About Co-ops in Canada
What is a Co-operative?
A co-operative is an enterprise that is jointly owned by the members who use its services. All members of a co-op are equal decision makers in the enterprise, using a democratic system of one-member, one-vote. In turn, all members share the benefits of co-operation, based on how much they use the co-operative's service.
Co-ops take different forms and they operate in all sectors of the economy, but a co-op is generally set up by a group of people who share a common need. By pooling their resources and working together, the members can satisfy that need through the co-operative. While they serve a wide variety of functions, co-ops generally fit one of the following four types:
- A consumer co-op provides products or services to its members (such as a retail co-op, housing, health-care or child-care co-op).
- A producer co-op processes and markets the goods or services produced by its members, and/or supplies products or services necessary to the members' professional activities (such as independent entrepreneurs, artisans, or farmers).
- A worker co-op provides employment for its members. In this type of co-op, the employees are the members and the owners of the enterprise.
- A multi-stakeholder co-op serves the needs of different stakeholder groups - such as employees, clients, and other interested individuals and organizations. This type of co-op is usually found in health, home care and other social enterprises.
Co-operatives serve both economic and social purposes. While a co-op exists to meet the common needs of its members, it also promotes the development of those members through their involvement in the democratic governance of the enterprise. At the same time, the co-operative is usually undertaking local social development or economic development activities, such as creating jobs or providing goods and services that would otherwise be unavailable to the community.
Member Shares and Patronage Dividends: A co-operative's start-up capital usually comes from member shares in the co-op, and a portion of any surplus generated by the co-op may be returned to members in the form of patronage dividends. This type of return is different from profits earned on invested capital since it is based on how much the member uses the co-operative's service, not on the number of shares the member holds in the co-operative. Some co-operatives are structured as non-profit entities, such as housing, health- and day-care co-ops. These co-ops do not issue patronage dividends.
The Legal Status of a Co-operative: A co-operative will need to be incorporated either provincially or federally before it is a legal entity. It may be formed in accordance with a provincial co-operative statute setting out its corporate form and mode of operation; or in accordance with the Canada Co-operatives Act when the co-operative has a place of business in at least two provinces.
How is a Co-operative Different from other Businesses?
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Co-operative business
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Investor-owned business
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Non-profit organization
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Ownership
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The share is listed in the member's name.
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Generally, a share carries no name. Unless registered, it belongs to the bearer.
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There is no ownership. Members are taken on (or membership accepted) when they agree to pay annual dues conferring member status, or a one-time membership fee.
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In general, a membership share may not increase in value. It can usually only be redeemed by the co-op at its par value.
Some legislation allows for investment shares (non-par value) to members and/or non-members.
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A common share may increase in value. A shareholder may sell his or her shares to another person at an agreed upon price.
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Anyone may become a member, whether or not they use or benefit from the services provided by the organization, as long as they support the purpose of the organization.
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Member's responsibility is limited to the amount of the shares he or she holds.
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Shareholder's responsibility is limited to the value of the shares he or she holds.
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Voting
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A member is entitled to only one vote at a general meeting, regardless of the number of shares he or she holds.
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A shareholder is entitled to a number of votes, equivalent to the number of shares he or she holds in the company.
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Generally, one person, one vote. Delegates or proxies may be used depending on the governing legislation.
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Some co-operatives with a large and dispersed membership have a delegate structure for representing members (e.g., one delegate represents multiple members from a geographic district).
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No proxy voting allowed.
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A shareholder may obtain a proxy to vote for other shareholders.
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Holders of investment shares have restricted voting rights.
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Sharing in the Surplus
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Co-operative legislation may limit or prohibit the payment of interest on share capital.
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There is no limit on share dividend.
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Surpluses may be paid into the reserve or to members in the form of patronage returns proportional to the business done by each member with the co-operative.
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Profits may be distributed in the form of dividends according to the provisions for each class of shares, or reinvested in the company. The value of shares reflect the net value of the corporation.
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Surpluses do not belong to individual members but to the organization. They may, therefore, not be redistributed among the members but must be returned in full to the indivisible general reserve of the organization.
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Some legislation allows co-operatives that issue investment shares to allocate part of their surpluses as dividends on those shares.
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Some provincial legislation may stipulate that a co-operative's general reserve is indivisible, or divisible in whole or in part.
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Shareholders may dispose of all of the assets of the business in accordance with certain legislative provisions.
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Some co-operatives, such as housing, health and day-care
co-operatives, are structured as non-profit entities. Surpluses are not distributed to members.
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The Various Kinds of Co-operatives
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Financial Co-operatives
- These co-operatives offer financial, loan or investment services, and insurance services to their members.
- They are owned by user members or by subscribers to insurance.
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Examples
- Caisses populaires
- Credit unions
- Insurance co-operatives
- Mutual companies
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Retail Co-operatives
- They provide their members with goods for their personal use.
- They are owned by the consumers of the goods sold by the co-operative.
- They work in various sectors.
- They range from small purchasing groups to large supermarket-type organizations.
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Examples of sectors
- Food
- Student supplies
- Hardware
- Clothing
- Outdoor recreational gear
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Service Co-operatives
- They provide services to their members (individuals or corporations).
- They are owned by the users of the services.
- They can range in size from small day-care centers to large housing co-operatives.
- They can represent an interesting alternative to public services delivery.
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Examples of services
- Water supply
- Cablevision
- Community recreation facilities
- Electricity, natural gas and wind energy
- Housing
- Day-care centres and nurseries
- Funeral services
- Health care
- Transportation and communication
- Tourism
- Municipal services
- Community and social services
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Producer Co-operatives
- Some co-ops market, or process and market, their members' products and services.
- Others may also provide supplies or services necessary to their members' economic activities.
- They are owned by the members who purchase or sell products and services through the co-op.
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Examples of sectors
- Agricultural processing and marketing
- Farm supply
- Feedlots, pastures, and pooling of equipment
- Seed cleaning
- Arts and crafts
- Taxi industry
- Government procurement
- Fisheries
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Worker Co-operatives
- The purpose of these co-operatives is to provide their members with work through a jointly owned enterprise. They may be found in all economic sectors.
- These co-operatives are owned by their employee members, and they operate mainly in the small- or medium-sized enterprise sector.
- In a worker co-operative, the members obtain jobs and control the management and administration of their enterprise.
- Employees sometimes form a co-operative for the purpose of acquiring voting shares in the corporation that employs them. These are called worker shareholder co-operatives.
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Examples of sectors
- Agri-food
- Natural food
- Arts and entertainment
- Manufacture and sale of clothing
- Communications and marketing
- Construction and renovation
- Education
- Forestry
- Printing and publishing
- Industrial production and manufacturing
- Ambulance services
- Business services
- Home care and nursing services
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Multi-Stakeholder Co-operatives
- The membership of these co-operatives includes different categories of members who share a common interest in the organization, e.g. clients, employees, investors, and community organizations
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Examples of sectors
- Home care services
- Health services
- Enterprises serving disabled workers
- Community services
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The Key Benefits of Co-operatives
Meeting a BroadRange of Needs and Opportunities
The co-operative model is flexible enough to meet the widest range of needs and opportunities - from housing, health care and employment, to manufacturing, marketing and financial services. The co-op model has a long history and a proven track record in social and economic development, having served thousands of groups in both rural and urban settings.
Helping Producers Compete
Co-operatives help thousands of Canadian producers to pursue their livelihood and successfully compete in the marketplace through collective marketing and other co-op ventures - e.g., in agriculture, the fisheries, forestry and the arts. Thousands more Canadians who work in tourism, the taxi business, home care, communications and other sectors also provide their services through co operatives.
Serving Rural and Remote Communities
Co-operatives offer goods and services throughout Canada, but they are especially important to many rural and remote communities. In some communities, co-operatives are the only providers of retail and financial services, health and home care services, communications and utility services, tourism facilities and other basic amenities.
Developing Community Leadership
Co-ops provide informal schools of entrepreneurship, where members gain business and leadership training through the democratic governance process. More than 70,000 members hold leadership positions in Canada's co-operatives at a given time.
Building Social Capital
Co-ops create productive networks that broaden the base of support and resources available to their members. These networks foster the well-being of individual members, while strengthening community linkages and creating an efficient and co-ordinated approach to sustainable change in the community.
Promoting Local Ownership and Control
Co-operatives are community-based enterprises that build local assets and keep wealth in the community by returning dividends to members - while creating jobs and economic opportunities. Co-ops are rarely susceptible to pull-out or take-over since they are guided by the interests of local stakeholders, not outside investors.
