Co-operatives Law Reforms
The Co-operatives Amendment Act 2016 (the Act), commenced on 1 January 2017, and amends the Co-operatives Act 2009. These changes align co-operatives law in Western Australia with co-operatives legislation in other states and territories and allow Western Australia to participate in the Co-operatives National Law (CNL).
In preparation for the commencement of the Act an information sheet describing the main changes that will result from the commencement of the CNL in Western Australia was forwarded to all registered co-operatives. This information is outlined below.
Introduction to the Co-operatives National Law
Amendments to the Co-operatives Act 2009 (WA) will take effect on 1 January 2017 along with changes to the Co-operatives Regulations 2010, to allow co-operatives registered in Western Australia to benefit from state’s participation in the Co-operatives National Law (CNL). This guide addresses questions that co-operatives may have about WA co-operatives law after 1 January 2017.
Why was it necessary to amend the WA Co-operatives Act?
The CNL has been developed to make it easier for co-operatives to operate in more than one state and to remove the competitive disadvantages that exist in comparison to companies operating under the Corporations Act 2001 (Cwth). For WA co-operatives to access these CNL benefits it was necessary to amend the Co-operatives Act 2009 (WA). Importantly those amendments are not expected to impact greatly on the day-to-day operations of existing co-operatives, but the potential benefits will be considerable.
Will our co-operative still be registered?
Yes. There will be no need for currently registered co-operatives to re-register.
Will we be a ‘small’ co-operative?
If currently a small co-operative, a co-operative will continue to be a small co-operative under the amended Co-operatives Act 2009 (WA). In some instances, a co-operative that is currently a large co-operative may be classified as a small co-operative.
As from 1 January 2017, to be classified as a small co-operative, a co-operative need only satisfy any two of the following three criteria for the relevant financial year:
- Consolidated revenue of less than $8 million.
- Consolidated gross assets of less than $4 million.
- Fewer than 30 FTE employees.
The asset and employee tests are applied on the last day of a co-operative’s financial year, with the revenue threshold being the revenue for that financial year.
As such, a change to small co-operative status could be effective as of the financial year next ending after 1 January 2017.
What transitional arrangements have been made for foreign co-operatives?
All co-operatives currently registered as ‘foreign co-operatives’ in this State will become ‘participating co-operatives’ under the amended Co-operatives Act 2009 (WA) and can continue to operate in the same way as before.
Will co-operatives need to change their rules?
There will be some changes to processes and terminology and all co-operatives should review their Registered Rules i.e. the rules currently lodged with the Department of Commerce. In the event of inconsistency between the legislation and a co-operative’s Registered Rules, the legislation will override the rules. So it is in the interests of a co-operative and its members that the board ensure the co-operative’s rules are updated and accurate.
If, after reviewing the Registered Rules, the only changes required are those to give effect to obligations under the Co-operatives Act 2009 (WA) as amended, the changes can be initiated by a board resolution – there is no requirement for a special resolution of the members. If the rules are to be altered in this way the board must lodge the changes with the Department of Commerce. It is only when the Department registers the changes that they take effect. Once the changes are registered, members must be notified writing of the alterations as soon as practicable but in any event not later than the day when notice is given to the members of the next Annual General Meeting.
Will our reporting obligations change?
All co-operatives will continue to provide an annual return to the Registrar of Co-operatives within 28 days after their annual general meeting. A new annual return form is available from the Department of Commerce website.
There will not be any significant change to the contents of the annual return. Large co-operatives will be required to lodge their audited financial reports but small co-operatives need only lodge financial reports if they are directed by their members or the Registrar to do so.
Will my responsibilities as a director or a manager of a WA co-operative change?
There will be some changes to the responsibilities of officers as from 1 January 2017. All board members, the secretary and senior management staff of a co-operative have responsibilities as ‘officers’. The amended Co-operatives Act 2009 (WA) will align those responsibilities with those that apply to officers of a corporation registered by ASIC.
It is very likely that WA co-operative directors and officers are already meeting the required standards. However penalties for contravening the Co-operatives Act 2009 (WA) can be severe and it is recommended that all co-operatives ensure that their directors, their secretary and senior management staff, i.e. their officers, are provided with information and advice about their duties and responsibilities.
In general terms, there are three duties:
- An officer must exercise powers and discharge duties with the degree of care and diligence that a reasonable person would exercise in the circumstances.
- An officer must exercise powers and discharge duties in good faith, in the best interests of the co-operative and for a proper purpose.
- An officer must not use information obtained in the course of his or her duties to gain advantage for themselves or someone else, or to disadvantage the co-operative.
The requirement that a co-operative appoint a secretary is unchanged. The secretary of a co-operative must take all reasonable steps to ensure that the co-operative complies with its obligations under the Co-operatives Act 2009 (WA) as amended. In some circumstances, a failure by the co-operative to meet the requirements of the Act may also be an offence by the secretary.
Further information on this topic can be obtained from the Department of Commerce website.
What other changes should we be aware of?
The following changes may affect existing WA co-operatives:
- Changing rules. Rule changes will only require the Registrar’s pre-approval if they change the active membership provisions or convert a non-distributing co-operative to a distributing co-operative or vice versa.
- Postal Ballots. Co-operatives are currently required to make provision for the conduct of postal ballots in their rules. Under the Co-operatives Act 2009 (WA) as amended, there will be regulations for the first time, about how postal ballots are to be conducted. Most co-operatives have based their rules about postal ballots on the model rules, and those will be consistent with the new regulations. If a co-operative developed its own rules around the conduct of postal ballots when it was registered, the rules should be checked for consistency with the regulations.
- Number of Directors. The Co-operatives Act 2009 (WA) as amended, will require a board to have at least three members.
- Removal of a board member. The Co-operatives Act 2009 (WA) as amended, will permit removal of a board member by a simple majority vote of members - a special resolution will no longer be required. However, there are specific requirements that must be followed before a resolution to remove a board member can be put to a vote of members. Further information on this topic can be obtained from the Department of Commerce website.
- Requirement to lodge updated disclosure statement. If there is a change in the rights or liabilities attaching to any class of share or a significant change occurs in the financial position or prospects of the co-operative, the disclosure statement lodged with the Registrar of Co-operatives will no longer be current and an updated disclosure statement must be lodged with the Registrar within 14 days. This is not intended to include usual seasonal or cyclical changes in the financial position or prospects of a co-operative - but major events such as a large write down of the balanced sheet, the purchase or disposal of a subsidiary or the loss of a critical income source due to the departure of one or more member patrons or some other event.
Will there be any new fees or increases to fees?
No. There will be no additional fees and no increases to fees as a result of amending the Co-operatives Act 2009 (WA). As is currently the case, fees will be reviewed periodically in the future. However, for co-operatives having to amend their rules so they align with the Co-operatives Act 2009 (WA) as amended, there will be the standard small one–off document lodgement fee of $38.50.
Where can I find more about the legislative changes?
The CNL has been implemented in Western Australia by amendment of the Co-operatives Act 2009 and the Co-operatives Regulations 2010. The amended Co-operatives Act 2009 and new Regulations can be viewed or downloaded free of charge from the State Law Publisher website.
For more information about the changes in other states and territories visit New South Wales Fair Trading.
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