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The rules provide for the internal governance and the way the cooperative organises its activities. They outline the cooperative's primary activity or activities, objects, active membership provisions, qualifications for members and directors, admission of new members, matters relating to shares, charges, meeting procedures, distribution of surplus, accounts and audit requirements, and more.
Pursuant to section 99 of the Act, the rules have the effect of a contract between the cooperative and each member; and between the cooperative and each director, the principal executive officer and the secretary of the cooperative; and between a member and each other member. Under the contract, each of those persons agrees to observe and perform the provisions of the rules as in force for the time being so far as those provisions apply to that person. The rules are the constitution of the organisation.
The rules of a cooperative must be in accordance with section 100 of the Act and Schedule 3 to the Act. Cooperatives may compose their own rules addressing all the requirements of the Act, or they may use model rules that have been developed.
When completed, a draft of the rules of the cooperative must be submitted to Business Affairs, with an Application for Approval of Proposed Rules for a Cooperative, at least 28 days before the formation meeting is held. If, at the time of lodgement, the model rules have been published, and the cooperative's rules contain any alterations to the model rules, the draft must be accompanied by a statement setting out the alterations and the reasons for the alterations. (See section 17(2) of the Act).
Business Affairs may approve the rules as submitted, approve the rules with amendments, or refuse to approve the rules. Approval is given by Business Affairs by notice in writing to the person who submitted the rules.
Model rules for the three types of cooperative are available below. If the model rules relating to a cooperative deal with a matter that is not dealt with in the cooperative's rules, then the model rules relating to that matter are deemed to be included in the rules of the cooperative.
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Click here to view Model Rules for a Non Trading Cooperative - With Shares
Click here to view Model Rules for a Non Trading Cooperative - Without Shares
Click here to view Model Rules for a Trading Cooperative
Under section 112 of the Act relating to Primary Activity, the rules of a cooperative must specify the primary activity or activities of the cooperative, and specify the manner and extent to which a member is required to actively support the cooperative. This support is measured against the cooperative's primary activity (or a combination of primary activities), and members are obliged to use or support an activity or activities of the cooperative in order to retain the right to be a member, including the right to vote. Such activity level should be stated as a minimum requirement.
Examples of a primary activity of various forms of cooperative are provided below.
The cooperative must determine that the proposed active membership provisions:
are reasonable when considered in relation to the activities of the proposed cooperative as a whole;
satisfy the requirements that a member must utilise an activity of the cooperative in connection with the carrying on of the cooperative's proposed primary activity; and
are measurable, relatively succinct, and precise enough to enable an objective determination to be made as to whether a particular member is active or inactive.
However, a non-trading cooperative may satisfy the requirements by providing that a member must pay a regular subscription in connection with the cooperative's primary activity.
Examples
An example of a primary activity of a non-trading cooperative for artificial stock breeding in the dairy industry would be:
'In accordance with Part 6 of the Act;
the acquisition of semen and associated products for retail to members is a primary activity of the cooperative; and
a member shall pay a yearly subscription payable each year in order to establish active membership of the cooperative.'
An example of a primary activity of a trading cooperative for fruit packing could be:
'In accordance with Part 6 of the Act;
the acquisition of fruit from its members and the packing of fruit and the manufacture of associated products is a primary activity of the cooperative; and
a member shall provide a minimum of tonnes of fruit to the cooperative in each financial year in order to establish active membership of the cooperative.'
An example of a primary activity of a retail-trading cooperative within the hardware retail industry could be:
'In accordance with Part 6 of the Act;
the operation of a trading store providing goods and services to its members is a primary activity of the cooperative; and
a member shall purchase goods and/or services from the cooperative to the value of a minimum of $ per month in order to establish active membership of the cooperative.'
Any alteration to the rules must be considered carefully and properly planned to meet the deadlines under the Act to minimise inconvenience and costs.
Special Resolution
Pursuant to section 108 of the Act, the Rules of a cooperative cannot be altered unless the alterations are approved by a special resolution, except where the Act provides otherwise. Section 189 of the Act defines a special resolution (for this purpose) as follows:
'a special resolution is a resolution of a cooperative that is passed by a two-thirds majority of the members who, being entitled to do so, vote in person or (if proxies are allowed) by proxy at a general meeting of members, vote in favour of the resolution.'
General Meeting of Members
Members in general meeting may undertake alterations to the rules, whether it is at an annual general meeting or special general meeting as long as the requirements of the Act have been met. If there is an inconsistency between a provision of the Act and the rules of the cooperatives about the procedure for altering the cooperatives rules, the provision of the Act prevails to the extent of the inconsistency.
Procedure
A draft of a proposed rule alteration must be submitted to Business Affairs for approval at least 28 days before notice of the proposed special resolution to alter the rules is given to the members. Approval is required before the resolution altering the rules is passed by the cooperative in general meeting.
Application for approval is made using the Application for Approval of Proposed Alterations of Rules form. Included with the application should be:
The prescribed fee must accompany this application for approval of proposed alteration of rules.
Once Business Affairs approval of the draft proposed alteration of rules has been received, and after the 28 day period referred to above has expired, the cooperative must then give its members 21 days notice stating the intention to propose a special resolution, the reasons for proposing the special resolution and the effect of the special resolution being passed (including the requirements under section 120 of the Act in respect to active membership provisions).
Filing for Registration
After the special resolution has been passed at the meeting, application for registration of the proposed alterations must be submitted to Business Affairs within 28 days.
The Application for Registration of Alteration of Rules form is used for this application and must be accompanied by the prescribed fee, as well as a printed consolidated copy of the cooperatives rules including the alteration.
An alteration to the Rules does not take effect unless registered by Business Affairs (s108).
If the alteration is not contrary to the Act or the Regulations and there is no other reasonable cause to refuse registration, Business Affairs must register the alterations (s108(3)). If the special resolution has been passed by means of a special postal ballot, Business Affairs will need to be satisfied that the rules of the cooperative specifically permit this to occur (s189(2)). Business Affairs will issue a certificate of registration of the alteration, and a copy will be forwarded to the cooperative.
