Cooperatives

A cooperative is different from a company in that it requires at least five share holders and being a registered legal entity each shareholder holds equal voting rights. Cooperatives apply the concepts of democracy, contributing, and delegation in order to benefit all members. Initially, all members are expected to partake and share the accountability of running the organisation.

Advantages of cooperatives

  • It is usually less costly to register a cooperative than a company
  • At general meetings all shareholders has an equal voting rights regardless of their shareholding or involvement in the cooperative
  • Shareholders, directors, managers and employees are not held accountable for debts of the cooperative unless those debts are caused irresponsibly, unenthusiastically or fraudulently
  • Besides directors members can be under 18, though these members cannot stand for office and do not have righting votes
  • A cooperative is member owned and controlled and is not controlled by investors
  • All shareholders and all members have to be active in the cooperative
  • Members only have one vote so there is a feeling of equity
  • Members initially feel that they are working for themselves so there is a greater job satisfaction
  • There is no conflict in interest as the owners are the general workers and there is a lesser chance of industrial relations problems

Disadvantages of a cooperative

  • There is a minimum requirement of five members
  • There is usually a limited distribution of profits to members/ shareholders and some cooperatives may prohibit the distribution of any profit to the members/shareholders
  • Cooperatives are formed to provide a service to their members rather than a return on investment, it wont be easy to attract potential members/shareholders whose primary interest is a financial return
  • Shareholders may have a better involvement or investment than others, however, they still only get one vote
  • Members/shareholders have to be actively involved in the cooperation
  • Cooperatives require ongoing cooperative education programs for members
  • Raising funds does not come easy