Co-operatives NSW Symposium
Troy Sarina
Macquarie University
Troy.sarina@mq.edu.au

Co-operative development in Australia
• A legitimate alternative organisational form since 1859
• Legacy of Australian economy was to promote capitalistic enterprise rather than cooperative effort
Why?
- Overarching public policy agenda
Promotion of ‘for-profit’ forms of organisations rather than democratizing the economy
- Focus has been on Individual and consumerism NOT cooperative ideals
(Wickremarachchi 2012)

Co-operative development in Australia (cont.)
Notions of Federalism – protecting State autonomy while also facilitating the functioning of a national economy
Role of Constitution, section 51 (xx) “Corporations power”
- Allows Federal government to legislate for entities that have the primary purpose of engaging in trading and financial activities across state boundaries
Result?
- A fractured and constrained growth of cooperatives across Australia regulated by inconsistent laws relating to operation and governance of cooperatives
An emergence of a “competitive disadvantage” for cooperatives

Co-operative development in Italy
Embedded in the social structure of Italy
Constitution of 1948
“The republic recognizes the social function of the cooperative” (Article 45)
Why? An attempt to promote fair and social partnerships and democratize the economy

Co-operative development in Italy (Cont.)
Result?
- Reference to cooperatives in Constitution of 1948
- Recognition of cooperatives in company law (see Legislative decree n.6 17
Jan 2003
- General rules applicable to cooperatives are contained in Civil Code (CC)
(ss. 2511-2545)
- Article 2520 deals with special rules and the connection with the CC. CC applies to the extent of any inconsistency with special rules

• Realising the intentions of the Australian Uniform Co-operative Laws
Agreement 2010 made by States and Territories
• States with highest presence of Co-operatives have enacted appropriate legislations and supporting regulations. e.g. NSW, Co-operatives (Adoption of National Law) Act 2012 (NCL)
• Northern Territory & Tasmania in the process of drafting appropriate supporting regulations to give laws effect
• Queensland has withdrawn from agreement but remains committed to developing supporting legislation to allow other State laws to operate effectively

Subject of Analysis: Co-operatives (Adoption of National Law) Act 2012
1. Removing regulatory barriers for co-operative expansion as well as reducing costs of establishing businesses in other jurisdictions
• Participating Co-operatives provisions
• see ss. 456 ff.
s 456 For the purposes of this Chapter and without limiting the definition of carry on business in section 4 in its application to a participating co-operative, a participating co-operative carries on business in this jurisdiction if it:
(a) solicits for members in this jurisdiction; or
(b) seeks share capital in this jurisdiction, takes deposits in this jurisdiction or offers other securities in the co-operative in this jurisdiction (including the issue of CCUs and debentures)

2. Clarification of Co-operative forms
Distributive vs. non-distributive co-operatives (see ss. 17-19)
Distributive co-operative has the opportunity to provide a return on investment to members and non-members alike (see s.18)
- Impact? Enhance Co-operative access to capital as well as providing alternative share options to investors.
Form of additional capital? Co-operative Capital Unit (CCU), see. S.345
Result? Enhancing mobility of capital across different sectors within the economy while safeguarding democratic management structure

3. Corporative governance amendments
• See s. 192 ff. for details
• Directors duty mirror Corporations Act provisions ( found in s. 180) of the Act
• Major Obligations divided into three main areas reflect Corporations Act agenda:
1. Fiduciary Obligations : Act in Good Faith and in the interests of the cooperative (see for example s.192-193)
2. Statutory Obligations : Ensure general monitoring and reporting obligations are complied with while demonstrating they understand and pursue the fundamental goals of the co-operative (s. 196), avoid insolvent trading (s. 554)
3. Contractual obligations : Mirror Statutory obligations to act with due diligence which extends to declaring any conflicts of interests (s 208)
Intended impact? Improving appeal for external investment and overall performance

Co-operatives (Adoption of National Law) Act 2012 No 29 [NSW]
Appendix Co-operatives National Law
Table
Applied provisions of
Corporatio ns Act
Location of applied provisions in Corporations
Act
Matter to which applied provision applies
Provision of this Law that makes the declaration
Sections
111AA–111
Part 1.2A (Disclosing entities)
Debentures (and
CCUs) of a
AX co-operative
Sections Chapter 2L Debentures (and
283AA–283 (Debentures) CCUs) of a
(Annual financial reports and directors’ reports)
A co-operative with quoted securities
Sections
299A–300A
Sections
302–306
Sections
307–313
Section 337
Section 337
Section 277
Part 2M.3, Division 1
(Annual financial reports and directors’ reports)
A co-operative with quoted securities
Section 281
Part 2M.3, Division 2
(Half-year financial report and directors’ report)
A co-operative that is a disclosing entity
Section 282
Part 2M.3, Division 3
(Audit and auditor’s report)
A co-operative Section 283
Section 315
(1)
Part 2M.3, Division 4
(Annual financial reporting to members)
A co-operative that is a disclosing entity
Section 285
Section 288 Section 318 Part 2M.3, Division 4
(Annual financial reporting to members)
A co-operative
Sections
323–323C
Part 2M.3, Division 6
(Special provisions about consolidated financial statements)
A co-operative Section 294
Sections
324AA–324
DD (except section
324BD)
Sections
416–434G
Part 2M.4
(Appointment and removal of auditors),
Divisions 1–5
A co-operative Section 297
Section 393
Sections
435A–451D
(except section
446B)
Part 5.2 (Receivers, and other controllers, of property of corporations)
A co-operative
Part 5.3A
(Administration of a company’s affairs with a view to executing a deed of company arrangement)
A co-operative Section 382
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Current version valid from 4.3.2014 to date (generated on 26.10.2015 at 11:34)

Survey of 100 top companies of ASX examining link between corporate governance and organisational performance found positive correlation between organisational performance and the following:
1. Proportion of independent directors;
2. Concentrated institutional investment in the organisation;
3. Board size (providing more management expertise)
For more information see:
Kathy Rao, Kathyayini, Carol A. Tilt, and Laurence H. Lester. "Corporate governance and environmental reporting: an Australian study." Corporate
Governance: The international journal of business in society 12, no. 2 (2012): 143-
163.
Possible area of future research for cooperatives?

• Director/Officer Obligations have now been extended to Co-operative
Secretary
• See s.190 of NCL
• All co-operative require appointment of company secretary
• Considering wide range of tasks, officer obligations now apply
• Secretary duties include compliance matters such as:
• Organisation of annual meetings;
• Preparation of auditing cycles and documentation;
• Authentication of contracts;
• Formalisation of co-operative rules;
• Co-ordinating with co-operative registrar

• Does size matter?
• Determining financial reporting and auditing requirements based on the size of the organisation- similar to other statutory regimes including corporation and employment law
How are ‘small’ co-operatives defined?
See clause 1.4 of the Co-operatives National Regulations . A ‘small cooperative’ if any TWO of the following characteristics are satisfied:
• Consolidated revenue of less than $8 million per financial year;
• The value of consolidated assets at the end of the year is less than $4 million at the end of the financial year;
• The co-operative and entity it controls has less than 30 employees at the end of a financial year

• See s.271 of the NCL
• At first instance, no auditor is required to be appointed. However:
• Reporting requirements based on member demands:
• Members with 5% of votes can give a direction to prepare financial reports;
• The type of reports required can be dictated by express instruction of the members;
• Any reporting requested must comply with Corporations Act standards relating to the the relevant request (Accounting standards etc.) UNLESS stated otherwise by members
Main intention: to reduce financial & administrative burdens faced by smaller organisations.

• A slow but worthwhile journey towards addressing the “competitive disadvantage’ that co-operatives have been facing under Australian
Corporations Law
• The relatively recent enactment of these laws are yet to be evaluated
• However, the transition to enacting “enablers” for the promotion of co-operatives establish a positive regulatory landscape once arguments about the benefits of co-operatives receive more traction at the political level
• Areas of further regulatory reform
- Macro reforms – Establishing a louder ‘voice’ at the Federal level particularly in relation to education
- Promotion for uniformed laws in Qld
- A more detailed comparison of regulations relating to the various
State laws to further relieve administrative burdens
- Assessment of the impact of these regulatory amendments

Thoughts? Questions?
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