Co-operative membership rights and responsibilities

Definition

A member of a co-operative can be:

• someone who has signed the application for registration
• someone admitted by the co-operative under its rules
• members of a merged co-operative
• a corporation (if allowed by the co-operative rules)
• a minor (if the co-operative rules do not have age restrictions). A minor cannot vote (unless their membership is joint with someone who has these rights) and cannot hold office or be a director.

The minimum number of members a co-operative must have is:

• 5 active members or a lesser number if approved by the Registrar, or
• 2 co-operatives (in the case of a co-operative group).

It is an offence for a director to allow a co-operative to continue operations for more than 28 days after it has less than the minimum number of members.

Becoming a member

A person is qualified to become a member of a co-operative if:

• there are reasonable grounds to believe the person will be an active member, and
• the person is eligible under the co-operative's rules.

A person intending or applying to become a member must be given a copy of the following documents: 

• the co-operative's rules
• all relevant special resolutions that have been passed by the co-operative
• the most recent financial information reported to members
• written notice of any entry fees or regular subscriptions to be paid.

They must also be given a notice that the documents are available.

Distributing co-operatives with a minimum $200 share subscription must give prospective members a current, registered disclosure statement. The statement must be registered with NSW Fair Trading.

The disclosure statement must include information to inform prospective members:

• of the nature and extent of their financial involvement or liability as a member
• the active membership provisions for the co-operative
• the rights and liabilities attaching to shares in the co-operative, and
• any other information that may be directed by the Registrar.

Active membership

The rules will specify what a member must do for the co-operative to remain an active member. These requirements are based on the needs of the co-operative and members. A member who is not active is not entitled to vote and must, eventually, have his or her membership cancelled.

Fees and regular subscriptions

The co-operative rules may require members to pay entry fees and regular subscriptions.

The regular subscription may be based on:

• the value of business the member does with the co-operative, or
• profits earned by the co-operative on business done by the member with the co-operative.

Register of members

A co-operative must maintain a register of its members. The register must contain the information specified in the Co-operatives National Law (the CNL).  Members have the right to inspect this register free of charge.  Members may obtain copies of entries free of charge unless the rules require a fee to be paid.

The CNL restricts the use and disclosure of information obtained from the register.

Rights and liabilities of members

The rights and liabilities of members are:

• a member can only exercise their rights once:
  • their name appears in the register of members
  • they have paid for their membership or acquired a share or interest as required by the rules
• the right to vote is attached to membership and not shareholding. Members are entitled to one vote irrespective of the number of shares they may hold. Joint members have one vote between them
• members who are minors are not entitled to vote and cannot hold any office in a co-operative
• only active members are entitled to vote at a meeting or in a postal ballot
• 20% of active members (or a lesser percentage if specified in the rules) may requisition a meeting
• a member is entitled to inspect various co-operative registers and documents. Go to the Running a co-operative page for more information
• members are liable to the co-operative for amounts owed due to their membership. This includes any unpaid amount on the member's shares and any charges due under the rules
• a member may also be liable for any trade or business with the co-operative, and for any fines it imposes.

Fines

If the rules allow, a co-operative may fine a member for breaching its rules. The rules must also state the maximum fine that can be imposed.

A fine must not be imposed unless the member:

• is given written notice stating the reason for imposing the fine
• has had a reasonable opportunity to appeal the case to the board in person or in writing.

Disputes between members

Disputes among members, between members and the co-operative, or the board must follow the dispute resolution procedures in the rules. For more information on resolving disputes visit the Managing co-operatives disputes page.

Ending a membership

A membership ends if the:

• membership is cancelled due to inactivity
• member is expelled or resigns under the rules of the co-operative
• member becomes bankrupt or insolvent (unless the rules state otherwise)
• member dies
• contract of membership is cancelled due to misrepresentation or mistake
• member is a corporation, and the corporation is deregistered
• where the co-operative has shares, if the member ceases to hold shares in the co-operative.

Cancellation of inactive memberships and cancellation of members’ shares

The board must give the inactive member at least 28 days' notice of its intent to cancel the membership.

The board must declare a membership cancelled if:

• a member's whereabouts are unknown for at least 3 years (or shorter if stated in the co-operative rules)
• a member has not been active at any time during the last 3 years (or a shorter time if stated in the co-operative rules).

If the co-operative has share capital, the board must forfeit the member's shares when it cancels the membership.

A co-operative's board may defer cancelling a membership for up to 12 months. This is allowed in limited cases where unusual events may have prevented the member from fulfilling their duties.

The CNL lists cases where an inactive member's membership can't be cancelled. These include if the co-operative is insolvent, under administration, has a receiver appointed, or is being wound up.

A maximum of a $2,000 fine may be imposed by NSW Fair Trading on the co-operative for not cancelling inactive members' memberships.

A member can apply for a Supreme Court order against the cancelling of membership within 6 months after the board announces their intention to cancel the membership.

Repayments of amounts due to a member on cancellation, resignation or expulsion

Members are entitled to be paid amounts owing to them (including repayment of share capital as appropriate) within one year. The board can delay repayment if it considers repayment would adversely affect the financial position of the co-operative. The amount due must be paid as soon as repayment would not adversely affect the co-operative’s financial position and must be paid within 10 years (or shorter period if specified in the rules).