A Co-Operative (Co-Op) is a Company Formation which allows a group of people to buy a product or service in bulk. Then the Co-Op sell these products to the members or owners of this group. All the members of this Co-Operative has to buy from this group only.
There are three keys to the success of a Co- Operative:
- It is advised to have many members in a Co-Operative;
- Profits have to be well managed by trustworthy individuals;
- Each member is advised to buy from the Co-Op so that the Co-Op can buy products in bulk.
What does a Co-Operative Registration require?
- 5 or more founding members
- None of the members may have been declared insolvent in South Africa
- Minimum 2 directors
- Each director must have a valid ID book and Physical address in South Africa.
Before registering a co-operative, a formation meeting needs to be held with all persons that are interested in establishing the co-operative.
- The Chairperson outlines the aims and objectives of the proposed co-operative
- The Chairperson answers all the arising questions
- The Chairperson invites everyone to join
- Those interested should be given an application form for Membership to complete
- The persons that have completed the above-mentioned application form decide how many persons will be required to manage the co-operative
- The members will then elect the board of directors (the board of directors will be the management or steering committee of the co-operative)
Also discuss and agree on the following:
- The Objectives (exactly what the co-operative will do)
- The equipment, premises and other materials needed by the enterprise
- Where will the premises (co-operative office) be located
- How will the co-operative be financed? How will the funds be obtained?
- Draw-up an initial business plan
- Choose a name for the co-operative (propose and choose alternative names).
Important rules to keep in mind when choosing a Co-Operative name:
- The name must always indicate what the main business objective of the co-operative is. For example, a co-operative that does Catering, the name must have a word like Catering as part of the name.
- If the co-operative has multiple objectives, the main objective must still appear as part of the name but words like “Multi-Purpose” or “Other Projects” could also form part of it.
- The words “Primary /Secondary / Tertiary Co-operative Limited” must always appear at the end of the name.
Co-Operatives may take the form of primary, secondary or tertiary co-operatives. Types of Co-operatives include agricultural, marketing, housing, financial services, consumer, service, crafts and burial societies and so on.
If you form a co-operative made up of a group of five or more individual members and your purpose is to provide services and employment for one another and promote community development, then you will fall in the category of a primary co-operative.
Secondary co-operatives are formed when two or more primary co-operatives come together because they are involved in similar activities and want to promote their services in the sector in which they are active.
Tertiary co-operatives are formed by secondary co-operatives which come together to promote the interests of their members to government bodies, the private sector and other stakeholders.
The constitution of a Co-Operative is the document which contains all the rules for how a Co-operative should be structured and managed. The constitution should include:
- Official document – Procedures and Regulations in the Constitution
- General Matters
- The Annual General Meeting (AGM)
- The Board of Directors
- Decision making
- Any other rules that agree with the Co-operative principles
Every member has to read the constitution of the Co-operative carefully and understand all the regulations in it. Alternatively, the Board of Directors must explain all the rules of the constitution to the members and ensure that they understand them.
CIPC can provide you with a model constitution especially designed for co-operatives. You may use this model for your own co-operative or amend it to suit the requirements of your own co-operative.
When registering a co-operative, two copies of the model constitution need to be handed in together with the application form CR1.
- Model Constitution for Primary Agricultural Co-operatives
- Model Constitution for Primary Non Specific Co-operatives
- Model Constitution for Primary Housing Co-operatives
- Model Constitution for Primary Worker Co-operatives
A share is literally like a slice of ownership. If you buy a share in a co-operative, you will then own a part of a capital value of the co-operative and the amount that you own is determined by the size of your share and the capital value of the co-operative.
Think of buying a slice of cake: the whole cake may be on sale for R20-00, but if it is cut into 10 slices and you buy one slice for R2-00, you will probably eat it straight away.
However, if you contribute R2-00 to buying the ingredients for the cake before it is baked, then you will own a 10% share of that cake in advance. Now your share has the potential to increase in value. For instance, once the cake is baked someone might be willing to pay R30-00 for the whole cake. The value of your share would therefore increase to R3-00, so you will make a 50% profit. Of course you also face the risk that your share could lose its value. If the cake doesn’t taste good, you might not be able to sell it and then your share will be worth nothing. So, it is in your interest to get involved in baking that cake and making sure that it is delicious.
Issuing shares – how does it work?
If the capital value of a co-operative is worth R100 000, the members may decide to create 1,000 shares for sale at a value of R100 each in order to raise more money for developing the business. If you buy 10 of these shares, you will pay R1,000. You will then own 1% of the capital value of the co-operative. When the capital value of the co-operative increases, the value of your shares will increase as well. You may sell your shares back to the co-operative when you resign from the co-operative and you will be paid out the value of your shares at the time of sale.
A co-operative must give share certificates to all members who hold shares in the co-operative. It must also give certificates to members who have made loans to the Co-operative.
Cost for Co-Operative Registration: R 500.00