Understanding Co-operatives: How Could They Work For My Business?

Choosing the right business structure for your business or cause can be a challenging process to navigate. 

In the process of looking at your various options, you might have come across the concept of “co-operatives”. But what exactly are they in the New Zealand context?

In short, a co-operative in New Zealand may be an unconventional business structure, but it provides a perfect framework to bring people together in a democratic and equal way. 

What Is A Co-operative?

Co-operatives are member-driven enterprises that are created to meet the common economic, social, and cultural needs and aspirations of their members. 

These organisations operate on principles of shared responsibility, democracy, and decision-making to benefit all members. 

A co-operative is its own separate legal entity in New Zealand, and the liability of the entity is separated from its members. 

To register a co-operative in New Zealand, you’ll need at least five members, and all these members have equal status and voting rights. 

What Can A Co-operative Do?

Co-operatives in New Zealand can engage in a variety of social and commercial activities, as long as these are defined within its rules. 

They generally fall into four categories: 

1. Consumer Co-operatives – where the co-operative’s members buy and sell goods or services to other members at a competitive rate, such as food co-ops or retail co-operatives 
2. Producer Co-operatives – where members collaborate in the production, processing, or marketing of goods, such as agricultural co-operatives
3. Service Co-operatives – where members provide services to each other, such as healthcare, education, or housing
4. Worker Co-operatives – where employees own and manage the business, sharing in decision-making and profits

The Two Types Of Co-operatives

Broadly speaking, co-operatives in New Zealand are either distributing or non-distributing. 

Here’s an explanation of how they differ:

Distributing Co-operatives 

Distributing co-operatives share parts of their surplus with members through dividends or rebates. 

If you’re forming a distributing co-operative, you need to have share capital and at least five active members. 

Each member must buy the minimum amount of shares as stated in the co-operative’s rules. 

Distributing co-operatives are suitable for ventures that aim to generate profits for their members.

Non-distributing Co-operatives 

Non-distributing co-operatives are more suitable for community organisations and do not distribute any surplus to members. They exist for a particular cause or to support a community, rather than for profit-making purposes.

Non-distributing co-operatives use their surplus to support their activities and may have share capital, although this is not mandatory. 

If a non-distributing co-operative is wound up, members receive back the original value of their shares, at most. 

A Future For Co-operatives 

In recent economically uncertain times, there has been a renewed interest in co-operatives in New Zealand. 

Traditionally, co-operatives have been prevalent in the agricultural sector, but they are now expanding into other areas.

For those who are dissatisfied with traditional companies and their focus on short-term profitability, co-operatives offer an alternative business model that prioritises the interests of members, employees, the wider community, and the environment. 

Co-operatives and Sustainability 

Co-operatives as a structure are well-suited for environmental and social causes, as their core principles align with the social dimensions of sustainability. In sectors like creative industries and green economies, co-operatives have an edge due to their democratic nature and collaborative ethos. 

Co-operative enterprises offer sustainable solutions to our changing world, from renewable energy to social care co-operatives. 

Moreover, co-operatives often engage with vulnerable groups such as migrant workers and focus on employment creation and work integration. They complement the role of governments in providing essential services like child care and health care. 

Co-operatives are a versatile business structure that can be utilised for a wide range of purposes, not just those with an explicit focus on sustainability. They are increasingly being used in diverse businesses from financial services to housing or grocery stores.

Need Help Setting Up A Co-operative? 

If you’re considering a co-operative structure for your business or cause in New Zealand, or you’d like assistance with setting up a co-operative, we’re here to help. 

You can get in touch with us at 0800 002 184 or [email protected]. 

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