Cooperatives

(Small Business Guide - Sara Williams - Press Vitesse)

A cooperative is a group of people operating through a jointly owned and democratically run organisation. The type of cooperative varies. For example, this could be a group of workers who own the organisation they work for, or consumers who join together to buy more efficiently, or an agricultural cooperative where farmers join forces to strengthen their bargaining power. Cooperatives are underpinned by strong values, such as self-help, democracy, equity. To foster these, most co-operatives adhere to seven principles:

1. voluntary and open membership
2. democratic member control. Many adhere to a system of one member, one vote
3. member economic participation. Members all constribute to the organisation's capital and democratically control its use in the business. Often the capital itself cannot be distributed to individual members and, even on winding up, would be given to charity or put to some community use. Profits may be distributed to members, kept within the business, or used in some other way agreed on by the members
4. autonomy and independence. Cooperatives can enter into agreements with other organisations and raise money from external sources, but only on terms which ensure the democratic control of the members is maintained.
5. 5. education, training and information. These are provided by the cooperative to its members so they can contribute effectively to its development. The cooperative also has a dury to inform the public about the nature and benefits of cooperation.
6. cooperation among the cooperatives ( through local, regional, national and international bodies)
7. concern for the community.

Choosing a legal form

You will need to get legal registration or incorporation for the cooperative. There are four possible legal forms.

First, you could form a partnership. The disadvantage with this is that there is no limited liability. And the business could be sold for the benefit of its members; this is not in keeping with a fundamental principle of a cooperative. On the other hand, you can form a partnership with only two people, whereas to form a cooperative society (see below), you need seven.

Second, you could form a limited company; but the aims of the company run counter to some of the basic principles of a cooperative, so it would be difficult to organise.

Thirs, you could seek registration wiht the Financial Services Authority as a cooperative society under the Industrial and Provident Societies Act 1965. You will need seven founder members. You will find registration will be quicker if you apply through a 'promoting body', such as the Cooperative Union (which now incorporates the Industrial Common Ownership Movement). The Cooperatives Union can help with setting up a new cooperative.

Finally, you could organise the cooperative as a company limited by guarantee. This needs only two people to form it.

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