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5. Incorporation as a co-operative company

A co-operative is formed for the mutual benefit of its members. The Income Tax Assessment Act 1936 defines a co-operative as a corporate structure which conducts at least 90% of its business with one or more of the following objects:

  • the acquisition of animals or commodities for disposal or distribution among its shareholders;
  • the acquisition of animals or commodities from its shareholders for disposal or distribution;
  • the storage, marketing, packing or processing of commodities of its shareholders;
  • the rendering of services to its shareholders; or
  • the obtaining of funds from its shareholders for the purpose of making loans to its shareholders to enable them to acquire land or buildings to be used for the purpose of residence or of residence and business.

The Income Tax Assessment Act 1936 also provides limitations in relation to share capital ownership in co-operatives. The number of shares to be held by any one member is limited and shares cannot be listed on a stock exchange or sold to the public in any other manner. Alternatively, the co-operative can have no share capital.

In Western Australia, co-operatives are established under the Companies (Co-operative) Act 1943. This Act is also set to be replaced in the immediate future. It is likely that the new co-operatives legislation will provide for types of co-operatives that are very similar to associations, but with less restriction on trading activities.

Co-operatives can be very complex to set up and you should seek legal advice if you want to establish this type of company.