Examples of SMART active membership rules

SMART active membership rules state the activities  (called primary activities) first and then link the active membership requirement to a real and measurable action that the member needs to contribute to one or more of the primary activities.

Non-distributing co-operatives, (whether they have a share capital or not) are permitted to have an active membership rule that merely requires the payment of an annual subscription. Distributing co-operatives must have an active membership requirement that directly connects with an activity of the co-operative. An annual subscription alone in a distributing co-operative is not sufficient.

A non-distributing co-operative

A non-distributing co-operative may be formed for a range of purposes that suit a community enterprise. It may or may not have a charitable purpose. Whether it has a charitable purpose is determined by the Australian Charities and Not for Profits Commission (ACNC). Examples of charitable purposes and how these might be appropriately expressed can be found at www.acnc.gov.au.

Where the purpose of the co-operative is to provide access to community services through a neighbourhood centre.

The primary activities of the co-operative are:

  1. To establish and manage a neighbourhood centre,
       
  2. to develop and provide services to the local community that promote a sense of community identity and inclusion, and
       
  3. to support other community organisations with a similar or associated purpose.

To be an active member of the co-operative a member shall pay an annual subscription of not less than $5.

Note 1: This active membership requirement provides a simple certainty regarding who has a voting right at meetings of the co-operative. It is easy for members to comply with this requirement, however, it lacks any real contribution to the activities because it does not require any participation through attending events, using services or volunteering. This kind of co-operative will be likely to have a heavy reliance on grant funding.

Note 2: if the non-distributing co-operative also has a share capital, there will be a separate rule requiring the member to subscribe for the minimum number of shares.

A food co-operative

Where the purpose of the co-operative is to support local food production and consumption

The primary activities of the co-operative are:

  1. To purchase products that are produced/grown/value added within a locality [this could be defined as a geographical region or by reference to a distance from the co-operative such as ‘100 km radius’],
       
  2. sell products produced within the [defined] locality through wholesale or retail outlets or services, and
       
  3. promote the economic, social and health benefits of buying or consuming local produce.

To be an active member of the co-operative a member must do one of the following things:

  1. Supply local products to the co-operative to the value of $xyz* in each financial year, or
       
  2. purchase products from the co-operative to the value of $abc** in each financial year, or
       
  3. provide x hours of volunteer time to the co-operative in each financial year.

*The value of produce supplied should be set as a minimum that producers are able to simply comply with. The co-operative can require the supply of additional produce through separate contracts. The value could be expressed at a wholesale or supply price.

**The value of produce purchased could be expressed as the total paid for produce sold by the co-operative.

Note: Many food co-operatives are incorporated as non-distributing non-share co-operatives. This means they cannot issue shares, but may only issue debentures or CCUs.  There is no reason why they cannot be incorporated as co-operatives (non-distributing or distributing) with a share capital. Food co-operatives without a share capital often have an annual subscription requirement. This can be a separate requirement under the rules or it can also form part of the active membership rule. If the annual subscription is to be part of the active membership rule then it is best expressed as follows, and should specify a maximum to permit discounted subscriptions if desired.

To be an active member of the co-operative a member must:

  1. Pay the annual subscription specified in the rules AND
       
  2. do one of the following things:
       
    • supply local products to the co-operative to the value of $xyz* in each financial year, or
         
    • purchase products from the co-operative to the value of $abc** in each financial year, or
         
    • provide x hours of volunteer time to the co-operative in each financial year.

A renewable energy co-operative

Where the purpose of the co-operative is to construct and generate renewable energy

The primary activities of the co-operative are to:

  1. Develop, own, operate and manage a renewable energy facility [wind farm or farms, solar farm or farms, etc];
       
  2. generate and supply energy from the co-operative’s facility or facilities;
       
  3. provide advice and assistance to its members to reduce energy usage and increase members’ energy efficiency.

To be an active member of the co-operative a member:

  1. Must purchase or consume energy generated directly or indirectly by the co-operative; or
       
  2. subscribe to the co-operative’s information advisory service relating to energy usage and efficiency; or
       
  3. subscribe to the co-operative’s newsletter.

Where there is less certainty about the ability of members to directly acquire energy from the co-operative or where the broader purpose of the co-operative is to increase demand for renewables an alternative rule might be:

The primary activities of the co-operative are:

  1. Owning, operating and maintaining renewable energy generators and associated infrastructure;
       
  2. investing, managing and/or participating in programs to achieve local uptake of renewable energy;
       
  3. advocating for programs to facilitate local uptake of renewable energy;
       
  4. researching, educating, producing and disseminating information to promote renewable energy generation; and
       
  5. generating renewable energy.

To be an active member of the co-operative a member must:

  1. Purchase ‘green energy’ of not less than $50 (plus GST) each financial year; or
       
  2. acquire and install renewable energy generation facilities for sale of electricity to the grid installed at a member’s residential or commercial premises and provide evidence of the sale of energy to the grid each financial year; or
       
  3. attend a co-operative strategic planning event at least once a financial year; or
       
  4. undertake a minimum of 2 hours of volunteer work for the co-operative each financial year.

A product marketing co-operative

Many agricultural producers use a co-operative to combine their strength to compete in a larger market. The model works well for all persons or individuals who have something to sell and where it is too difficult or costly to advertise or market their goods, particularly if the products require processing or packaging before they can be sold. The goods might be agricultural products, home or cottage industry products, artworks or event tickets. There are co-operatives of real estate agents who combine to reduce advertising costs, or travel agents who combine to get discounted deals on travel packages and then advertise the same at shared cost. It is important in these co-operatives that the active membership rule focuses upon getting members to supply a product to enable the co-operative to market and sell it.

The primary activities of the co-operative are:

  1. The marketing of (fish/organic vegetables/jewellery/artworks/theatre productions/fresh truffle) on behalf of its members;
       
  2. the development of standards for the classification, packaging, labelling and processing of (agricultural products/fairtrade products/ ‘local’ marques etc);
       
  3. the collection, packaging and processing of (fish/organic vegetables/ fresh truffles etc); OR
       
  4. the display/ framing/transport of artworks/jewellery or theatre production equipment.

To be an active member a member must:

Product marketing co-operatives cover a diverse range of activities and in order for members to comply with active membership the requirements must be linked to at least one primary activity and be reasonable. They will normally be expressed as a minimum requirement. Additional services through the co-operative are available under separate contracts. Below are some examples of how a co-operative might expect its members to support its marketing activities.

  1. Supply xyz kgs  (fish/organic vegetables) each (week/month/financial year) at the price set by the co-operative at the beginning of each financial year; OR
       
  2. provide one item of artwork for sale through the co-operative each financial year; OR
       
  3. list one theatre event through the co-operative for promotion each financial year.


   Note 1: For marketing co-operatives that wish to ensure that product is of a particular quality or criteria, the product could be described with respect to that criteria eg ‘First Grade’ produce. In respect of artworks or theatre productions, perhaps a value or scope of the artwork or production could be specified if desired.

Note 2: Some co-operatives are formed to not only market products but also to promote a particular product because of its quality or origin. Co-operatives may want their members to strive towards achieving particular quality standards and will possibly develop training programs in this respect. Participation, in clear terms, can also be included in active membership rules, however, the more requirements there are, the smaller the potential number of members (and share capital).