Cooperatives Info-Guide

The following 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. Although most of the questions will be answered in the Info-Guide, the list is by no means exhaustive. The selected items provide a helpful overview of programs, services and regulations relating to cooperatives. This blended product of both federal and provincial information is developed to answer a growing demand for strategic information by business people. Municipal and other non-government information could be included, depending on the content and region. Further information on these programs, services and regulations can be obtained through any of the following:

• calling the telephone numbers listed under the program descriptions;
• using the links listed in the program descriptions to visit Web sites and Canada Business documents;
• calling a Canada Business service centre and speaking with one of the Information Agents; or
• visiting the Canada Business Web site.

FORMS OF BUSINESS ORGANIZATION

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From a legal point of view, there are four types of businesses:

• Sole proprietorships;
• Partnerships;
• Corporations; and
• Cooperatives.

Cooperatives * 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.

WHAT IS A COOPERATIVE?

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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.).

Associations include 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 cooperative);
• 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.

Cooperatives operate democratically (one person, one vote) through two bodies: general meetings of the members or delegates; and, the board of directors. At the federal incorporation level, at least two-thirds of the directors must be members and elected at a general meeting. The delegate structure may reflect the size of the organization or the distance covered by the cooperative and may include more than one delegate for each organization or territory represented (this may vary at the provincial incorporation level).

The cooperative's start-up capital usually comes from cooperative shares purchased by members. Federal cooperatives, 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 cooperative

Cooperatives 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.). Cooperatives 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

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.

Roles and responsibilities of members

Members are the most important part of a co-operative, and the co-operative exists to meet their needs. Just as the board has specific duties and responsibilities, members have responsibilities to themselves and to their organization. Members have a duty to:

• attend meetings and other co-operative activities;
• assist in amending by-laws as required;
• help to finance the co-operative by purchasing shares;
• communicate complaints and suggestions to management and the board of directors;
• support the development of other co-operatives;
• elect directors;
• participate on committees and in other activities of the organization; and
• use the services provided by the co-operative.

For information on meetings, record-keeping and reporting, please consult the Canada Business Fact Sheet  Core Functions and Processes of Cooperative Governance.

ADVANTAGES AND DISADVANTAGES

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Advantages

• owned and controlled by members;
• democratic control by one member, one vote;
• limited liability;
• profit distribution (surplus earnings) to members in proportion to use of service; surplus may be allocated in shares or cash.

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.

LEGAL STATUS OF A COOPERATIVE

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A cooperative may be formed in accordance with:

• a provincial cooperative statute setting out its corporate form and mode of operation;
• or the Canada Cooperatives Act when the cooperative has a place of business in at least two provinces.

The degree of supervision and guidance offered to cooperatives varies from province to province. A number of provincial governments have special programs to assist cooperative 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 cooperatives in the Yukon and the Northwest Territories.

The federal statute and some provincial statutes recognize two kinds of cooperatives:

• cooperatives that get their financing from the sale of shares to members;
• cooperatives that get their financing from loans from members.

You may also consult the Canada Business Fact Sheet  Articles and Bylaws Regarding Cooperatives

Incorporation of a cooperative can be a very complex matter and you may require legal assistance. For information on federal incorporation, please visit Corporations Canada's Web site.

7 STEPS TO FORMING A COOPERATIVE

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Phase I—Develop the cooperative business idea

• Step 1: Assemble a group of interested people
• Step 2: Conduct a feasibility study

Phase II—Coordinate the pre-cooperative's activities

• Step 3: Hold an organizing meeting
• Step 4: Conduct a viability study

Phase III—Organize and start-up the cooperative

• Step 5: Organize the association
• Step 6: Organize the enterprise

• Step 7: Hold the initial general meeting

For additional information you may consult the Canada Business Fact Sheet
Registration of a Cooperative.

Business plan of a new cooperative

A business plan is a document providing a complete description of the cooperative 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 of a new co-operative

1. Summary of the business plan
2. Brief description of the cooperative
3. Analysis of the cooperative'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

Attachments

Canada Business' Interactive Business Planner is an on-line collaborative tool with which you may create your business plan. For more information please see the document Interactive Business Planner - IBP or go directly to the Interactive Business Planner Web site.

FEDERAL INCORPORATION

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TheCanada 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.

The following fees are required for document filings and services rendered:

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);
• Continuance Kit (for cooperatives currently incorporated under Canadian legislation other than the Canada Cooperatives Act that wish to continue or move into the later);
• Incorporation Kit (to incorporate a cooperative under the Canada Cooperatives Act).

For more information on the federal incorporation of a cooperative, or to obtain hard copies of the information kits, please contact:
Corporations Canada
Industry Canada
9th Floor
Jean Edmonds Tower South
365 Laurier Avenue West
Ottawa, Ontario  K1A 0C8
Telephone: (613) 941-9042
Fax: (613) 941-0601
Toll-free (information): 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 cooperatives and is partly modelled on the Canada Business Corporations Act. The legislation provides cooperatives 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.

TAXATION

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Canadian cooperatives are generally subject to the same taxes as other business firms. Cooperatives 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.

ADDITIONAL INFORMATION

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Co-operatives Secretariat

The Co-operatives Secretariat is an agency established in 1987 to help the federal government respond more effectively to the concerns and needs of co-operatives. It aims to:

• advise the government on policies affecting cooperatives;
• co-ordinate the implementation of such policies;
• promote cooperatives within the federal government.

The secretariat also provides a link between the co-op sector and the many federal departments and agencies with which they interact.

For more information, or to order a copy of the publications, please contact:

Co-operatives Secretariat - Publications
Agriculture and Agri-Food Canada
3rd Floor
1525 Carling Avenue
Ottawa, Ontario  K1A 0C5
Telephone: (613) 759-7194
Fax: (613) 759-7189
Toll-free (information): 1-877-295-7160
E-mail: coops@agr.gc.ca
Web site: http://coop.gc.ca/index_e.php

Other Web Sites Related to Cooperatives

• Canadian Co-operative Association— http://www.coopscanada.coop
• Conseil Canadien de la Coopération— http://www.ccc.coop/francais/accueil/accueil.asp (available in French only)
• Department of Justice Canada, Canada Cooperatives Act— http://laws.justice.gc.ca/en/C-1.7/index.html

Notes: *"cooperative" may also be spelled "co-operative".
**"non-profit" also known as nonprofit organizations, non profit organizations, not-for-profit organizations, voluntary organizations and volunteer organizations

• 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
• Corporations Canada

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.