Members’ rights and responsibilities and liabilities

Members’ rights

Members can exercise rights of membership once their names are in the register of members and they have paid the co-operative for membership, or acquired shares or interests according to the rules. Only active members can exercise voting rights.

The Board of a co-operative must make available to each person who intends to apply to be a member a copy of the rules, a copy of special resolutions which would apply to the prospective member, and a copy of the last financial information reported to members.

Co-operative members have democratic rights. Effective communication with the board and the board’s clear communication with members can have a positive effect on the way a cooperative operates and will activate the membership. The board can deal with issues it has been authorised to control under the rules and law, but members should be involved in all major decisions and actions affecting the co-operative.

Members’ responsibilities to a co-operative

The rules of a co-operative may require a member to have a certain level of dealings with a cooperative for a fixed period. The member may be required to pay membership fees and annual contributions, sell products through or to the co-operative, obtain supplies or services through or from the co-operative, or pay liquidated damages for failure to comply. A member must be an active member as described in the co-operative’s rules, or the Act, which state that a member is inactive if they have not been an active member for three years.

To enable a co-operative to operate to its full potential, a member should also:

  • patronise and support the co-operative
  • invest equity as required
  • be involved with its affairs
  • consider serving on the board or committees
  • vote effectively
  • support and communicate with the board
  • keep informed.

Members’ liability to a co-operative

Co-operative members have limited liability for the co-operative’s debts (unless the member is in a position to cause the debts recklessly, negligently, or fraudulently) and are not under any personal liability to the co-operative except for the following:

  • A member of a co-operative with share capital is liable to the co-operative for the amount (if any) unpaid on the shares held by the member together with any charges payable by the member to the co-operative as required by the rules.
  • A member of a co-operative without share capital is liable to the co-operative for any charges payable by the member to the co-operative as required by the rules.

If provided for in the rules, a co-operative may impose a fine of up to $1000 on a member for an infringement of the rules. The co-operative must give notice to the member that it intends to impose the fine, give the reason for the fine, and give the member the opportunity to tell the board why the fine should not be imposed.

Dispute resolution

At times, disputes do arise, even in cohesive and friendly co-operatives.

The rules must be comprehensive in describing grievance procedures for dealing with disputes between members, and members and their co-operative. A co-operative should also have a code of conduct that clearly describes the kind of behaviour expected of members.

A member is permitted to appoint someone else to act on their behalf in a grievance procedure, and the procedure must allow for natural justice to be applied, meaning that all parties involved in the dispute should understand all the facts of the situation, be heard by an unbiased party, and be allowed the right to reply to an accusation.

A member or the co-operative can apply to a tribunal for an order to declare and enforce the rights or obligations of members between themselves, or between the co-operative
and members.

Oppressive conduct of affairs

The Registrar or a member can apply to the Supreme Court for an order if they believe the affairs of the co-operative are being conducted in a way that is:

  • oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member, or,
  • contrary to the interests of the members as a whole.

A member can apply for an order if they believe an act or omission, or a proposed act or omission, by or on behalf of the co-operative, or a resolution, or a proposed resolution, of
members, was or would be oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member, or contrary to the interests of the members as a whole.

The Supreme Court can make an order:

  • To regulate the future conduct of affairs of the co-operative.
  • For the purchase of a member’s shares and repayment of share capital.
  • Requiring a person to do an act or thing.
  • Amending the rules of the co-operative.
  • Directing the co-operative to institute, prosecute, defend or stop proceedings.
  • Authorising a member or members to institute, prosecute, defend or stop proceedings in the name of and on behalf of the co-operative.
  • To restrain a person from engaging in conduct or from doing an act or thing.
  • For the Registrar to appoint an administrator of the co-operative.
  • That the co-operative be wound up.
  • To appoint a receiver, or receiver and manager, of the property of the co-operative.
  • Directing a co-operative to become registered as a company.
  • For costs.

Active membership resolution

If an active membership resolution is to be made at a meeting, at least 21 days notice must be given to members stating whether the member is eligible to vote on the resolution and the full text of the proposed resolution, and containing a copy of Section 156 of Co-operatives National Law.

If the board is meeting to consider a proposal to submit an active membership resolution, all directors are eligible to vote on the proposal.

If the rules of the co-operative do not have active membership provisions, the only members eligible to vote are those who would be active members if the resolution had already
taken effect.