21/05/2008 - 22:00

Legal shift for cooperatives

21/05/2008 - 22:00

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True believers in the value of cooperatives are hoping new legislation and a drive to educate the next generation of business leaders will help rekindle interest in the sector.

Legal shift for cooperatives
Co-operative Approach: Co-operatives WA secretary Peter Wells hopes new legislation will remove some of the confusion over the business model.

True believers in the value of cooperatives are hoping new legislation and a drive to educate the next generation of business leaders will help rekindle interest in the sector.

In an increasingly competitive world, the corporatisation of traditional cooperative strongholds, such as agriculture, and the ongoing need for balance sheet management have driven many businesses away from the mutual structure that cooperatives offer.

But there are currently efforts to replace 60-year-old legislation with new laws that will streamline the cooperative offering, including more flexibility in the recognition of ownership.

In addition, the sector's peak industry body, Co-operatives WA, has sought to make the structure more familiar to the market by working with business education providers.

Co-operatives WA says the lack of understanding of the collective-style business model is a hurdle that it hopes will be lowered by the proposed new laws which are edging closer to parliament's upper house.

The industry body secretary, Peter Wells, said the sector has faced the challenge for some time.

Mr Well said the committee report due at the upper house by the end of the month would help remove some of confusion surrounding cooperatives.

"The legislation is going to be more detailed about how co-operatives work, what a member's rights are, what the board's obligations are," Mr Wells told WA Business News.

The co-operative model has its roots in collective ownership, where the entity is democratically owned and managed for the provision of services or goods for the benefit of its members.

Currently, the state has 60 active cooperatives with a combined annual turnover of more than $2 billion.

The state's largest cooperative-style operation is the Capricorn Society Ltd, which has an estimated annual turnover of $770 million.

Capricorn recently altered its structure to a public company in a bid to overcome some of the perceived disadvantages of being a cooperative, especially given it operated across state and international boundaries.

Mr Wells said Co-ops WA would promote the legislation to the community to rekindle interest in the cooperative structure, which has had to compete with other business models.

"Cooperatives probably suffer because there is not a ready reference point; you go to accounting, legal or marketing people who may come through an education process that has not given a lot of recognition to the cooperative business model," Mr Wells said.

As a result, the organisation has been working with tertiary institutions to gain more recognition of the model through universities and business schools, however the focus for now is how the bill fares in parliament.

According to the Department of Consumer and Employment Protection, the proposed bill will replace legislation that is around 60 years old and bring WA's cooperatives in line with other states.

Once implemented, the legislation will replace two current Acts with a single statute for regulating cooperatives.

It will also increase a cooperative's ability to raise capital through a new financial instrument called a 'cooperative capital unit' to both members and non-members.

However, as is the case now, nonmembers will not hold the same rights as members, thereby safeguarding members who are actively involved in a cooperative.

Additionally, the bill will also make interstate trading easier for WA cooperatives with other states and territories, thereby reducing bureaucratic hurdles currently in place.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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