Co-operatives in Agribusiness
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 article, we 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.
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.
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:
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 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.
Please contact a member of HopgoodGanim’s Corporate advisory and governance team if you have any questions regarding a co-operative in Queensland.