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 SprayAgricultural Co-op formed 75 years agoOwned by 800 cranberry growers in U.S. & CanadaHas over 2000 employeesLeading producer of canned & bottled juice drinks in

North America$1.4 billion in gross sales

Co-op Profile: National

The Co-operators GroupFormed in 1945 by Saskatchewan farmersLargest Canadian multi-product insurance companyAssets exceeding $5.7 billionOwned by 37 co-op organizations in CanadaNL Federation of Co-ops is a member-owner

Co-op Profile: Provincial

Fogo Island Co-opFormed in 1967 to resist resettlementDevelopment process pioneered the use of community

television to organize residents“Fogo Process” used as community development tool

around the worldCo-op owns 3 fish plants, a laboratory, a marine service

centre & has access to a fleet of 30 long-linersAnnual sales of approx. $20 million

Co-op Profile: Provincial

Eagle River Credit UnionFormed in 1984 when BMO pulled out to lack of businessReceived strong support from Caisse Populaire in Blanc

Sablon & local businessesNow second largest credit union in the provinceFull service credit union with 6300 membersHas 6 branches , $79 million in assets & 6550 member

owners

Co-op Profile: Provincial

Advocate Youth Services Co-opFormed 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 ModelUnit 3: Co-operative Principles, Legislation & GovernanceUnit 4: The Existing Co-operative SystemUnit 5: Developing a Co-operative

Unit 2Co-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 PurposePrivate Sector: seeks to maximize profitability for investorsCo-operatives: seeks to provide members with needed

services at the lowest possible cost

Different Control StructurePrivate 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 ProfitsPrivate 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

BenefitsAccess to quality services at reasonable cost Control of a business that places priority on their needsSharing of surplus profits that remain in the communityStable service delivery & and longer business lifePriority on local employment

ObligationsUse their co-op’s servicesBuy shares & maintain their equity investmentAttend AGMs and other membership meetingsBe 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 & GovernanceUnit 4: The Existing Co-operative SystemUnit 5: Developing a Co-operative

Unit 3Co-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 ActApplies to co-ops that do business in two or more provinces or

territoriesNL Examples: Co-operators Group & Mountain Equipment Co-

op

NL Co-operatives Act Incorporates local co-ops & gives them legal statusRegulates 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 SystemUnit #5: Developing a Co-operative

Unit 4The 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 unionsEmploying 1,400 people57,000 members doing business in excess of $800 million

Types of Co-opsConsumer (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 5Developing 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