In 2016, the Federal Government established the Farm Co-operatives & Collaboration Pilot Program to encourage collaborative farming. One of the ways this has been achieved historically in Australian farming business practice has been the use of co-operatives as a collaborative business structure.

In this alert, Senior Associate Lea Fua and Solicitor Christina Hooper take a brief look at the role co-operatives have historically played as a business structure in agribusinesses in Australia, and set out some of the key features of a co-operative under Queensland law.

Historical context of co-operatives

Co-operatives have long had a place in the Australian agribusiness landscape as a structure that allows farmers to own and control more of their food supply chain. As co-operatives were initially established by farmers to maximise their bargaining power and their market position, there have been substantial agribusiness co-operatives in the dairy, cotton, horticulture, meat and sugar industries. The members of these co-operatives share in the investment including the risks, benefits and losses. Co-operatives allow members to pool resources with other operators in the same industry, with the ultimate aim of delivering a greater return.

What are the basic features of a co-operative?

In Queensland, co-operatives can function in either a trading or non-trading capacity. A trading co-operative must have share capital and comply with the rules contained within the co-operative constitution that allow it to give returns or distributions to members on surplus funds or share capital.

In contrast, a non-trading co-operative cannot give financial returns to its members and this applies to distributions on surplus or capital. The profits raised can only be used to expand or improve upon the co-operatives primary activities.

Regardless of whether the co-operative is trading or non-trading, it must have a membership of at least five active members.

Pursuant to the Cooperatives Act 1997 (Qld), co-operatives adhere to the following principles:

  • They are voluntary organisations open to all persons able to use their services and accept the responsibilities of membership;
  • Members have equal voting rights (1 member, 1 vote) and additional shares in a co-operative do not amount to additional voting rights;
  • Profits are divided among each member, with the distribution generally dependent on how active the member is within the co-operative and the surpluses applied to:
    • Developing the co-operative;
    • Benefiting the members; or
    • Supporting other activities approved by the members.
  • They are run by and for the members;
  • Education and training is given to members, representatives, managers and employees;
  • They aim to strengthen the co-operative movement by working with local, state, national and international networks for members; and
  • They uphold the sustainable development of their community through their policies.

A co-operative is a separate legal entity and can sue, or be sued, in their own name. Under a co-operative structure, members can buy, and sell, from within the co-operative. This can have the flow on effect of offering more competitive prices and lowering costs.

Officers of co-operatives

Officers of co-operatives have responsibilities under the Cooperatives Act 1997 (Cth) analogous to company directors under the Corporations Act 2001 (Cth) in the sense that they must exercise their powers and discharge functions with a degree of care and diligence. Cooperatives are also required to adhere to the requirements of the Corporations Act 2001 (Cth) in relation to financial records, reports and audits.