Law changes for co-operatives
On 1 December 2020, law changes came into effect for co-operatives in Queensland. These changes mean the Cooperatives Act 1997 (the Act) was repealed and replaced by the Co-operatives National Law Act 2020 (the CNL).
The new laws are designed for all co-operatives across Australia to adopt a nationally consistent approach, as well as to help reduce costs and red tape.
As a co-operative, you don’t need to do anything to transition to the CNL. Co-operatives registered under the Act have had their registration transferred to the CNL automatically on 1 December 2020.
The law changes are outlined below:
- types of co-operatives
- co-operative rules
- operating across state borders
- financial reporting
- fundraising
- director and officer responsibilities.
Types of co-operatives
Trading and non-trading co-operatives
Trading co-operatives are now known as distributing co-operatives. Non-trading co-operatives are now known as non-distributing co-operatives.
Learn more about the difference between distributing and non-distributing co-operatives.
Small and large co-operatives
Co-operatives are categorised as either small or large. This is based on their size and fundraising activities to simplify and reduce financial reporting requirements for small co-operatives.
A co-operative is defined as small if it meets 2 of the following 3 criteria:
- the consolidated revenue of the co-operative and the entities it controls, if any, is less than $8 million for the financial year
- the value of the consolidated gross assets and entities it controls, if any, is less than $4 million at the end of the financial year
- the co-operative and the entities it controls, if any, had fewer than 30 employees at the end of the financial year.
A small co-operative must also have:
- no securities on issue to non-members during that year, other than securities issued to former members after cancelling their membership
- not issued shares to more than 20 members in a financial year or, if it is has done this, the amount raised by issuing those shares does not exceed $2 million.
All other co-operatives are defined as large co-operatives.
Co-operative rules
Co-operatives can continue to use their existing rules without needing to update them. However, if there are any inconsistencies between a co-operative’s rules and the CNL, the rules of the CNL will prevail.
Operating across state borders
Co-operatives from different states have mutual recognition, which means they can operate freely across borders, with no more requirement for separate registration and reporting in each state or territory.
Because a co-operative doesn’t need separate registrations, they no longer have to pay registration fees to trade in other states or territories.
Learn more about registering a co-operative.
Financial reporting
Small co-operatives no longer need to have their financial statements audited or need to lodge them with the Office of Fair Trading (OFT).
Small co-operatives still need to submit a simplified annual return to OFT within 5 months after the end of their financial year. An annual general meeting must be held within 5 months of the end of the financial year.
If you are a small co-operative, you can stop using your auditor because audit requirements have been removed.
There are no changes to the reporting requirements for large co-operatives.
Learn more about financial reporting for co-operatives.
Fundraising
Co-operatives can now raise funds by issuing co-operative capital units to its members or non-members.
These units are a financial instrument that give co-operatives a way to raise funds to finance their operations without diluting member control and ownership.
If a co-operative wants to issue co-operative capital units, they must update their rules. Section 349 of the CNL sets out the minimum requirements for what the rules must contain.
Director and officer responsibilities
The changes to the law modernise the duties and responsibilities of directors and officers to a corporate governance standard which is consistent with standards under the Corporations Act 2001. Directors and officers have a duty to:
- act with due care, good faith and diligence to carry out their functions in the best interests of the co-operative
- not use their position to disclose or misuse inside or confidential information to
- cause detriment to the co-operative
- gain an advantage for themselves and others
- disclose any conflict of interests between their personal interests and duty as a director. If such a conflict occurs, the director must not be present at a board meeting when the matter is discussed and decided (unless the board agrees otherwise)
- ensure the co-operative can meet its financial obligations and prevent insolvent trading.
Learn more about roles and duties of directors and officers.