Co-op Training Module I

Basics of the Co-operative Model

 What is a Co-operative?

A legally incorporated business, owned by its members who use its

services.

Like other businesses a co-op:

– Requires start up capital/equity
– Generates revenue to cover its costs
– Must provide quality services
– Can distribute profits back to its owners
– Can retain profits for future needs
– Goal is financial self sufficiency
– Provides limited liability for member owners
– Can borrow money/sign contracts
– Pays business taxes
Co-ops are Different From Private Enterprise

Owners benefit from use of the co-op’s services

– Not seeking a financial return on their investment
Decision making is democratic – one member/vote
,
– Not based on number of shares held
Profits are allocated based use of the co-op’s services
– Not based on number of shares held
A co-ops business assets are owned collectively by local
members
– Cannot be used for private gain
Co-ops have stated social as well as economic goals
– Profit is not the only concern
 Who are Co-op Members?

They are:
– Individuals who access retail, financial, housing & health care
services
– Business operators who benefit from bulk purchasing, sharing
facilities & joint marketing activities
– CED and other nonprofit groups that share equipment, office
space, etc. to reduce operating costs
 Types of Co-operatives in NL

Financial - providing banking, investment services

– Nfld. & Labrador Credit Union
– Hamilton Sound Credit Union

Retail – groceries, hardware, building supplies

– Indian head Consumer’s Co-op
– Gander Consumer’s Co-op

Service – health care, housing, childcare

– North Shore Central Ambulance Co-op
– Advocate Youth Services Co-op
 Types of Co-operatives in NL

Producer – fishery, farming, filmmaking, crafts

– Northeast Coast Sealer’s Co-op
– Nfld Independent Filmmakers Co-op

Worker – provides members with employment

– Extension Community Development Co-op

Multi-stakeholder – membership categories

– Blueberry Industry Co-op
– Fogo island Co-op
 Co-operative Profile: International

Ocean Spray
Agricultural Co-op formed 75 years ago
Owned by 800 cranberry growers in U.S. & Canada
Has over 2000 employees
Leading producer of canned & bottled juice drinks in North
America
$1.4 billion in gross sales
 Co-op Profile: National

The Co-operators Group

Formed in 1945 by Saskatchewan farmers
Largest Canadian multi-product insurance company
Assets exceeding $5.7 billion
Owned by 37 co-op organizations in Canada
NL Federation of Co-ops is a member-owner
 Co-op Profile: Provincial

Fogo Island Co-op

Formed in 1967 to resist resettlement
Development process pioneered the use of community television to
organize residents
“Fogo Process” used as community development tool around the
world
Co-op owns 3 fish plants, a laboratory, a marine service centre &
has access to a fleet of 30 long-liners
Annual sales of approx. $20 million
 Co-op Profile: Provincial

Eagle River Credit Union

Formed in 1984 when BMO pulled out to lack of business
Received strong support from Caisse Populaire in Blanc Sablon &
local businesses
Now second largest credit union in the province
Full service credit union with 6300 members
Has 6 branches , $79 million in assets & 6550 member owners
 Co-op Profile: Provincial

Advocate Youth Services Co-op

Formed by young people in Baie Verte in 2007 to:
– Engage local youth in the community development process
– Undertake community infrastructure projects
– Develop other opportunities for youth employment
– Engage in training & career development activities
– Support member participation in youth camps, conferences &
other provincial events
 Next Units

Unit 2: Co-ops as a Business Model

Unit 3: Co-operative Principles, Legislation & Governance
Unit 4: The Existing Co-operative System
Unit 5: Developing a Co-operative
 Unit 2
Co-operatives
As a Business Model
Co-op Structure: Roles & Responsibilities

Members
• Are the owner/investors and have ultimate control of the co-op
• Participate in decision making relating to;
– Policy development
– Appointment of auditor & annual financial reports
– Distribution of profits
– Election of the board of directors
• Members participate through the co-op’s AGM & other
membership meetings
• Member shares are the basis for the co-op’s long term
financial stability
• Member use of services is the co-op’s primary source of
revenue
Co-op Structure: Roles & Responsibilities

Board of Directors
• Elected by & take direction from the members
• Pro-actively directs co-op operations based on co-op principles,
legislation, by-laws & policies
• Selects, supervises & provides direction to management
• Manages & protects the assets of the co-op
• Provide membership with full accounting of co-operative
activities
and directions
Co-op Structure: Roles & Responsibilities

Committees
• Appointed by members and/or board
• Delegated authority for specific tasks or projects
• Reporting relationships outlined in by-laws & terms of reference
• Standing Committees: Finance & Audit, Member
Communications, and Staff Relations
• May be appointed for short terms, to address specific issues
as they arise
Co-op Structure: Roles & Responsibilities
Management & Staff
• Hired by and reports directly to the Board
• Responsibilities & powers similar to those of private sector
manager
• Hires, directs and evaluates all other staff
• Responsible for successful management of the co-op business
• Understands co-op business structures & governance
processes
• Provides operational reports at board & membership
meetings
 Smaller Co-operatives

Smaller co-ops may rely on part-time/seasonal staff or none at all

Member responsibilities remain the same as larger structures
Board and committee members may be more involved in day-to-
day operations
Rely more on volunteer member and/or other community
resource support
 Comparison with Other Sectors

Public Sector: federal, provincial & municipal governments that

provide public services, paid for by tax revenues

Private Sector: businesses & organizations that provide services for

the public to maximize profits for individual gain

Social Economy Sector: non-profit organizations & businesses

that respond to socio-economic needs of communities.
Co-ops are part of this sector
 Co-ops are Unique

Different Purpose
Private Sector: seeks to maximize profitability for investors
Co-operatives: seeks to provide members with needed services at
the lowest possible cost

Different Control Structure

Private Sector: amount of invested capital dictates the level of
voting control
Co-operatives: each member has one vote, irrespective of
amount of capital invested
 Co-ops are Unique

Allocation of Profits
Private Sector: profits distributed as dividends on invested capital,
regardless of use of products or services
Co-operatives: profits allocated to members as rebates on
proportional use of products and services, not on the amount of
capital invested
 Member Benefits & Obligations

Benefits
Access to quality services at reasonable cost
Control of a business that places priority on their needs
Sharing of surplus profits that remain in the community
Stable service delivery & and longer business life
Priority on local employment

Obligations
Use their co-op’s services
Buy shares & maintain their equity investment
Attend AGMs and other membership meetings
Be informed and engage in the decision making process
 Co-op Facts

Operate in a wide variety of business sector

– Not just grocery stores or credit unions
They are subject to co-op legislation
– But not controlled by government
Have a higher survival rate than other businesses
– Not “last resort” enterprises operating in marginal business
situations
Make profits, employ local people and contribute to local
economies
– Not charities or non-profit organizations
 Essential Conditions for Success

A co-op must:
– Meet the needs of its members
– Be economically viable with secure financing
– Have strong member patronage & participation
– Deliver top quality services at reasonable cost
– Make board/staff/member education a priority
– Hire competent & committed management/staff
– Have strong leadership and a succession plan.
– Have a positive relationship with the community
– Buy & hire local as much as possible
– Be adaptable to changing business environments
 Next Units

Unit 3: Co-operative Principles, Legislation & Governance

Unit 4: The Existing Co-operative System
Unit 5: Developing a Co-operative
 Unit 3
Co-operative Principles,
Legislation & Governance
 Co-operative Principles & Values

• Voluntary and open membership

• Democratic member control
• Member economic participation
• Autonomy and independence
• Education, training, and information
• Co-operation among co-operatives
• Concern for community
 Co-operative Legislation

Canada Co-operatives Act

Applies to co-ops that do business in two or more provinces or territories
NL Examples: Co-operators Group & Mountain Equipment Co-op

NL Co-operatives Act
Incorporates local co-ops & gives them legal status
Regulates operations including:
– Member investment & profit sharing
– Democratic processes
– Limited member liability & board indemnification
– Non-member investments
– Financial & audit requirements
– Dissolution of a co-op
 Co-operative By-Laws

The NL Act requires co-ops to develop by-Laws to govern their

operations. By-laws address:
– Structure and objectives of the co-op
– Who can be a member
– Member share purchase requirements
– Meeting quorum & notification requirements
– For profit or non-profit status
– Distribution of profits
– Board size, election, & term of office
– Membership withdrawal & share pay outs
– Role of officers, committees & manager
– Bonding requirements
– Procedures for by-law amendment
 Co-operative Operational Policies

• Articulate operational & service delivery procedures

• Are developed by individual co-ops and articulated in:
– Meeting minutes
– Operational manuals
– Member information kits
• Build on the Co-op Act & by-laws by & address:
– Procedures for decision-making
– Actions to be taken in different situations
– Stakeholder roles, responsibilities, and authorities
 Common Co-operative Policies

Procedures for:
– Hiring of staff, personnel policies, working conditions
– Member & public relations
– Gender equity & responding to harassment issues
– Charitable donations & other community supports
– Setting of service fees
– Terms/conditions for access to services
– Treatment/protections - members/customers/clients
– Conflict of interest guidelines
– Financial management & reporting
 Co-op Governance Summary

• Co-op Principles
• Canada Co-operatives Act
• NL Co-operatives Act
• Co-operative By-laws
• Co-operative Operational Policies
• Membership handbooks
• Member/customer service procedures
 Next Units

Unit #4: The Existing Co-operative System

Unit #5: Developing a Co-operative
 Unit 4
The Existing Co-operative System
 An Integrated Co-op Network

First Tier: Local co-operatives in the community that provide

services for their members e.g.
– Petty Harbour Fishermen’s Co-op
– North Shore Central Ambulance Co-op
– Terrington Consumer’s Co-op
– Eagle River Credit Union

Second Tier: Centrals formed by at the provincial or regional

level to represent first tier co-ops & provide them with
other services
– NL Federation of Co-ops (NLFC)
– Co-operative Housing Association of NL (CHANAL)
– Co-op Atlantic (CA)
 An Integrated Co-op Network

Third Tier: National co-op organizations that represent second tier

co-ops and provide a range of other support services e.g.
– Canadian Co-op Association
– The Co-operators Group Ltd.
– Worker Co-operative Federation of Canada

Fourth Tier: International co-op agencies, made up of national

centrals, which promote co-operatives on a global level e.g.
– International co-operative alliance
– World Council of Credit Unions
 Canadian Co-operative System
(Co-op Sector)
Co-op Sector
– Over 10,000 co-ops & over 10 million members
– Three of every 10 Canadians are members of a co-op
– Over $160 billion in assets & employ over 160,000 people
– Over 250,000 producers rely on co-ops for their livelihood

Financial/Credit Union sector

– Over 1600 credits unions and caisse populaires
– 10 million members at over 3400 locations
– Over $170 billion in assets and employ over 60,000
– Only financial institutions in over 900 communities
across Canada
 Provincial Co-op Sector Overview

Provincial Statistics
Over 90 co-ops and credit unions
Employing 1,400 people
57,000 members doing business in excess of $800 million

Types of Co-ops
Consumer (Clarenville Consumers Co-op)
Fisheries (Torngat Fisheries Co-op)
Agriculture ( Eastern Farmer’s Co-op)
Cultural industry (Nfld. Independent Filmmakers Co-op)
Health services (North Shore Central Ambulance Co-op)
Community development (Advocate Youth services co-op)
Child care (Confederation Daycare Co-op)
Housing (Kilbride Housing Co-op)
 Intra-Provincial Co-ops

Co-op Atlantic
– Retail & agricultural co-op services
– Gander warehouse
Co-operator’s Group Ltd
– Insurance & investment services
Others
– True Serve Hardware Co-op
– Country Ribbon Chicken
– Central/Farmer’s Dairy Co-ops
– Mountain Equipment Co-op
 Unit 5 - Developing a Co-operative

• Overview of the incorporation process

• Key questions to be addressed
• Requirements for success
• Understanding the development process
• Steps involved in the development of a co-operative project
• Where to obtain financial assistance & advice
 Unit 5
Developing A Co-operative
 Incorporation

• Understanding of the Co-operatives Act

• Minimum of 3 members
• Must submit:
– Articles of Incorporation,
– Draft By-Laws
– Business Plan
– Required fee
• Reviewed by the Registrar of Co-operatives
• Certificate of Incorporation issued
 Opportunity Identification

Key Questions:
Would the recipients of the services (potential co-op members) be
better served by owning and having direct control of the
enterprise?
Will the services provided by the co-op enterprise provide a clear
and direct benefit for the member–owners that would justify
their investment in the enterprise?
Are there available sources of technical, advisory and financial
support to help with the co-op enterprise development
process?
 The Development Process

• Elements of a Successful Co-op Start-up

• Identifying a common need for a service that requires a
common action
• Agreement amongst potential members that the a new coop
can best address this need
• An adequate level of trust among potential members must be
developed
• Member’s personal and financial commitment must be
secured
• Other key stakeholders support must be on side
• Capacity to implement business and operational plans
must be in place
Phases of the Development Process

Phase 1: Opportunity Identification

– Marketing & Promotion of the Co-op Model
– Informed Response to Public Inquiries
– Introductory Presentations/Workshops

Phase 2: Development of the Business Idea

– Initial Concept & Market Assessment
– Initial Agreement re: Co-op Model & Objectives
– Development of Concept Paper
– Initial Assessment - Project Financing and Feasibility
– Development of Initial Budget Estimates
Phases of the Development Process

Phase 3: Building the Co-op Group

– Confirmation of Co-op Structure & Membership
– Establishment of Steering Committee
– Agreement on Tasks & Time Lines

Phase 4: Confirming Business Feasibility

– Group Consensus - Potential Feasibility
– Development of Business Plan*
– Recruitment of Members Initiated
– Agreement on Member Equity Contributions
– Potential Financing Sources Confirmed
Phases of the Development Process

Phase 5: Co-op Incorporation

– Draft By-laws and Business Plan Completed
– Provisional Board of Directors Confirmed
– Articles of Incorporation Completed
– Documents and Fee Submitted
– Registrar Confirms Incorporation

Phase 6: Business Start Up

– Banking/Accounting Procedures in Place
– Member Equity and Business Financing in Place
– Staff Hired (if required)
– Operational Policies/Procedures Developed
– Opening Ceremonies - First AGM Held
Phases of the Development Process

Phase 7: Ongoing Co-op Operations

– Policies and Procedures Manual
– Monitoring of Operations
– Regular Board Meetings
– Ongoing Policy Development
– Development of Business/Community Networks
– Membership in Provincial/Regional Centrals
 Support Services

Co-op Zone Newfoundland & Labrador

– Regional Co-op Developer’s Network
– Co-op Equity Investment Fund
– Community Capacity Building Program
– www.nlfc.coop
Agriculture & Agrifoods Canada
– Co-op Secretariat
– Co-op Development Initiative
National Co-op Sector Programs/Services
– Co-op Atlantic
– Co-operators Development Fund
– Canadian Co-op Association
– www.coopzone.coop