Cooperatives, mutuals and member-owned firms
The committee received evidence during the inquiry which used the terms
co-operative, mutual or member-owned firm interchangeably. The approach taken
in this report is informed by the Business Council of Co-operatives and Mutuals
(BCCM), who describe their member organisations as Co-operative Mutual
Enterprises (CMEs). The statement by Mr Graeme Nuttall, who in 2012 reviewed
employee ownership in the UK for the Department for Business, Innovation and
Skills, probably put it more succinctly by stating that, 'All co-operatives
are mutuals, but not all mutuals are co-operatives'.
The committee would add...but both are member-owned firms.
As the peak representative body for CMEs in Australia, the BCCM
...CMEs are not well understood in markets or by regulators in
Australia. They are formed to pursue different purposes from investor-owned
companies but they exist and compete in the same markets as those entities. A
greater understanding of their purpose and their governance model will provide
a basis for the development of policies that enable Australia to obtain the
best value from this business model.
Contextually, BCCM sees CMEs contributing widely to the Australian
...They distribute wealth, control and ownership...they are
self-help organisations that bring diversity, competitive forces and consumer
choice to markets. They address market failure by enabling smaller market participants,
enterprises or individuals, to compete in markets that favour larger entrants.
Finally, they present an alternative public service delivery model for
government that combines commercial focus, community ownership and a commitment
to the pursuit of the social purpose. The submission will provide a comparison
between the privatisation and the mutualisation of government services and
The BCCM doesn't distinguish the two business models, rather it combines
the two types of enterprise and differentiates them only in terms of the
regulatory environment they operate in, and their contrast with other business
CMEs include both not for profit and for profit entities.
They run lean and efficient business operations for their members and their
communities...There are regulatory differences: co-operatives are incorporated
and regulated under state and territory laws, mutuals are regulated under the
federal Corporations Act.
Despite regulatory differences, CMEs share important
characteristics that distinguish them from companies. They are a self-help
response to the mutually identified needs of individuals or organisations. They
are driven to meet both financial and social goals.
Table 1.1 – Types of cooperatives and mutuals
- Members jointly purchase programs and services, improving value for money and access to expert advice.
Formed by members to increase their bargaining power in the market (e.g. bulk buying from suppliers to gain volume discounts).
The Co-op (University
unions: Teachers Mutual
HCF, Australian Unity
- Provide members with an income as well as empower employees with a stake
in the organisation’s decision-making process.
Pursue long-term strategies that smooth out the peaks and troughs of the business cycle.
cooperatives: Sunderland Homecare
Nundah Community Enterprise
- Enable self-employed members and member businesses or community groups to band together and find strength in numbers.
Includes secondary cooperatives, a consortium cooperative where all members are cooperatives and consortium mutuals which umbrella organisations with like needs.
Child Care Cooperative
and District Aboriginal
Goulburn, CBH Group;
Associated Newsagents Cooperative
SA, Hairdressers’ Cooperative
Hybrid – multi- stakeholder
– a consumer
Table 1.1 (above), produced by Ernst and Young (EY) describes the
typical types of CMEs currently operating in Australia, and provides examples
of each type.
In their submission, EY submitted that the difference between
co-operatives and mutuals is historical, except for the fact that co-operatives
have to subscribe to the seven principles of the International Co-operative Alliance
(see para 2.10). Their submission added that historically the term mutuals
referred to 'member-owned businesses in banking, superannuation and healthcare.'
The following definitional sections provide descriptions of the types of
co-operatives and mutuals that fall under these business models.
The defining characteristic of a co-operative is that it is owned by
their members and acts in the interests of their members, rather than to
provide benefit to shareholders or investors. Two types of cooperatives are
provided for under current Australian law: Distributive and Non-Distributive.
A Distributive Co-operative, commonly known as a Trading Co-operative, is
typically a commercial enterprise where members may share the financial surplus.
Whereas a Non-Distributive Co-operative uses any surplus to 'further the
activities of the co-operative'.
Co-operative Development Services Ltd provides a list on their website
of further characteristics that both types of co-operative typically have. A
co-operative is characterised by the following:
A member must support an activity associated with the primary
activity of the co-operative, e.g. a dairy farmer is required to deliver an
agreed quantity of milk to the co-operative in any given period to remain an
A trading co-operative must have a share capital.
Disclosure statements are required for formation and issuing
Bonus shares can be issued to members upon asset sale or
Shares can be issued at a premium.
Members may be required to subscribe to more shares or lend money
to the co-operative.
Surplus funds can be distributed to members by way of a 'limited'
dividend on shares held, bonus shares and/or a rebate in proportion to the
business done by the member with the co-operative.
Surplus funds from winding up is distributed to members in
proportion to share capital held by a member.
A trading co-operative or distributive co-operative, can provide a
pecuniary benefit to members, and as such, is subject to a disclosure regime
co-operatives legislation. A non-trading co-operative is not subject to the
disclosure regime. Surplus funds from winding up are distributed to another
'not-for-profit' organisation approved by members of the co-operative.
A non-trading co-operative has the following features:
- A member must maintain a relationship with the co-operative
associated with its primary activity, e.g. a parent must have a child enrolled
in a child care co-operative to be an 'active' member. Payment of a regular
subscription by a member is also sufficient to establish 'active' membership of
a non trading co-operative.
No disclosure statement required for formation (except NSW) or
Shares cannot be issued at a premium.
Bonus shares cannot be issued either from asset revaluation or
sale, or from profits.
Members cannot be compelled to acquire more shares or lend money
to the co-operative.
Profits made from trading are reinvested in the co-operative
and/or distributed to a charitable organisation.
To mark the UN International Year of Co-operatives in 2012, the
Australian Bureau of Statistics published an article setting out the typical
characteristics and activities. The article described how both the distributive
co-operatives would 'require their members to maintain an active relationship
with the co-operative'....and this can 'include purchasing or supplying goods or
services, paying an annual subscription, or being a tenant of a housing
co-operative.' The article also described the range of activities that are
often undertaken by co-operatives in Australia:
[C]onsumer (buying and selling goods to members at a
competitive rate); marketing (branding, marketing and distributing members’
products and services); service (providing services to members, such as health,
electricity or housing); and community (resource, information and skill sharing
that encourages ownership and participation). Financial co-operatives comprise
credit unions, mutual building societies and friendly societies.
Australian tax law
Co-operative companies are defined in Australian tax legislation as a company
that has certain limitations on its shareholding and trading, and that has one,
or all, of the following as its object:
- the acquisition of commodities or animals for
disposal or distribution among its shareholders;
- the acquisition of commodities or animals from its
shareholders for disposal or distribution;
- the storage, marketing, packing or processing of
commodities of its shareholders;
- the rendering of services to its shareholders;
- the obtaining of funds from its shareholders for
the purpose of making loans to its shareholders to enable them to acquire land
or buildings to be used for the purpose of residence or of residence and
International Co-operative Alliance
The International Co-operative Alliance sets out a list of principles that guide how co-operatives should operate,
and that distinguish them from other forms of enterprise:
1. Voluntary and Open Membership
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
2. Democratic Member Control
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 primary co-operatives members have equal voting rights (one
member, one vote) and co-operatives at other levels are also organised in a
3. Member Economic Participation
Members contribute equitably to, and democratically control,
the capital of their co-operative. At least part of that capital is usually the
common property of the 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.
4. Autonomy and Independence
Co-operatives are autonomous, self-help organisations
controlled by their members. If they enter into agreements with other
organisations, including governments, or raise capital from external sources,
they do so on terms that ensure democratic control by their members and
maintain their co-operative autonomy.
5. Education, Training and Information
Co-operatives provide education and training for their
members, elected representatives, managers, and employees so they can contribute
effectively to the development of their co-operatives. They inform the general
public - particularly young people and opinion leaders - about the nature and
benefits of co-operation.
6. Co-operation among Co-operatives
Co-operatives serve their members most effectively and
strengthen the co-operative movement by working together through local,
national, regional and international structures.
7. Concern for Community
Co-operatives work for the sustainable development of their
communities through policies approved by their members.
Similarly, the distinguishing characteristic of a mutual organisation is
that it 'is owned by its members, and run
exclusively for their benefit, rather than for the benefit of outside
Internationally, mutuals tend to be larger organisations than co-operatives,
and specialise in specific business sectors. In Canada mutuals are often
insurance companies where the policy holder is a participant in the business.
Co-operatives and Mutuals Canada this results in a 'very stable and successful
business model'. 
In the UK the Communities and Local Government Committee used the
definition of a mutual from Mutuo who described mutuals in similar terms to
...organisations which are owned by, and run for the benefit of
their current and future members. These are different to social enterprises in
that a large proportion of the business should be owned by either employees
and/or the local community.
However the UK committee's report also pointed out the differences
between the two concepts, differentiating them on the basis that co-operatives
subscribe to the following principles of the International Co-operative
An autonomous association of persons united voluntarily to
meet their common economic, social, and cultural needs and aspirations through
a jointly-owned and democratically-controlled enterprise...
The advantages of the mutual model in comparison to other business
structures was highlighted by Regis Mutual Management set out what it sees as
the economic benefits unique to mutual enterprises:
– Mutuals deliver better value, broader and more appropriate
insurance protection for members as well as a reduction in overhead costs.
– Mutuals drive competition and diversity into the market. This is
particularly important in the financial services sector.
Supporting Australian Financial Services Sector - Insurance or
reinsurance business that might otherwise be ceded to foreign markets can be
retained within the domestic market.
- The use of mutual structures has the potential to create greater
domestic employment in areas which benefit the community.
The scale and extent of the sector
The scale of CMEs in Australia and
internationally is significant. The UN's International Year of Cooperatives
(IYC) was launched in recognition of the scale of the sector, citing the
International Cooperative Alliance's membership of 800 million alone.
The UN IYC was also promoted on the basis that cooperatives have the
ability to extend far beyond the reach of other businesses in areas such as job
creation, social inclusion and achieving positive environmental outcomes:
Cooperatives represent a model of economic enterprise, which
when effectively implemented, promotes democratic and human values as well as
respect for the environment...Cooperatives help create, improve and protect
income as well as they generate employment opportunities and contribute to
poverty reduction. As of 2007, cooperatives were responsible for more than 100
million jobs worldwide. Cooperatives also promote social integration and
cohesion as they are a means of empowering the poor and marginalized groups. As
such, they also play an ever-increasing role in the promotion of gender
equality and the social and economic empowerment of women. 
In Australia the Australia Institute estimates that eight in ten
Australians are members of some form of CME, but tellingly, only a fraction of
that number actually realise it.
The Australia Institute also estimated the size of the sector in
Australia and worldwide, the economic and social impact it has through the
creation of jobs, and the types of industries where cooperatives and mutuals
Table 1.2: Overview of member owned businesses
13.5 million members (estimated)
$1,700 billion annual
100 million employed
103 financial mutuals
Three billion livelihoods secured
$83 billion combined total assets of
23% share of global insurance market
$17 billion: top 100 turnover in 2011
Seven million automobile club members
Cooperatives UK (2011); The UK co-operative economy 2011 – Britain’s return to
co-operation; World Council of Credit Unions; ABS (2012); socialbusiness.coop,
Cooperatives Australia (2012).
A key element in measuring the economic and social impact of the work of
CMEs is the collection of data that illustrates the work of CMEs across a
variety of sectors, as well as the effect the Co-operatives National Law (CNL)
is having on the sector.
Robyn Donnelly, a former employee of the NSW Registry of Co-operatives
who was on the intergovernmental committee that developed the CNL, submitted
that the paucity of data on the breadth of activity by CMEs is preventing a
full picture of the sector being developed, and thus hindering the development
of appropriate policies to address the issues facing the sector:
The development of good policy requires information. There is
no national database for co-operatives. State Registrars do not generally
publish statistics about the number of co-operatives in their jurisdictions or
the number of co-operatives that transfer incorporation or that are
deregistered. Unlike the monthly publication of statistics by companies there
is very little information to test the impact of any regulation for
The Mercury Centre in Sydney contended that the lack of data and
subsequent understanding of co-operative and mutual enterprises (CMEs) in key
government agencies is systemic and detrimental:
The BCCM summary identified that the key barriers are those
areas of recognition, education and regulation. The Mercury Centre concurs with
this assessment, particularly in the context of government regulation,...However,
the Mercury Centre considers that further important issues include (1)
structural efficiency and organisational capacity, (2) measurement and impact
and (3) community and public asset ownership.
To help alleviate this lack of data around the sector, BCCM commissioned
the University of Western Australia's Co-operative Enterprise Research Unit
(CERU) to undertake a study into the top 100 CMEs in Australia. Dovetailing
with this work is the continued development of the Australian Co-operative and
Mutual Business Index (ACMI) that commenced in 2012, also being undertaken by
the Co-operative Enterprise Research Unit (CERU) within the University of
Western Australia (UWA) Business School. The research is designed to map the
size and structure of the sector, to provide a 'better understanding of these
Australian Co-operative and Mutual businesses and their contribution to the
The initial findings estimated the combined turnover of these
enterprises was approximately $25 billion, while
their combined assets amounted to $108 billion.
The pie chart (Figure 1) below illustrates the diversity of the sector, with
CMEs active in a number of key industries.
Australia’s Top 100 CME by industry sector T. Mazzarol (2014)
A breakdown of these figures by industry and overall value, including earnings
and net profit after tax is set out in Table 1.3 below:
Table 1.3 Top 100 Australian Co-operative and Mutual Enterprises
Notes to table: EBIT = earnings
before interest and tax; NPAT = net profit after tax.
To supplement this research BCCM recommended that data should be
collected at a state and territory level and then collated at a federal level. An initial first step in this process should be for
the ABS to begin regular collecting/disaggregating and reporting on relevant data
across the CME sector.
The committee recommends that the Commonwealth Government ensures that a
national collection of statistics and data is undertaken to provide an accurate
picture of the scale and extent of the co-operative and mutual sector.
The diversity of co-operatives
As illustrated at Figure 1 above, CMEs operate in almost every sector of
the economy. The committee received evidence from a cross section of these
The Voluntary Parents Services Co-operative appeared before the
committee in Sydney and explained how they provided a service which brought
parents together in fundraising efforts for schools across NSW. The
co-operative has reportedly raised $100 million.
Also in the education field, Australia Scholarships Group (ASG) is a
co-operative of parents established more than 40 years ago to assist them to
plan for the children's education. As the largest member-owned education
services provider in Australia and New Zealand, ASG provides a range of
education plans across public, independent and private school systems, to more
than 155 000 members.
Supporting the tertiary education sector is the Co-op Book Shop, an
institution across Australian university campuses. It operates in half of
Australia's universities with 60 book shops and is Australia's largest
co-operative with nearly two million members.
Yenda Producers Co-operative are a growers' co-operative of around 1550
producers in the Riverina region of New South Wales. The committee heard that
while they have similar goals to other business entities in that they have to
make a profit, the impact of their activities in the local community goes well
In the local area, we employ 80-odd local people and their
families who contribute to our local community. The wages bill is around $4½
million in the year just gone. As well as that, we support over 100 local
charities and schools—you name it; if someone puts their hand up, generally we
are there to support them in the local area. We are a distributing co-op, so we
do pay rebates and dividends back to our shareholders. In the last five years,
those dividends and rebates have amounted to over $7 million back into the
A very different co-operative of bus operators in Victoria also provided
evidence to the committee. The Bus Association Victoria (BusVic) is a member-owned,
voluntary professional association for Victoria's private, accredited bus and
coach operators. The co-operative represents its members in a variety of ways
including advocacy with respect to their relations with government, which
includes contract negotiations and legislative and regulatory compliance
The Central New South Wales Renewable Energy Co-operative Ltd (CENREC)
and the Community Power Agency Co-operative Ltd are two organisations in the
growing co-operative energy sector. CENREC was formed by a number of community
members in Bathurst and Orange to invest in a proposed project by Infigen
Energy to develop a windfarm at Flyers Creek.
Community Power Agency Co-operative Ltd provides support some of the 60
community energy projects around Australia.
Another organisation established to assist and support other
co-operatives and social enterprises, is the Mercury Centre Co-operative. The
Mercury Centre advises business on how to establish and develop social
enterprise business models through collaboration and shared resources built on
community and ethical values.
The community and social housing sector also features many co-operative
organisations. SouthEast Housing Co-operative Ltd. in Victoria told the
committee that while the sector is relatively small in Australia to date,
internationally it is the preferred model for the provision and maintenance of
In response to community concerns around the lack of affordable GPs and
healthcare, the National Health Co-operative was established in 2006 in the West
Belconnen community of North Canberra. The co-op is now open at six locations
in Northern Canberra. These clinics are fully accredited to the RACGP 4th
Edition Standards and Charnwood is also accredited as a GP Registrar training
practice. Regular clinics are also conducted at six nursing homes closely
located to the practice sites. Members have access to bulk-billed GPs and
allied health visits (subject to MBS guidelines and regulations), and 30,000
people have now registered as patients.
Many of the largest mutuals provided evidence to the committee. The
Customer Owned Banking Association (COBA) is the peak body for Australia's
credit unions, building societies and mutual banks. The sector represented by
COBA are collectively the largest holder of household deposits outside the four
The National Roads and Motorists' Association (NRMA) are another one of
Australia's most well-known and largest mutuals with 2.4 million members in NSW
and the ACT. They, along with other motorists' organisations and car clubs
under the banner of the Australia Automobile Association, have seven million
members. The NRMA is a for-profit organisation.
Australian Unity is a large mutual organisation that has been operating
for 175 years, and provides health care, aged care and financial services to
around 850 000 people. Again, it is run on a for-profit basis, but as with all
mutuals, these profits are re-invested in the organisation for the benefit of
Another area where mutuals have a strong presence is the insurance
industry. Hirmaa appeared before the committee representing 18 health
insurance organisations. These organisations collectively provide insurance to
around one million people, and comprise a variety of the business structures,
with mutuals or member-owned insurers being the most prevalent.
Superannuation is also a field where the mutual structure is heavily
favoured. Industry Super appeared before the committee and set out the scale
of their operations. From relatively small beginnings where the industry funds
had 200 000 members and managed $2.5 million in assets, they now have a
membership of nearly five million and hold assets of around 376 billion.
Current state and federal legislation governing co-operatives and mutuals
The development of the Co-operatives National Law (CNL) began in 2012
through the Council of Australian Governments (COAG). The intention was that
each state and territory would pass uniform legislation or legislation
consistent with the CNL by May 2014.
New South Wales are the lead jurisdiction for the legislation which is
intended to reduce red tape and subsequent business costs involved in
registering and governing a co-operative across jurisdictions. To date NSW,
Victoria, Tasmania, South Australia and the Northern Territory have adopted the
WA has amended its Co-operatives Act 2009 (WA Act) to align with the
Nevertheless, some inconsistencies
remain. While Queensland has withdrawn from the agreement altogether, there are
indications that it may yet amend its existing legislation to be consistent
with the national law. ACT is planning the introduction of its enabling laws in
There are four elements to the legislation, the enabling Act, the
Co-operatives National Law, the Co-operatives National Regulations and the
local regulations. All jurisdictions that adopt the law will have these
The NSW government provided information to the committee explaining the objects
of the CNL, and the expected outcomes. One of the overriding objectives is to
'ensure that there are no competitive advantages or disadvantages for
co-operatives as compared to corporations'.
The main reforms to achieve this are:
Improved consistency of co-operatives legislation through the
introduction of uniform template
laws with the option to use alternative consistent legislation;
Cross border business
reform, with automatic
authorisation arrangements replacing the requirement for a co-operative to register in each State or Territory
in which it wants to do business;
Simplification of financial reporting and audit requirements for
More flexible options to raise funds from members or external sources through the introduction of co-operative capital
units (CCUs) in all jurisdictions;
Responsibilities and duties of directors
and officers of a co-operative updated and made consistent with the Corporations Act 2001 (Cth) (the Act);
Improved consistency and referencing of the Act where it can be appropriately applied to co-operatives, such as certain administration and winding up matters;
Setting out the responsibilities of the secretary of a
co-operative and the consequences of not meeting those responsibilities;
Removing the requirement for a formation
disclosure statement for a proposed
nondistributing co-operative, unless requested
to provide this statement by the regulator;
The naming of the types of co-operatives was changed from 'trading' and 'non trading' co-operative to 'distributing' and 'non-distributing' co-operative to better reflect
the nature of the co-operative;
Former members' rights have been reduced from 5 years to 2 years duration
in line with stakeholder feedback. Schedule 3 (1) of the CNL provides
for a savings provision in the CNL Adoption Act of a jurisdiction, to maintain the existing former members' rights under their
Co-operatives Act before the commencement of the CNL;
Capacity for enforceable undertakings between a person and the regulator
has been introduced to enable a cost effective means of ensuring
compliance by co-operatives with the law;
In NSW, about half the fees in its CNL Local Regulations have been reduced,
when compared with the
corresponding fee under the previous
NSW Co-operatives Regulation 2005;
Introduction of a fee for the lodging of annual returns or annual reports by a co operative, to help to recoup the costs of the NSW Registry
Services in reviewing these documents for compliance with the CNL. 
To support transition to the new regulatory environment the states and
territories that have enacted the CNL have put
in place administrative arrangements to provide information and assistance to
those seeking to establish a co-operative, or for established organisations.
Consumer Affairs and Fair Trading in Tasmania for example has published
a number of fact sheets on the CNL as well as documentation on the new fees and
While Consumer and Business Affairs in South Australia has a new section on its
website which includes administrative and governance arrangements as well as
information and advice on how to run a co-operative.
Chapter 3 includes further discussion of the adequacy of information and advice
from state and federal agencies, as well as commentary on the CNL.
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