for which activities, please contact the Co-operatives office for assistance.

To contact the Co-operatives Branch of the Nova Scotia Economic Development:
Co-operatives Branch
35 Commercial Street, Suite 101
Truro, Nova Scotia
Canada
B2N 3H9
Telephone: (902) 893-6190 Fax: (902) 893-6108
e-mail: fpierce@gov.ns.ca
web site: http://www.gov.ns.ca/snsmr/coop/default.asp

7.        TAXATION

Canadian co-operatives are generally subject to the same taxes as other business firms. Co-operatives usually fit into one of the following categories:  Producer, Consumer or Worker.  A Corporation Return form is to be filed within six months after each fiscal year-end.   Combined annual return/income tax return filing option - The new schedules will be incorporated in tax preparation software. Copies of the schedules will be available at the Canada Revenue Agency's Web site at http://www.cra.gc.ca/menu-e.html at tax service offices, and at points of service of Industry Canada Corporations Directorate. A list of these locations is available on the Corporations Directorate Web site at http://corporationscanada.ic.gc.ca/epic/internet/incd-dgc.nsf/en/home?OpenDocument.

For more information:
please call (613) 941-9042
E-mail: hotline.service@ic.gc.ca
Web site: http://corporationscanada.ic.gc.ca/epic/internet/incd-dgc.nsf/en/home?OpenDocument
see the document Farm Credit Canada - Mandate

8.        ADDITIONAL INFORMATION

Co-operatives Secretariat
The Co-operatives Secretariat was created in 1987 from the Co-operatives Section of Agriculture Canada to improve the relationship between Canadian co-operatives and the numerous federal departments and agencies known to have legislation or policies affecting co-operatives. The Co-operatives Secretariat, working closely with the Minister responsible for co-operatives, acts as a coordinator for interaction between the government and the Co-operative sector.

If you would like to know more about co-operatives, or if you intend to form a Co-operative, ask for the information kit "Forming Our Co-operative: Information Kit for Entrepreneurs" by writing to:
Co-operatives Secretariat
Agriculture and Agri-Food Canada
4th floor, Room 467
Sir John Carling Building
930 Carling Avenue
Ottawa ON   K1A 0C5
Phone: (613) 759-7194
Fax: (613) 759-7489
E-mail: coops@em.agr.ca
Web site: http://www.gov.ns.ca/snsmr/coop/default.asp
see the document Co-operatives Secretariat

Web Sites of Interest

Canada Cooperative Act (CCA-Coop)
http://laws.justice.gc.ca/en/C-1.7/172061.html

Co-operatives Secretariat
http://www.gov.ns.ca/snsmr/coop/default.asp

Canadian Co-operative Association>
http://www.coopcca.com

Department of Justice Canada - Canada Cooperatives Act
http://laws.justice.gc.ca/en/C-1.7/index.html

Conseil Canadian de la Coopération
http://www.franco.ca/

Health Care Co-operatives Startup Guide  
http://coop.gc.ca/index_e.php?s1=guides&s2=health-sante&page=intro

9.        ADDITIONAL INFO-GUIDES

See the document -  Aboriginal Info-Guide

See the document - Business Start-Up Info-Guide

See the document - Co-operatives Info-Guide

See the document - E-Business Info-Guide

See the document - Employment and Training Info-Guide

See the document - Entrepreneurs with Disabilities Info-Guide

See the document - Exporting Info-Guide

See the document - Financing Info-Guide

See the document - Government Procurement Info-Guide

See the document - Importing Info-Guide

See the document - Innovation Info-Guide

See the document - Library Guide

See the document - Non-Profit Info-Guide

See the document - Taxation Info-Guide

See the document - Young Entrepreneurs Info-Guide

This information is updated on a regular basis, but organizations change unpredictably -- therefore, not all the information as presented may be timely or accurate.

• New Generation Co-operatives for Agricultural Processing and Value Added Projects
• Cooperative Glossary
• Cooperative Structure
• Cooperative Governance
• Co-operative - Business Structure
• Financing and Financial Management for Cooperatives

DISCLAIMER
Information contained in this document is of a general nature only and is not intended to constitute advice for any specific fact situation. Users concerned about the reliability of the information should consult directly with the source, or seek legal counsel.

Links Policy
Some of the hypertext links lead to non-federal government sites which are not subject to the Official Languages Act and the material is available in one language only.