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Standard fact sheet.
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Large print fact sheet.

Co-operatives rules 

A co-operative is governed primarily by the Co-operatives National Law (the CNL) and the Co-operatives National Regulations (the CNR) and Co-operatives (New South Wales) Regulation 2014 (the Local Regulations) as applied in NSW. In addition, its operations and its relationship with its members are governed by its rules.

The rules of a co-operative have the effect of a contract:

  • between the co-operative and each member; and
  • between the co-operative and each director, chief executive officer and the secretary of the co-operative; and
  • between each of the members of the co-operative.

As a member of a co-operative you are agreeing to observe the provisions of the rules.

Content of the rules 

A co-operative’s rules must provide for the matters included in Schedule 1 of the CNL.

The rules may include the objects of the co-operative and any other provision that may be appropriate for an individual co-operative as long as that provision is not contrary to legislation.

Model rules 

The CNR contain Model Rules that may be used by general co-operatives. These rules provide core rules including all the matters that are required by Schedule 1.

Model Rules as at a particular time are available for the following types of co-operatives:

  • Model Rules for a distributing co-operative
  • Model Rules for a non-distributing co-operative without share capital
  • Model Rules for a non-distributing co-operative with share capital.

As co-operatives engage in a wide range of activities, the Model Rules are not intended to deal with all aspects of the business or activities of a co-operative.

The co-operative will need to carefully consider any model rule that it wishes to include to ensure that rule suits its proposed activities and intentions.

With the introduction of the CNL co-operatives are encouraged to review their rules and, update them or adopt new rules as appropriate

If the rules of a small co-operative currently require that accounts must be audited, then it will be necessary to change the rules if the co-operative wishes to take advantage of the reduced financial reporting requirements.

Where a co-operative wishes to adopt a whole new set of rules it can adopt its own rules or the Model Rules as at the date approved by the members.

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Reviewing the rules 

Depending on the complexity of the proposed co-operative’s operations it may be necessary to seek professional advice to assist in reviewing and preparing the rules.

Own rules

A co-operative can include some or all of the relevant model rules in its own rules, making any additions or changes to the rules as appropriate for the co-operative. If a co-operative prepares its own rules then it must ensure that the rules comply with the requirements of the CNL and the CNR.

Model rules

Where a co-operative adopts the Model Rules it is important to note the following:

  • The Model Rules are to be completed by inserting specified details or by striking out any words as specifically required or permitted in the Model Rules. A row of dots in a model rule indicates that a relevant detail or other information is required to be inserted in that particular rule.
  • If any other change is made to the text of the rules or if any additional rules are to be included the co-operative is deemed to have adopted the rules as its own rules.

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How are the rules changed? 

Where an existing co-operative wishes to change its rules it can adopt or amend its own rules or adopt Model Rules as at the date approved by the members.

Where a co-operative has adopted its own rules or the Model Rules as at the date approved by the members, those rules will only change when they are amended by the co-operative. In these circumstances any change to the Model Rules as set out in the CNR will only apply to the co-operative if it chooses to adopt the amended rule(s).

A co-operative can amend its rules or adopt new rules by special resolution. In limited circumstances a board of a co-operative may pass a resolution amending the rules. This may only occur where an amendment is giving effect to a requirement, direction, restriction or prohibition imposed or given under the CNL.

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Special resolution 

A special resolution to amend the rules may be considered at a general meeting or, if the co-operative’s rules provide for it, by postal ballot. A two-thirds majority of eligible voters need to pass the special resolution for it to be approved. However, a co-operative’s rules may require a higher majority of votes to be passed for a special resolution to be approved.

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Prior approval by the Registrar 

Prior written approval of the Registrar is required for any proposed amendment to:

  • the active membership provision
  • rules relating to the conversion of a non-distributing co-operative to a distributing co-operative
  • rules of a co-operative that is a registered club which restrict the voting rights of different classes of members

A draft of the proposed amendment together with a statement advising the reasons for the amendment must be submitted to the Registrar using an Application for prior approval of rule amendment/s (form C11) before the resolution amending the rules is passed by a co-operative.

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Notice to members  

A co-operative must give members a minimum of 21 days notice in which to consider the proposed amendment. The notice to the members must state:

  • the intention to propose the special resolution to amend the rules
  • the reasons for proposing the change, and
  • the effect it will have if the special resolution is passed.

Where a co-operative proposes amending its active membership provision the notice to members must also state:

  • whether the member is eligible to vote on the resolution
  • the full text of the proposed resolution, and
  • a copy of section 156 of the CNL concerning cancellation of membership of an inactive member

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Registration of change of rules 

An amendment to the rules does not have any effect until it is registered with NSW Fair Trading.

When the members pass the special resolution approving the change of rules, an Application to register rule amendment/s (form C10), together with payment of the relevant fee, must be lodged with Fair Trading’s Registry Services within 28 days of the resolution being passed. A consolidated copy of the rules of the co-operative, including the amendment/s, must be attached to the form.

The co-operative will be advised of the outcome of the application.

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What if there is a breach of the rules? 

An individual may take action against a member or the co-operative if a breach has occurred. This action may be either internal or external.

An individual should utilise the grievance procedure outlined in the co-operative’s rules for resolving a dispute.

Fair Trading does not generally become involved in relation to alleged breaches of the rules.

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Accessing a copy of the rules 

Members are entitled to obtain a copy of the rules from a co-operative on payment of the fee (if any) specified in the co-operative’s rules.

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Further information 

For further information please contact:

Registry Services
PO Box 22
154 Russell Street
Bathurst NSW 2795
Tel: 6333 1400
Freecall: 1800 502 042
Fax: 6333 1444
Email: registryinquiries@finance.nsw.gov.au

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