Starting a co-operative

Rules of the co-operative

Draft a copy of the rules and get the Registrar to approve them. Model rules for distributing and non-distributing co-operatives are available. See the Co-operatives rules page for details on the Model rules and matters that must be covered.

We recommend you seek financial or legal advice on the proposed rules for a co-operative.

IMPORTANT - communicate with potential members about the draft rules. Decide on any changes before submitting them to the Registry for approval. Pay special attention to the active membership rule. This rule will decide what members must do to support the co-operative's primary activity or to remain active members. See the Co-operative active membership page for more details.

Prepare draft disclosure statement (if required)

Distributing co-operatives must prepare a disclosure statement for potential members.

Non-distributing co-operatives don't need a formation disclosure statement. It is only needed if directed by the Registrar. If the co-operative's operations may cause serious financial risks to its members, a disclosure statement is needed. There are other cases where a disclosure statement is necessary. Contact NSW Fair Trading for further information.

The formation disclosure statement must have all the information potential members need. It must describe the nature and extent of a member's financial involvement or liability. The disclosure statement should address:

• estimated costs of formation
• active membership provisions of the proposed co-operative
• rights and liabilities attached to shares in the proposed co-operative
• capital required for the co-operative at the time of formation
• co-operative's projected income and expenditure for its first operating year
• information about any contracts required to be entered into by the co-operative; and
• any other information that the Registrar directs to be included.

If a disclosure statement includes a report by a person, such as an accountant or auditor, it must also state that the person has given and not withdrawn consent for the statement, or the report included. They must also give consent to the context in which the statement appears.

A sample disclosure statement for formation is available to help you prepare the statement.

You may need financial or legal advice to prepare the disclosure statement and rules.

Assistance may also be found at:

• BCCM website which provides information on starting and running a co-operative.
• Farming Together co-op builder is a great guide for farming groups. It helps them understand the legal documents needed to form a co-operative in Australia.
• Co-operative Federation is an advocacy body for the co-operative sector. It is a member-based group.

Naming the co-operative

A co-operative's name must include 'Co-operative', 'Co-op', or 'Coop' and end with 'Limited' or 'Ltd'.

The proposed co-operative name will be rejected if it is misleading. It also must not be too similar to an existing co-op, body corporate, or business name.

You can check the names of existing organisations and business names on the Search ASIC registers.

Registrar’s approval

Submit the draft rules and disclosure statement (if required) to NSW Fair Trading. Also, submit a Form C1 Application Co-operative Rules Formation Disclosure. Ensure to do this well in advance of the proposed formation meeting. NSW Fair Trading will review the documentation and if in compliance with the CNL approve the documentation to be presented at the formation meeting.

After the rules and disclosure statement are approved, you must hold a formation meeting. At least five potential members must attend the meeting.

Before the meeting

• Notify potential members* of the date, time and place of the formation meeting.
• Prepare a copy of the approved rules for signing.
• Prepare a copy of any disclosure statement for signing.
• Have the Form C4 Application to register cooperative ready for signing.
• Ensure all attendees have a copy of the rules and disclosure statement.
• Prepare the application for membership form for potential members to complete. Application forms should record the full name and address of potential members. It should also record the number and face value of shares (if any), the amount paid on the shares and the signature of each member.

At the meeting

• Ensure at least five persons are present. They must be suitably qualified* to be a member of the proposed co-operative.
• Elect a chairperson to run the meeting.
• Elect a secretary to keep a written record of the meeting.
• Present any disclosure statement approved by the registrar.
• Pass the proposed rules. Two-thirds of the proposed members at the meeting must vote to adopt the rules. If members want to change the rules, the registrar must approve the changes. Then, another formation meeting must be held.
• Elect the first directors according to the co-operative’s rules.
• Proposed members sign the membership application form.
• Authorise someone to apply to NSW Fair Trading and complete the registration.
• The chairperson and secretary of the meeting must sign a copy of the rules, and any disclosure statement.
• Complete the Form C4 Application to register co-operative.

* A person is suitably qualified if:

• there are good reasons to believe the person will join the co-operative
• in the case of an individual – the person is an adult, and
• satisfies any other requirements for membership in the proposed rules.

Within two months of the formation meeting, send these documents to NSW Fair Trading:

• completed Form C4 Application to register co-operative
• a copy of the rules signed by the chairperson and secretary of the formation meeting. This certifies that they were approved at the formation meeting
• a copy of any disclosure statement. It must be signed by the chairperson and secretary of the formation meeting. It must certify that the statement was presented at the meeting
• the relevant application fee.

If approved, the Registrar will register the co-operative and issue a registration certificate.