Co-operatives (Alberta) 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 many 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.

• calling the telephone numbers listed under the program descriptions;
• visiting the Web sites listed under the program descriptions;
• using the document numbers provided, to find more in-depth documents;
• calling The Business Link Business Service Centre and speaking with one of the Information Officers; or
• visiting The Business Link Business Service Centre Web site at http://www.cbsc.org/alberta

Forms of Business Organization
From a legal point of view, there are four main types of businesses:

1. Sole proprietorships;
2. Partnerships;
3. Corporations; and
4. 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.

There are three important differences between private enterprise and co-operatives (Source: Rural Education & Development Association - REDA)

1. Purpose
Co-operatives are a form of business incorporated to provide a service (or employment) to their members for the purpose of meeting economic, social or cultural needs as opposed to privately-owned companies which are mainly profit-driven. Shares in a co-op do not appreciate in value and do not behave as an investment.

2. Financial surplus
In a co-op, surplus earnings are distributed to the members according to their patronage of the co-op. In a privately-owned company, income is usually distributed as dividends associated with shares. Members of a co-op may decide to put the surplus back into the co-operative as retained earnings. While this helps the capital position of the co-op, it does not change the members' rights or privileges. Also, co-ops keep money in the local economy since surpluses mainly go to members living in the community, not to distant investors.

3. Control
In a co-operative at the local level, control is linked to member-owners. Each member has only one vote, regardless of the number of shares he or she holds. By contrast, in a privately-owned company, each share carries a vote.

What is a Cooperative?
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.

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 whom are members elected at a general meeting, and the delegate structure may reflect the size of the organization or the distance covered by the cooperative and 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 co-operative 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 co-operatives put their values into practice.

Advantages and Disadvantages
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.

Are there different types of co-operatives? (Source: Rural Education & Development Association - REDA)
The co-operative model for organizing a business is recognized and practiced world-wide as a successful alternative to other forms of business structure. In Alberta, co-operatives operate successfully in many areas of the economy. They range in size from small business to large corporations and from non profit service organizations to large trade associations. Co-operatives can be found listed among the top companies in Canada and the United States.

Virtually any type of business is a potential co-operative organization.  As defined in provincial legislation, a co-operative can be incorporated for the purpose of carrying on any lawful industry, trade or business on a co-operative basis.

There are five basic types of co-operatives which can be established as either business co-ops or not-for- profit co-ops:

Examples of cooperatives

• Retail cooperatives: examples include the Mountain Equipment Co-op, Calgary Co-operative Association, the Sedalia Consumers Co-operative and the Legal Co-operative.
• Agricultural cooperatives: examples include the Little Bow Feeders' Association, the Rosebud Seed Cleaning Plant Limited and the Balzac Seed Cleaning Plant Limited.
• Housing cooperatives: examples include the Southern Alberta Co-operative Housing Association, the Liberton Terrace Housing Co-operative Ltd. and the Aldergrove Housing Co-operative Ltd.

The Legal Status of a Cooperative
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 co-operative 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 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 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.

Incorporation of a cooperative can be a very complex matter and you may require legal assistance. For more information, you may also visit the Corporations Canada website.

The 7 steps in forming a co-operative
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
  • 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

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

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
11. Attachments

How to incorporate federally (Note: see the document Federal Co-operatives )
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.

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

Incorporation of a cooperative can be a very complex matter and you may require legal assistance.

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 ).

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 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://strategis.gc.ca/corporations

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
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. For more information, please see the document Income Tax Returns - the T2 Corporate Income Tax Return and the T2 Short Return 

ADDITIONAL INFORMATION

Co-operatives Secretariat (Note: see the document 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 co-operatives;
• co-ordinate the implementation of such policies;
• promote co-operatives 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.

Publications offered by the Co-operatives Secretariat

• Forming Our Co-operative: Information kit for entrepreneurs
• Health Care Co-operatives Startup Guide

For more information, or to order a copy of the publications, please contact the Co-operatives Secretariat:

Co-operatives Secretariat
1341 Baseline Road
Tower 7, 6th floor
Ottawa, Ontario
K1A 0C5
Telephone: (613) 759-7193
Toll-free (information): 1-888-781-2222
Fax: (613) 759-7489
E-mail: coops@agr.gc.ca
Web site: http://www.agr.gc.ca/policy/coop

Other Web Sites related to Cooperatives

• Department of Justice Canada - Canada Cooperatives Act - http://laws.justice.gc.ca/en/C-1.7/index.html
• Co-operatives Secretariat - http://coop.gc.ca/index_e.php?s1=guides&page=intro
• Canadian Co-operative Association - http://www.coopcca.com
• Health Care Co-operatives Startup Guide - http://coop.gc.ca/index_e.php?s1=guides&s2=health-sante&page=intro
• Co-operatives: A Start Up Guide - http://www.acca.coop/coopresources.html

Information specific to Alberta
For most co-operatives, incorporation in Alberta is under the new Cooperatives Act . To obtain an incorporation package, contact:

Alberta Government Services
Director of Cooperatives
3C, Commerce Place
10155 - 102 Street
Edmonton, Alberta
T5J 4L4
Phone: (780) 427-5210 To call toll free in Alberta, dial 310-0000 and follow the instructions.
E-mail: government.services@gov.ab.ca

For Internet information and forms on How to Incorporate a Cooperative in Alberta and Register an Out-of Alberta Cooperative visit the Government Services website.

Alberta Community & Co-operative Association (ACCA)
ACCA serves co-operatives, credit unions and agricultural organizations by providing co-op development resources, youth and adult education, rural development, administrative services, conference coordination and financial management.

Alberta Community and Co-operative Association
220, 10403 – 172 Street
Edmonton, Alberta
T5S 1K9

Email: acca@acca.coop
Telephone: (780) 451-5959
Fax: (780) 452-5385
Website: http://www.acca.coop/index.html

*Note: "cooperative" may also be spelled "co-operative"

• Cooperatives Act - Alberta
• 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.