CO-OPERATIVE CONSORTIA – some issues to consider
Small traders and other small businesses sometimes work together co-operatively to enhance their trade through joint activities such as purchasing and marketing. This is known as a Co-operative Consortia and it can save money, spread risk, and enables the participating businesses to pool their resources, provide mutual support and learning and strengthen their business sector.
There are different types of co-operative consortia but one type is based on the use of space where the co-operative owns or leases the building and provides office services, equipment and work space for their member businesses.
Working to a robust business and marketing plan and appointing a Secretary to deal with the legal requirements of running a business are as necessary for a consortium as for any other business. A high level of trust and straight dealing between members is an essential prerequisite for the effective functioning of this type of co-operative.
Payment to the co-operative
There could be an annual payment and then commission on goods sold or percentage of produce put through or work obtained. This will vary according to the industrial sector and the wishes of the members.
Ownership of goods or produce
Members need to decide whether the co-operative takes ownership of the goods before it sells them or merely sells them as an agent on the members behalf. The latter can minimise risk and liability in the case of faulty goods. Member agreements would include quality control and how to deal with faulty goods.
Dividends on surplus are often paid according to the extent of the member’s trade with the co-operative during the previous year. Each co-operative will need to develop its own policy on retention of surpluses. These may be called bonuses or return of charges for the benefit of HM Revenue and Customs.
Ownership of Assets
All assets will be owned by the co-operative as a business entity, however an agreement needs to be made as to the redistribution of assets should the co-operative be dissolved. Co-operatives can either distribute assets amongst members or grant the assets to another charity, co-operative or good cause.
In a co-operative there may be some tension between the independence ole trader or organisation and the need for a collective approach. These tensions are lessened if there are clear formal agreements in place for decision-making.
Many of the above points will be dealt with in members’ agreements. Fundamental to the good working practice of the co-operative and maintaining the commitment of its members is a mission statement, clear objectives and agreements to which members will adhere.
There are different models for Co-operative Consortia which mainly depend on how to deal with dividends and assets. It has been recommended to BRC Steering Group that we adopt a model that allows dividends to be paid to members where appropriate (rather than not being able to pay any dividends) and ties the distribution of assets to another organisation of our choice (rather than allowing assets to be distributed amongst members should the co-operative be dissolved at any time in the future).