Running into trouble

Mergers and transfer of engagements

Two co-operatives can apply for approval to consolidate all or any assets, liabilities and undertakings through merger or transfer of engagements. This needs to be approved by each co-operative’s members by special resolution or resolution of the board, and an approved disclosure statement needs to be provided to members, if required by the Registrar. The Registrar may, with necessary grounds, direct a co-operative to transfer its engagements to another co-operative.

The effect of the merger or transfer is that the successor co-operative gains the members, rights and liabilities, pending proceedings, and the assets of the original co-operative without the need for any conveyance, transfer, assignment or assurance. A co-operative that has transferred its engagements to another co-operative ceases to exist.

Compromises and arrangements 

If a co-operative has such trouble paying its debts that it faces insolvency, a compromise or arrangement might be arranged between the co-operative and its creditors, or the co-operative and its members, to allow the co-operative to settle its debts at a percentage of their value, allowing it to remain trading.

A compromise or arrangement is binding only if it is approved by order of the Supreme Court. If it is between a co-operative and its creditors, the majority of creditors present and voting at a court ordered meeting, whose debts or claims comprise at least 75% of the total debts and claims of all creditors who are present and voting, can agree to the co-operative repaying the debts at a lesser value. If the compromise or arrangement is between the co-operative and members, the members concerned can agree to reduce the debt owed by the co-operative to them by special resolution passed by a special postal ballot.


An administrator may be appointed if a co-operative is in financial difficulties. The administrator’s roles are to investigate the co-operative’s activities and report to creditors. The administrator’s actions are aimed at improving the co-operative’s chances of survival or giving a better return to creditors.

Where a co-operative is, or is likely to become, insolvent, the co-operative’s board of directors has the primary responsibility to take action to appoint an administrator.

In serious cases, where there is no other option, the Registrar may appoint a person as an administrator to conduct the affairs of the co-operative if the Registrar is of the opinion that the co-operative is insolvent or likely to become insolvent at some future time.

An administrator of a co-operative has the functions of the board of the co-operative. On the appointment of an administrator, the directors of the co-operative cease to hold office; all contracts for the provision of secretarial or administrative services for the co-operative are terminated; and the administrator may terminate any contract of employment with the cooperative or any contract for providing other services to the co-operative.