Co-operatives Act, 2005 (Act No. 14 of 2005) Regulations Principles of Good Governance for Co-operatives 4. Members

 

Membership is at the heart of the co-operative. Each individual member has a role to play in the co-operative which goes beyond the service that the member receives from the cooperative. Members collectively own their co-operative through the democratic relationship stipulated in its constitution and there for each member has a responsibility to ensure good governance and delivery in terms of the needs of the members of their co-operative. Individually every member has a right to information and a right to influence decisions through votes.

 

Co-operative members share the same goals, have a say in how their co-operative is run and benefit through the services offered by the co-operative and may enjoy a share of the surplus. All members are jointly responsible for the election of board members and are entitled to have insight in the manner in which the co-operative is managed. The processes, customs, policies and structure of how the co-operative is managed are provided for in the constitution of the cooperative which is developed by the founding members of the co-operative and approved by its members. The constitution of the co-operative can only be amended through a special resolution at a general meeting of the co-operative provided that a notice that sets out the proposed amendment to the constitution is send out with the notice for the hosting of the general meeting. It is thus not possible for members to simply propose amendments to the constitution at a general meeting.

 

The first three co-operative principles speak directly to members of co-operatives. The first co-operative principle states that co-operatives are voluntary organisations open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination. The South African co-operative legislation does, however, allow the constitution of a co-operative to restrict the persons eligible for membership provided that the restriction is (a) reasonable to the business of the co-operative as set out in its constitution, and the commercial ability of the co-operative to provide services to prospective members; and (b) does not constitute unfair discrimination.

 

The second principle deals with democratic control. In terms of this principle co-operatives are democratic organisations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In terms of the South African co-operative legislation members in primary category A and B co-operatives have equal voting rights, i.e. one member one vote, and other co-operatives, i.e. category C primary co-operatives, secondary and tertiary co-operatives and the national apex co-operative are also organised in a democratic manner.

 

The third co-operative principle deals with member economic participation. The first part of this principle requires members to contribute equitably to, and democratically control, the capital of their co-operative. This reconfirms democratic control of the co-operative by its members as well as the manner in which the capital of the co-operative is used. The second part of this principle deals with how members are compensated for funds invested in the co-operative and how surpluses should be used. Unlike other commercial entities established for the purpose of profit, co-operative members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership of the cooperative.

 

The minimum membership for the establishment of a primary co-operative is (a) five natural persons, or; (b) two juristic persons, or (c) a combination of 5 persons, whether natural or juristic. The minimum membership for a secondary co-operative is 2 operational3 primary co-operatives whilst the minimum membership for a tertiary co-operative is 2 operational secondary co-operatives. The minimum membership for the national apex co-operative is three operational sectoral tertiary co-operatives that operate on a national level; and five operational multi-sectoral tertiary co-operatives that operate on a provincial, district or local level.

 

Each co-operative must annual submit membership information to CIPC as required in terms of Form Co-op 8 as part of their annual reports, independently reviewed reports or audited reports.

 

 

Members determine how the co-operative is run and must exercise this right by actively participating in all activities of the co-operative. Members should participate in deliberations at general meetings and any other meetings of the co-operative and exercise their right through voting at general meetings. Members collectively own the co-operative and, amongst other, have a right to:

 

Members should abide by the rules of the co-operative as stipulated in its constitution and act in accordance to the co-operative values and principles. Members should always act in the best interest of the co-operative and should ensure that all policies and performances are in accordance with the stated aims and objectives of the co-operative. The general meeting which is made up of all the members represents the sovereign body of the co-operative where decisions are made.

 

 

In co-operatives where members do not hold shares, members are liable for such amounts that are owed to the co-operative in terms of their membership agreement and any other amounts that such member may owe to the co-operative, such as purchases made but not yet paid for by the member. The financial liability of a member in a co-operative where members hold shares in the co-operatives is limited to an

 

In co-operatives where members are allowed to hold shares, the members are liable for all amounts owed to the co-operative in terms of their membership agreement, plus any other amounts that are owed to the co-operative in terms in terms of purchases made but not yet paid for as well as unpaid shares held by the members in the co-operative. The value of the unpaid shares is valued at the nominal5 value of the shares.

 

 

Members may at any point withdraw from being a member of the co-operative. This may be a decision to withdraw or on the death of a member. In both instances the co-operative must repay the membership shares to the member’s estate/family of the deceased member within a period of 2 years.

 

If a co-operative determines that the repayment of a member’s membership shares upon the withdrawal of that member’s membership, would adversely affect its financial well-being, the co-operative may, subject to other legislation and its constitution, defer such payment for a period not exceeding two years.

 

Unless the co-operative determines otherwise, the withdrawal of a member from the co-operative does not release the member from any debt or obligation to the co-operative or any contract between the member and the co-operative.

 

The termination or suspension of membership should be dealt with in line with the provisions in the constitution of the co-operative.

 

 

If the membership of a co-operative is reduced to a number less than the number required for registration, and if the number remains less than the number required for registration for six months, the co-operative is deemed to be de-registered in terms of the Co-operatives Act. Such co-operative must be converted into another legal entity or be wound up and the members of the co-operative may be held personally liable for any loss or damages which may occur as a result of any subsequent activities.

 

 

The annual return on membership and membership contributions needs to be provided as required in terms of the regulations (Form Co-op 8) and must be submitted to CIPC as part of either the annual report (category A primary co-operative), independently reviewed report (category B primary co-operative) or the audited report (category C primary co-operative, secondary co-operative, tertiary co-operative and the national apex co-operative).