Co-op Training Module I Basics of the Co-operative

Co-op Training Module I Basics of the Co-operative Model

What is a Co-operative? A legally incorporated business, owned by its members who use its services. Like other businesses a co-op: – – – – – Requires start up capital/equity Generates revenue to cover its costs Must provide quality services Can distribute profits back to its owners Can retain profits for future needs Goal is financial self sufficiency Provides limited liability for member owners Can borrow money/sign contracts Pays business taxes

Co-ops are Different From Private Enterprise Owners benefit from use of the co-op’s services – Not seeking a financial return on their investment Decision making is democratic – one member/vote , – Not based on number of shares held Profits are allocated based use of the co-op’s services – Not based on number of shares held A co-ops business assets are owned collectively by local members – Cannot be used for private gain Co-ops have stated social as well as economic goals – Profit is not the only concern

Who are Co-op Members? They are: – Individuals who access retail, financial, housing & health care services – Business operators who benefit from bulk purchasing, sharing facilities & joint marketing activities – CED and other nonprofit groups that share equipment, office space, etc. to reduce operating costs

Types of Co-operatives in NL Financial - providing banking, investment services – Nfld. & Labrador Credit Union – Hamilton Sound Credit Union Retail – groceries, hardware, building supplies – Indian head Consumer’s Co-op – Gander Consumer’s Co-op Service – health care, housing, childcare – North Shore Central Ambulance Co-op – Advocate Youth Services Co-op

Types of Co-operatives in NL Producer – fishery, farming, filmmaking, crafts – Northeast Coast Sealer’s Co-op – Nfld Independent Filmmakers Co-op Worker – provides members with employment – Extension Community Development Co-op Multi-stakeholder – membership categories – Blueberry Industry Co-op – Fogo island Co-op

Co-operative Profile: International Ocean Spray Agricultural Co-op formed 75 years ago Owned by 800 cranberry growers in U. S. & Canada Has over 2000 employees Leading producer of canned & bottled juice drinks in North America $1. 4 billion in gross sales

Co-op Profile: National The Co-operators Group Formed in 1945 by Saskatchewan farmers Largest Canadian multi-product insurance company Assets exceeding $5. 7 billion Owned by 37 co-op organizations in Canada NL Federation of Co-ops is a member-owner

Co-op Profile: Provincial Fogo Island Co-op Formed in 1967 to resist resettlement Development process pioneered the use of community television to organize residents “Fogo Process” used as community development tool around the world Co-op owns 3 fish plants, a laboratory, a marine service centre & has access to a fleet of 30 long-liners Annual sales of approx. $20 million

Co-op Profile: Provincial Eagle River Credit Union Formed in 1984 when BMO pulled out to lack of business Received strong support from Caisse Populaire in Blanc Sablon & local businesses Now second largest credit union in the province Full service credit union with 6300 members Has 6 branches , $79 million in assets & 6550 member owners

Co-op Profile: Provincial Advocate Youth Services Co-op Formed by young people in Baie Verte in 2007 to: – – – Engage local youth in the community development process Undertake community infrastructure projects Develop other opportunities for youth employment Engage in training & career development activities Support member participation in youth camps, conferences & other provincial events

Next Units Unit 2: Co-ops as a Business Model Unit 3: Co-operative Principles, Legislation & Governance Unit 4: The Existing Co-operative System Unit 5: Developing a Co-operative

Unit 2 Co-operatives As a Business Model

Co-op Structure: Roles & Responsibilities Members • Are the owner/investors and have ultimate control of the co-op • Participate in decision making relating to; – – Policy development Appointment of auditor & annual financial reports Distribution of profits Election of the board of directors • Members participate through the co-op’s AGM & other membership meetings • Member shares are the basis for the co-op’s long term financial stability • Member use of services is the co-op’s primary source of revenue

Co-op Structure: Roles & Responsibilities Board of Directors • Elected by & take direction from the members • Pro-actively directs co-op operations based on co-op principles, legislation, by-laws & policies • Selects, supervises & provides direction to management • Manages & protects the assets of the co-op • Provide membership with full accounting of co-operative activities and directions

Co-op Structure: Roles & Responsibilities Committees • Appointed by members and/or board • Delegated authority for specific tasks or projects • Reporting relationships outlined in by-laws & terms of reference • Standing Committees: Finance & Audit, Member Communications, and Staff Relations • May be appointed for short terms, to address specific issues as they arise

Co-op Structure: Roles & Responsibilities Management & Staff • Hired by and reports directly to the Board • Responsibilities & powers similar to those of private sector manager • Hires, directs and evaluates all other staff • Responsible for successful management of the co-op business • Understands co-op business structures & governance processes • Provides operational reports at board & membership meetings

Smaller Co-operatives Smaller co-ops may rely on part-time/seasonal staff or none at all Member responsibilities remain the same as larger structures Board and committee members may be more involved in day-today operations Rely more on volunteer member and/or other community resource support

Comparison with Other Sectors Public Sector: federal, provincial & municipal governments that provide public services, paid for by tax revenues Private Sector: businesses & organizations that provide services for the public to maximize profits for individual gain Social Economy Sector: non-profit organizations & businesses that respond to socio-economic needs of communities. Co-ops are part of this sector

Co-ops are Unique Different Purpose Private Sector: seeks to maximize profitability for investors Co-operatives: seeks to provide members with needed services at the lowest possible cost Different Control Structure Private Sector: amount of invested capital dictates the level of voting control Co-operatives: each member has one vote, irrespective of amount of capital invested

Co-ops are Unique Allocation of Profits Private Sector: profits distributed as dividends on invested capital, regardless of use of products or services Co-operatives: profits allocated to members as rebates on proportional use of products and services, not on the amount of capital invested

Member Benefits & Obligations Benefits Access to quality services at reasonable cost Control of a business that places priority on their needs Sharing of surplus profits that remain in the community Stable service delivery & and longer business life Priority on local employment Obligations Use their co-op’s services Buy shares & maintain their equity investment Attend AGMs and other membership meetings Be informed and engage in the decision making process

Co-op Facts Operate in a wide variety of business sector – Not just grocery stores or credit unions They are subject to co-op legislation – But not controlled by government Have a higher survival rate than other businesses – Not “last resort” enterprises operating in marginal business situations Make profits, employ local people and contribute to local economies – Not charities or non-profit organizations

Essential Conditions for Success A co-op must: – – – – – Meet the needs of its members Be economically viable with secure financing Have strong member patronage & participation Deliver top quality services at reasonable cost Make board/staff/member education a priority Hire competent & committed management/staff Have strong leadership and a succession plan. Have a positive relationship with the community Buy & hire local as much as possible Be adaptable to changing business environments

Next Units Unit 3: Co-operative Principles, Legislation & Governance Unit 4: The Existing Co-operative System Unit 5: Developing a Co-operative

Unit 3 Co-operative Principles, Legislation & Governance

Co-operative Principles & Values • • Voluntary and open membership Democratic member control Member economic participation Autonomy and independence Education, training, and information Co-operation among co-operatives Concern for community

Co-operative Legislation Canada Co-operatives Act Applies to co-ops that do business in two or more provinces or territories NL Examples: Co-operators Group & Mountain Equipment Co-op NL Co-operatives Act Incorporates local co-ops & gives them legal status Regulates operations including: – – – Member investment & profit sharing Democratic processes Limited member liability & board indemnification Non-member investments Financial & audit requirements Dissolution of a co-op

Co-operative By-Laws The NL Act requires co-ops to develop by-Laws to govern their operations. By-laws address: – – – Structure and objectives of the co-op Who can be a member Member share purchase requirements Meeting quorum & notification requirements For profit or non-profit status Distribution of profits Board size, election, & term of office Membership withdrawal & share pay outs Role of officers, committees & manager Bonding requirements Procedures for by-law amendment

Co-operative Operational Policies • Articulate operational & service delivery procedures • Are developed by individual co-ops and articulated in: – Meeting minutes – Operational manuals – Member information kits • Build on the Co-op Act & by-laws by & address: – Procedures for decision-making – Actions to be taken in different situations – Stakeholder roles, responsibilities, and authorities

Common Co-operative Policies Procedures for: – – – – – Hiring of staff, personnel policies, working conditions Member & public relations Gender equity & responding to harassment issues Charitable donations & other community supports Setting of service fees Terms/conditions for access to services Treatment/protections - members/customers/clients Conflict of interest guidelines Financial management & reporting

Co-op Governance Summary • • Co-op Principles Canada Co-operatives Act NL Co-operatives Act Co-operative By-laws Co-operative Operational Policies Membership handbooks Member/customer service procedures

Next Units Unit #4: The Existing Co-operative System Unit #5: Developing a Co-operative

Unit 4 The Existing Co-operative System

An Integrated Co-op Network First Tier: Local co-operatives in the community that provide services for their members e. g. – – Petty Harbour Fishermen’s Co-op North Shore Central Ambulance Co-op Terrington Consumer’s Co-op Eagle River Credit Union Second Tier: Centrals formed by at the provincial or regional level to represent first tier co-ops & provide them with other services – NL Federation of Co-ops (NLFC) – Co-operative Housing Association of NL (CHANAL) – Co-op Atlantic (CA)

An Integrated Co-op Network Third Tier: National co-op organizations that represent second tier co-ops and provide a range of other support services e. g. – Canadian Co-op Association – The Co-operators Group Ltd. – Worker Co-operative Federation of Canada Fourth Tier: International co-op agencies, made up of national centrals, which promote co-operatives on a global level e. g. – International co-operative alliance – World Council of Credit Unions

Canadian Co-operative System (Co-op Sector) Co-op Sector – – Over 10, 000 co-ops & over 10 million members Three of every 10 Canadians are members of a co-op Over $160 billion in assets & employ over 160, 000 people Over 250, 000 producers rely on co-ops for their livelihood Financial/Credit Union sector – – Over 1600 credits unions and caisse populaires 10 million members at over 3400 locations Over $170 billion in assets and employ over 60, 000 Only financial institutions in over 900 communities across Canada

Provincial Co-op Sector Overview Provincial Statistics Over 90 co-ops and credit unions Employing 1, 400 people 57, 000 members doing business in excess of $800 million Types of Co-ops Consumer (Clarenville Consumers Co-op) Fisheries (Torngat Fisheries Co-op) Agriculture ( Eastern Farmer’s Co-op) Cultural industry (Nfld. Independent Filmmakers Co-op) Health services (North Shore Central Ambulance Co-op) Community development (Advocate Youth services co-op) Child care (Confederation Daycare Co-op) Housing (Kilbride Housing Co-op)

Intra-Provincial Co-ops Co-op Atlantic – Retail & agricultural co-op services – Gander warehouse Co-operator’s Group Ltd – Insurance & investment services Others – – True Serve Hardware Co-op Country Ribbon Chicken Central/Farmer’s Dairy Co-ops Mountain Equipment Co-op

Unit 5 - Developing a Co-operative • • • Overview of the incorporation process Key questions to be addressed Requirements for success Understanding the development process Steps involved in the development of a co-operative project Where to obtain financial assistance & advice

Unit 5 Developing A Co-operative

Incorporation • Understanding of the Co-operatives Act • Minimum of 3 members • Must submit: – – Articles of Incorporation, Draft By-Laws Business Plan Required fee • Reviewed by the Registrar of Co-operatives • Certificate of Incorporation issued

Opportunity Identification Key Questions: Would the recipients of the services (potential co-op members) be better served by owning and having direct control of the enterprise? Will the services provided by the co-op enterprise provide a clear and direct benefit for the member–owners that would justify their investment in the enterprise? Are there available sources of technical, advisory and financial support to help with the co-op enterprise development process?

The Development Process • Elements of a Successful Co-op Start-up • Identifying a common need for a service that requires a common action • Agreement amongst potential members that the a new coop can best address this need • An adequate level of trust among potential members must be developed • Member’s personal and financial commitment must be secured • Other key stakeholders support must be on side • Capacity to implement business and operational plans must be in place

Phases of the Development Process Phase 1: Opportunity Identification – Marketing & Promotion of the Co-op Model – Informed Response to Public Inquiries – Introductory Presentations/Workshops Phase 2: Development of the Business Idea – – – Initial Concept & Market Assessment Initial Agreement re: Co-op Model & Objectives Development of Concept Paper Initial Assessment - Project Financing and Feasibility Development of Initial Budget Estimates

Phases of the Development Process Phase 3: Building the Co-op Group – Confirmation of Co-op Structure & Membership – Establishment of Steering Committee – Agreement on Tasks & Time Lines Phase 4: Confirming Business Feasibility – – – Group Consensus - Potential Feasibility Development of Business Plan* Recruitment of Members Initiated Agreement on Member Equity Contributions Potential Financing Sources Confirmed

Phases of the Development Process Phase 5: Co-op Incorporation – – – Draft By-laws and Business Plan Completed Provisional Board of Directors Confirmed Articles of Incorporation Completed Documents and Fee Submitted Registrar Confirms Incorporation Phase 6: Business Start Up – – – Banking/Accounting Procedures in Place Member Equity and Business Financing in Place Staff Hired (if required) Operational Policies/Procedures Developed Opening Ceremonies - First AGM Held

Phases of the Development Process Phase 7: Ongoing Co-op Operations – – – Policies and Procedures Manual Monitoring of Operations Regular Board Meetings Ongoing Policy Development of Business/Community Networks Membership in Provincial/Regional Centrals

Support Services Co-op Zone Newfoundland & Labrador – – Regional Co-op Developer’s Network Co-op Equity Investment Fund Community Capacity Building Program www. nlfc. coop Agriculture & Agrifoods Canada – Co-op Secretariat – Co-op Development Initiative National Co-op Sector Programs/Services – – Co-op Atlantic Co-operators Development Fund Canadian Co-op Association www. coopzone. coop