Co-operatives Act, 2005 (Act No. 14 of 2005)

All authority and power exercised in the co-operative should be performed in pursuance of the objectives of the co-operatives as stipulated in its constitution.

In exercising these powers the board of directors must develop a set of processes, customs, policies and structures that drive the manner in which an organisation is directed, administered and controlled. These process, customs, policies and structures must be approved by the members of the co-operative. As a minimum requirement, the constitution of a co-operative must comply with the requirements as stipulated in the Co-operatives Act 14 of 2005 as Amended by the Co-operatives Banks Amendment Act as well as Co-operatives Amendment Act No. 6 of 2013 and their regulations. The constitutions of each co-operative must furthermore also stipulate the requirements as agreed to by its members.

Governance is, however, not just about fiduciary duties and compliance with legislative requirements, it also involves fairness, participation, accountability, responsibility and transparency, i.e. thus putting the 7 co-operative principles to practice.

The board of directors and the co-operative members, who elect the directors, establish and guide the overall direction of the co-operative to ensure its success as a solid business enterprise and a co-operative community. The directors are accountable to the members of the co-operative and it is important that they accept this responsibility and ensure transparency in terms of the decision making as well as the financial accounting of the co-operative to members so that members can make informed decisions. The responsibility of good governance for co-operatives thus rest by the directors or the board as well as the co-operative members who elect the directors.

Distinctive management practices need to be developed that reflect the democratic values and sustainability of co-operatives and which fully exploit the potential the co-operative advantage. The board may appoint managers if the constitution of the co-operative so provides. Professional managers appointed by the board should adhere to the co-operatives principles, all legislative and constitutional requirements of the co-operative and ensure that they act in the interest of the members of the co-operatives. At the same time these managers must be innovative and strategic in ensuring that they optimize the profitability of the members of the co-operative.

The board of directors is required to compile a management decision report each year to ensure compliance with all legal requirements and the requirements contained in the constitution of the co-operative. All though the board of directors may appoint and delegate functions to managers, the board of directors remains accountable to members for the overall management of the co-operative.