Ending membership

Membership of a co-operative will cease if:

  • active membership provisions in the rules or Regulations are not met
  • the member is expelled or resigns in accordance with the rules
  • the member becomes bankrupt, or an administrator has control over the member’s property
  • the member dies
  • membership was granted on the grounds of misrepresentation or mistake
  • the member is a corporation that has become deregistered or insolvent (unless the rules state otherwise).

If a co-operative has share capital, membership will also cease if all the member’s shares are:

  • transferred to another registered member according to the rules
  • forfeited according to the law or rules
  • sold by the co-operative to another member under the rules
  • purchased by the co-operative as permitted under the law
  • or if the amount paid up on the member’s shares is repaid to the member according to the rules.

A co-operative’s rules may also state that a member can be expelled by special resolution and secret ballot if the member has:

  • seriously or repetitively failed to discharge the member’s obligations
  • acted in a way which prevented or hindered the co-operative carrying out one of more of its primary activities
  • brought the co-operative into disrepute
  • been contrary to one or more of the co-operative’s principles, and has caused the cooperative harm.

Written notice of the proposed special resolution must be given to the member at least 28 days before the date of the meeting, and the member must have the right to be heard and call witnesses at the meeting.

A member of a co-operative who has sold, transferred or disposed of the beneficial interest in all their shares, or agreed to do so, is no longer entitled to vote.

Sale or transfer of shares

The sale or transfer of shares is subject to the rules of the co-operative and can only occur on the death of a member; to an administrator who administers the estate of a member who, through mental or physical infirmity, is incapable of managing their affairs; or with the consent of the board, if they believe the acquirer will be an active member.

Purchase and repayment of shares 

The rules may authorise the co-operative to purchase a member’s share at the request of the member, and repay to the member, with the member’s consent, all or part of the amount paid up on shares when the amount repaid is not required for the activities of the co-operative. The amount paid by a co-operative for purchasing and repaying the amount paid up on shares, or both, cannot be more than 5% of the nominal value of the issued share capital immediately before the start of the financial year, and the amount of any additional share capital of the cooperative subscribed for within that year.

The board may decide to pay less than the nominal value of the share but only if the books of the co-operative show that the amount paid is the net shareholder’s equity per share in the business of the co-operative, or if there is a relevant provision in the rules of the co-operative.

A co-operative cannot purchase shares, or repay amounts paid up on shares, if the co-operative is likely to become insolvent because of the repurchase of the shares or because of the repayment of amounts paid up on the shares, or if the co-operative is already insolvent.

If a co-operative repurchases a share of a member, the co-operative may, instead of paying the purchase price to the member, allot or issue debentures or CCUs of the co-operative to the member in satisfaction of the amount. A deposit-taking co-operative can apply the amount as an interest-bearing deposit by the member with the co-operative. This only applies if the board considers payment of the repurchase price would adversely affect the financial position of the co-operative, or the board and the member both agree.

The deposit, debenture or CCU must be repaid to the member as soon as repayment would not adversely affect the financial position of the co-operative, and must in any case be repaid within 10 years (or within any shorter period the rules of the co-operative require) after the repurchase of the shares.

Repayment to expelled or resigned member 

If a member is expelled or resigns, within one year the co-operative must repay to the former member the amount paid up on the member’s shares, less any amount owed by the member to the co-operative. If the board feels repayment would adversely affect the financial position of the co-operative, or the board and former member agree, the co-operative can take the amount as a donation (with written consent), apply the amount as a deposit (deposit-taking co-operatives only), or allot or issue debentures or CCUs. If the last balance sheet of the co-operative showed a loss, there will be a proportionate reduction in the amount repaid to the member. Shares for which capital has been repaid must be cancelled.

Deceased member’s share

On the death of a member of a co-operative (who is not a joint member), the board must transfer the deceased member’s share or interest in the co-operative to the personal representative of the deceased member, or to one or more persons whom the deceased’s personal representative specifies within three months, unless the board reasonably believes the transferee or each transferee will not be an active member of the co-operative. The board must not give its consent to the transfer of a share if, because of the transfer, the nominal value of the shares held by the transferee would be more than 20% of the nominal value of the share capital of the co-operative, or a lower percentage if specified in the rules of the co-operative. In the case of a joint membership it is normal for the rules to specify that the membership transfers automatically to the surviving joint member or members. However, if using model rules an expressed succession rule would need to need added.

Cancelling membership of inactive members

The board must declare the membership of a member cancelled if:

  • the whereabouts of the member is unknown, and has not been known for a required period (three years, or a shorter period if stated in the rules)
  • the member is not currently an active member and has not been an active member during a required period.

The board must give the member at least 28 days’ notice of its intention to declare the member’s membership cancelled, unless the member’s whereabouts is unknown and the amount to be repaid to the member is not more than $100. If the member’s whereabouts are unknown, and the amount to be repaid is more than $100, notice can be published in a local newspaper. If the former member cannot be found after reasonable efforts, and the amount is less than $100, the co-operative can retain the amount.

Within a year of an inactive member’s membership being cancelled, the co-operative must either repay the amount owing to the former member or, if the board considers repayment would adversely affect the financial position of the co-operative, or if the board and former member agree:

  • the amount may be used as a donation to the co-operative, if the former member consents in writing
  • the amount may be applied as a deposit by the former member if the co-operative is a deposit-taking co-operative, or
  • the co-operative can allot or issue CCUs or debentures to the former member in satisfaction of the amount.

The cancellation of a member’s membership can be deferred by the board by resolution for up to a year if there have been unusual circumstances preventing the member from being active, or if the board thinks that an active membership resolution may be made during the deferral period which would be relevant in deciding if the member is an active member.

The board cannot cancel membership based on active membership provisions if the cooperative is insolvent, under administration, if a compromise or arrangement is being administered, if the co-operative is being wound up, if an appointment of a receiver of any property is in force, or if the co-operative has decided to become a company and has filed a copy of the entry in the minutes with the Registrar.

If a member’s shares have been cancelled due to inactive membership, the former member is taken to be the holder of those shares in the ensuing two years for the purposes of purchasing shares under a specific offer, entitlement of a shareholder if the co-operative becomes registered as a company, or entitlement to a distribution of surplus in a winding up of the cooperative. Conditions apply, and there is no entitlement to vote.