Creating the rules for your co-operative
Your co-operative must have a written set of rules (or a constitution) to govern how it runs. The rules form a contract between the co-operative and its members. They must outline everybody’s rights and responsibilities.
Before you can register a co-operative, you must draft its rules and have them approved by us.
Drafting the rules
You should think carefully about your rules right from the drafting stage. If you need to make any changes, you will have to start over again from the drafting stage, so it’s best to get it right from the start.
Talk to your members and get their input before you put the drafted rules to them at the formation meeting.
The rules should include:
- what primary activity or activities the co-operative is for
- how to admit new members
- whether you charge fines for breaking the rules
- what a person needs to do to keep active membership
- how to qualify to become a director
- what procedures you use to run a meeting
- how you will raise funds
- how to handle your accounts, shares and fundraising
- what happens with any surplus funds
- when and how financial reports are to be audited or reviewed if you are a large co-operative*.
*Note: Audits are optional for small co-operatives. If you are a small co-operative and choose not to audit your financial reports, you do not need to include when and how you will audit them in your rules. Learn more about reporting for co-operatives.
All members and office holders must agree to follow the rules. You can ask them to agree to the rules as part of agreeing to become a member. You’ll need to put a statement of agreement on the membership form, which they will need to sign.
Your rules must comply with the law. This means that writing your rules from scratch can be time-consuming and complicated. To help, we have written a standard set of rules that your co-operative can choose to adopt. These model rules are based on the model rules under the Co-operatives National Law Act 2020.
Make sure to read through the model rules before deciding whether to use them. The model rules might be a convenient tool for your co-operative. They:
- are appropriate to the needs of most co-operatives
- will help you comply with all the current regulations.
If you use the model rules, you may adopt them entirely. You will need to complete a few sections about the individual details of your co-operative.
We strongly recommend you seek legal advice if you draft your own rules.
Once the rules are approved by us, your co-operative can alter the model rules, but as soon as changes are made, the rules will be deemed as the co-operative’s own.
Submitting the rules
You must submit the rules to us before you formally adopt them. We need to approve your draft rules as early as possible to make sure they comply with the law. Submit them at least 28 days before you plan to hold the formation meeting.
You will need to fill out an approval form and send it with your draft rules and the fee.
- approve the rules as submitted
- approve different rules to those submitted
- refuse to approve the rules altogether.
When the submitted form is completed correctly and all necessary documents have been attached, we will notify you of the next steps in the registration process within 28 days. We will notify you of our decision.
If we don’t approve your draft rules, we will give the reasons. You can make any necessary changes and resubmit the rules. When we first approve the rules, they become the approved rules.
Agreeing on the rules
Once we approve your rules, you must next hold your formation meeting. At this meeting, the members must vote on whether to adopt the approved rules. You need a two-thirds majority to agree to these rules in order to adopt them.
If your members reject the approved rules, you need to start the process again—this is why you should get your members’ input when you start drafting them. You shouldn’t even edit the rules at the formation meeting. If you do, you must redraft and resubmit them to us for approval.
When the members accept the approved rules at the formation meeting, you should:
- have the people who acted as chairperson and secretary at the formation meeting sign and certify 2 copies of the rules
- submit the 2 copies with the application for registration of a co-operative form.
These will become your registered rules. You can make changes to your registered rules later, however, getting them right the first time will save you money, time and trouble.
Download the model rules
Model rules for distributing co-operatives
You can adapt or use these rules if you are a distributing co-operative with share capital. They cover membership, fees, voting rights and more.
Model rules for non-distributing co-operatives
You can adapt or use these rules if you are a non-distributing co-operative with share capital. They cover membership, fees, voting rights and more.
You can adapt or use these rules if you are a non-distributing co-operative without share capital. They cover membership, fees, voting rights and more.
To learn more about distributing and non-distributing co-operatives, refer to what is a co-operative.