1. What is a Co-operative?
A co-operative (co-op) is defined as:
- A business organization owned and operated by a group of individuals for their mutual benefit. (Wikipedia)
- An autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through jointly owned and democratically controlled enterprise.(International Cooperative Alliance)
- A business which follows co-operatives principles.
In the Barbados context, the business must also be registered under the Co-operative Societies Act, Cap.378A.
2. Co-operative Principles
“For the purposes of the Co-operative Societies Act, Cap.378A, a society conforms to co-operative principles if:
(a) no member or delegate has more than one vote;
(b) no member or delegate is entitled to vote by proxy;
(c) its business is carried on primarily for the benefit of its members;
(d) its membership is voluntary and available without any artificial restriction or any unlawful basis of discrimination, to any persons who can use its services and is willing to accept the responsibilities of membership;
(e) the rate of dividends on share capital that it pays does not exceed the rate prescribed in the regulations made under this Act;
(f) any surplus or savings arising out of its operations is:
(i) used to develop its business,
(ii) used to provide or improve common services to members,
(iii) used for the payment of dividends on share capital,
(iv) distributed among members in proportion to the business done by each member with the society,
(v) used to educate its members, officers or employees or the general public in the principles and techniques of economic and democratic co-operation,
(vi) distributed to non-profit charitable or benevolent organizations;
(g) co-operation with other societies is pursued;
(h) it provides for continuing education.”
3. Major Benefits
- Working together and pooling resources, a co-operative can purchase in bulk.
- Group insurance (lower cost to individual member).
- Income at bank is exempted from Income Tax.
- Part of a large movement that can lobby to Government & Private Sector (where there is unity, there is strength).
- The Society can seek out markets as a group rather than individually.
- Organized production.
- Long term contracts.
- Acquisition of equipment.
- Globalization and Trade Liberization (Export).
- Persons can complement each other creating synergies.
- Limited Liability Company.
- Recourse to assistance from the Co-operatives Department (Regulator).
- Every member has an equal say in the affairs of the society.
- To provide a service that other forms of enterprises are not offering.
- As a means of keeping profits and control of a business within the community. A co-operative is owned and controlled locally, therefore, the earnings of the co-operative stay in the community and are directed by members of the community.
4. Major Challenges
- Effectively working together is a skill.
- Persons may have their own agenda and not share the same vision.
- Under capitalization.
- Not all members may be fully engaged in the co-operative.
- Members may lack management and business skills and need to hire appropriate personnel.
5. How to form a Co-operative
Recommendation 127 of the International Labour Organization is concerned with the role of co-operatives in the economic and social development of developing countries.
Section 12 describes a co-operative as:
“…..an association of persons who have voluntarily joined together to achieve a common end, through the formation of a democratically controlled organization, marking equitable contributions to the capital required and accepting a fair share of the risks and benefits of the undertaking in which the members actively participate.”
Co-operatives basically are self-help organizations and are guided by fundamental principles that give them a peculiar character; therefore their formation must be handled differently from that of other corporate entities.
In addition, co-operatives are the beneficiaries of exemptions and privileges, therefore it is important to identify those that are genuine, as opposed to those that are nothing more than tax shelters.
Before a co-operative is registered, a great deal of preliminary work needs to be done. Persons desirous of starting a co-operative should therefore contact the Co-operatives Department at 535-0150 or email us at email@example.com. The Department would provide initial information, guidance at every stage and some training to ensure that the society is off to a good start.
1. Establishing Co-operation
A survey should be carried out by the interested parties to determine the following:-
(a) The needs of the group.
(b) The potential membership.
(c) The potential volume of business.
2. Co-operative Education
Understanding the co-operative way of doing business is a crucial, but neglected aspect of planning the establishment of a co-operative. This education should be carried out by representatives of the Co-operatives Department or by persons suitably qualified to do so. The purpose of such education is to sensitize potential members to the philosophy and principles of co-operation and the law governing co-operatives.
3. Organizing Committee
A steering committee should be set up to:
(a) Formulate the By-laws for registration of the Co-operative.
(b) Develop a business plan for the Society’s first three (3) years of operations.
(c) Recruit members in sufficient numbers.
3 (a) Concept Paper Framework
This framework is designed to help groups, seriously interested in developing a co-operative, to answer all the questions and identify all the strategic issues that must be addressed to determine the merits and feasibility of their initiative. The target audiences for this information include: potential funding agencies; potential stakeholders and partners; governments; community leaders; media, etc.
But, the most important audience are the co-op members themselves who need to ensure that they are all “on the same page” throughout the development process and are in agreement with the directions being pursued. Each phase of the development process will reveal information necessary to complete this document and when completed, the document will guide the development of the group’s business plan and incorporation of their co-operative. Its format is set out below:
Describe the Industry circumstances and rationale as to why it makes sense to move forward with the formation of this co-operative at this time.
2. Co-operative services
What direct services will the co-operative provide for potential members from a short term and long term perspective?
3. Co-operative benefits
What economic or social benefits will be provided for co-operative members, the industry sector and/or the community?
4. Co-operative members
Who are the individuals, enterprises or other agencies that are proposing the formation of the new co-operatives? Who else is being encouraged to consider joining and benefitting from the services to be provided?
5. Operational structure
What is the proposed organizational and operational structure for the co-op in the early start-up phase and what would be the long term objectives in this regard?
6. Co-op compared to other business structures
What makes this co-operative different from industry associations and/or non-profit agencies that may be operating in the business or social sector in which the co-op will be operating?
7. Existing and potential development partners
What agencies have assisted with the early stages of the development of the co-operative up to now and what other agencies may be approached to potentially assist with future development activities?
8. Facilities and location
What facilities (buildings, processing equipment etc.) will the co-operative require for business start-up in the short term and what will be the longer term requirements? Where will the facilities be located?
9. Operational costs
What is the general estimate of short term costs relating to business startup and what are the projections for the longer term?
10. Member shares and financing
What will be the value of member shares and how many are required to be purchased to address the co-ops initial financial requirements? How much additional business financing will be required and what potential sources for this financing are being considered?
What are the projected time lines for incorporation of the co-operative and start-up of business operations?
12. Key issues to be resolved
Are there key membership and/or industry issues that need to be resolved prior to proceeding with incorporation of the co-op or subsequent to business start-up? Is there a plan to have these issues addressed?
6. Requirements for registration
(a) The Co-operative principles set out in Section 4 of the Act and any modifications thereto must be observed.
(b) An application for registration obtained from the Co-operatives Department must be signed by at least ten (10) members who satisfy the requirements for membership if no member is a registered society.
(c) The minimum age for membership except in the case of a Junior Co-operative is sixteen (16) years.
(d) A completed application in the prescribed form along with the application fee of fifty dollars ($50.00) must be presented to the Registrar of Co-operative Societies.
(e) The application form along with the prescribed fee (currently $50.00), three (3) copies of the proposed by-laws and business plan should be submitted to the Registrar of Co-operatives for approval.
A business plan should state the following:
- the nature of the business to be carried on.
- sources of funding.
- sources of income.
- financial projections for a minimum of three (3) years.
- the source of potential membership.
- It should be noted that the Business Plan must be realistic and that the proposed Society should have the prospect of being viable. It is not advisable that the formation of a co-operative be a single-person effort, but there must be enough people who are willing to give of their time and effort co-operatively, to ensure success of the venture.
(f) If the registration of the Society is approved, a fee for the certificate of registration is payable as follows:
Co-operatives (other than junior co-operatives) – $200.00
Junior Co-operatives – Nil
7. Friendly Society:
A Friendly Society is a body of people who join together to ensure financial provision for members and their close relatives, (as specified by the Friendly Societies Act CAP 379) by means of voluntary subscriptions on a regular basis. Benefits provided include:
- Sickness, old age, funeral, unemployment and maternity benefits;
- Benefits on the widowhood of a member or spouse or for the maintenance of the orphan children of members; and
- Benefits for relief or maintenance of members during periods of distressed circumstances.
8. Co-operators Day
International Co-operators’ Day is held every year on the first Saturday in July. This is celebrated by all Co-operatives by the hosting of a fair which is open to the public. On this day the celebrating co-operatives come together, create a market and offer their products and services to the public. There is also a ceremony where the Minister of Small Business, Entrepreneurship and Commerce delivers a feature address.
9. Co-op Mart
This initiative was developed by the Co-operatives Day Planning Committee. Co-op Marts are held on various Saturdays throughout the year. Similarly to Co-operators Day, it gives the participating Co-ops the opportunity to showcase their products and services to the public. The main venue for this event currently is the Church Village Green at the Central Bank, Bridgetown Barbados.
10. Statistical Information
NUMBER OF NON-FlNANCIAL CO-OPERATIVES AND FRIENDLY SOCIETIES
|Renewable Energy Co-operatives||1|
|Total Registered Co-operatives||29|
|Total Registered Co-operatives||29|
Number of Members at June 30, 2019
Number of Members at May 30, 2020
SELECTED INDICATORS OF CO-OPERATIVE ACTIVITY
At July, 2019