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Guidelines for writing a Co-operative's Constitution

Provided by Business Partners Ltd, South Africa's leading investor in SMEs

contracts_small.jpgWhen a Co-operative has a founding meeting, a Constitution must be read and agreed to by all members. This document must be filed with Cipro. Below are some guidelines for what your Constitution should contain.

(1) A co-operative registered in terms of Co-Operatives Act 14 of 2005 must adopt a constitution that complies with section 14.

(2) A co-operative where the members are required to hold shares must adopt a constitution that complies with sections 14 and 15.

(3) Secondary and tertiary co-operatives must adopt a constitution that complies with sections 14 and 16.

(4) A co-operative may, in addition to the matters listed under section 14 (2), adopt any other provision that is not inconsistent with this Act.

(5) The Minister may publish, by notice in the Gazette, model constitutions that may be used by co-operatives.

The constitution of a co-operative must include-

  1. the name of the co-operative;
  2. whether it is a primary co-operative, a secondary co-operative, or a tertiary cooperative;
  3. the main objectives of the co-operative;
  4. a description of the business of the co-operative, including any restrictions on the business of the co-operative;
  5. a provision stipulating that each member has one vote in all meetings of the cooperative except in the case of secondary or tertiary co-operatives;
  6. the minimum period of notice of general meetings;
  7. the place where the registered office of the co-operative is located;
  8. the minimum and maximum number of directors;
  9. the term of office of directors, which may not be more than four years, and whether a director may be re-appointed for a second or further term of office; 
  10. the powers and restrictions on the directors of the co-operative to manage the business of the co-operative;
  11. the requirements for membership of the co-operative, subject to section 3 (2); 
  12. the requirements for withdrawal of membership of a co-operative, including the necessary period for the notice of withdrawal and repayment of shares, and any provisions relating to the liability of a member for a specified period after the date of withdrawal, subject to section 23; 
  13. a provision relating to the manner in which a portion of the surplus that is transferred as a reserve to a reserve fund in accordance with section 3 (e), may be utilised; 
  14. provision for the distribution of the assets of the co-operative on its dissolution; 
  15. the financial year of the co-operative; 
  16. procedures for the application of membership to the co-operative, which should be in accordance with co-operative principles; 
  17. a provision for the rights and obligations of members; 
  18. a provision for the transfer of membership, member loan and membership share; 
  19. the conditions and processes for the termination of membership; 
  20. the conditions and processes for the suspension of membership; 
  21. the structure for decision making whereby members can participate in decision making processes in a democratic and participatory manner; 
  22. provisions for annual general meetings and  special general meetings, including the manner in which such meetings are convened, the necessary periods of notice, the election of a chairperson and provisions for the proposal of resolutions that should ensure democratic decision making; 
  23. a provision for the period of notice for general meetings and must state the conditions and processes to be followed when requesting a general meeting; 
  24. a provision for the tabling and adoption of resolutions; 
  25. the determination of quorums for general meetings and must ensure that the quorum provides for adequate member control and decision making; 
  26. a provision relating to the manner in which voting may be conducted; 
  27. the conditions under which a resolution in lieu of a meeting may be held and passed; 
  28. the conditions and processes for requesting a general meeting; 
  29. a provision for the appointment of directors, on condition that only members may be appointed as directors; 
  30. the conditions for vacation of office by directors and the filling of any vacancies in a manner that ensures democratic accountability to the members; 
  31. the conditions and processes for the appointment of the chairperson, vice chairperson and acting chairperson; and
  32. the conditions under which a board of directors may delegate functions to a director or committee or manager;
  33. a provision relating to the manner in which a portion of the surplus that is not transferred to the reserve fund, may be utilised.

The constitution of a co-operative may include-

  1. the further objectives of the co-operative;
  2. the amount of business allowed with non-members, subject to the provisions of this Act;
  3. in the case of a co-operative having members in more than one region, the holding of regional general meetings and a conference of delegates;
  4. a provision for a member to appoint a proxy to attend and vote at a general meeting on that member's behalf, or for postal votes: Provided that no person may act as a proxy for more than 20 per cent of the members entitled to vote at a meeting, or for such lesser percentage of members stipulated in the constitution of the co-operative;
  5. provision for people who want to provide support to the co-operative without themselves becoming members to be appointed as associate members;
  6. a provision relating to the manner in which the supervisory committee may be constituted;
  7. the conditions under which the board of directors may delegate functions to a director, committee or manager;
  8. provisions regulating the appointment of a general manager or executive manager by the board of directors;
  9. provision to make rules consistent with the constitution and this Act concerning the holding of meetings or any other matter of procedure; and 
  10. provision for the settlement of disputes between members of the co-operative, or between a member of the co-operative and the co-operative itself.

Provisions where members are required to hold shares

Where a member is required to hold shares in a co-operative upon application or acceptance as a member, the constitution of a co-operative must provide-

  1. for the minimum number of membership shares to be issued to each member;
  2. for the nominal value of the shares;
  3. whether the membership shares are to be issued fully paid up or not fully paid up, and the conditions under which shares are to be paid;
  4. for the circumstances under which additional shares may be issued to members;
  5. for the maximum percentage of the share capital of a co-operative a member may hold, except in the case of a secondary or tertiary co-operative;
  6. for the circumstances under which shares issued to a member may be redeemed.

Provisions for secondary and tertiary co-operatives

(1) The constitution of a secondary or tertiary co-operative must provide for:

  • the main objectives of a secondary co-operative which must include the provision of sectoral services to the primary co-operatives that are its members;
  • the main objectives of a tertiary co-operative which must include advocating and engaging organs of state, the private sector and stakeholders on behalf of its members; and
  • the number of votes a member has in proportion to the number of primary or secondary co-operatives that are its members.

(2) The constitution of a secondary or tertiary co-operative may provide for:

  • the further objectives of a secondary or tertiary co-operative which may include any activity that is not inconsistent with the objectives of any of its members, and which is undertaken for their exclusive benefit; and
  • the further objectives of a tertiary co-operative which may include representing the interests of co-operatives within a sector or region, providing assistance for education and training, establishing a guarantee fund to facilitate external financing of its members, and the establishment of an audit fund to assist members to have their operations audited.

When a Co-operative cannot afford to use the services of an Auditor annually, it must complete a CR8 form (available on the Cipro website) and must choose one of the three options under part 2 of the form. The CR8 form is in the format of an affidavit, which must be provided by the Chairperson of the Co-operative and must be signed by a Commissioner of Oath.

Source: www.quick-companies.co.za and www.cipro.org.za

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Wikus Olivier  |  April 11, 2013
Very informative and structured... exactly what I needed. Does anyone know of anyone that has experience in Co-Operatives?