Financial management |
Payment and loans for directors and officers
Directors
A director should not receive any payment for services as a director other than fees, concessions and other benefits approved at a general meeting.
Financial benefits to officers
Officers other than directors of a cooperative can receive loans or other financial benefits from the cooperative only if the majority of the board approves it. Some cooperatives may create a scheme under which officers are eligible for loans or other financial benefits, but the majority of the board must approve the scheme.
These restrictions also apply to any companies or trusts for which the officer of the cooperative is a director, trustee or beneficiary.
Financial benefits to directors and their associates
Directors or their associates can obtain loans or other financial benefits from the cooperative only under:
- a scheme approved at a general meeting
- a scheme specifically discussed and approved at a general meeting
- similar terms that anyone not associated with the cooperative would get.
A two-third majority at a board meeting would have to approve the loan or benefit.
Declaration of financial and other interests
A director of a cooperative must declare to the board the nature and extent of any direct or indirect interest they have in a contract that the cooperative is considering.
This can include when the director of the cooperative is also involved with another organisation that is considering entering into an agreement or business arrangement with the cooperative. For example, using a supplier in which a director has a part ownership.
To declare this interest, the director should notify the board in writing that they are involved with the organisation and that they should be regarded as having an interest, financial or otherwise, in any contract the cooperative makes.
They should declare this at the board meeting where the contract is first discussed, or, if the director develops an interest later, bring it to the board´s attention at the next board meeting.
Exceptions
A cooperative director not does have to declare an interest in contracts if:
- they are buying goods and services from the cooperative
- the cooperative is leasing land to the director
- they are selling agricultural products or livestock to the cooperative
- the interest is permitted by the rules of the cooperative.
Management contracts
These are contracts or other types of arrangements where the cooperative agrees to have its business managed by someone else.
A management contract must first be approved by a special resolution or it becomes void.
Managing the accounts
Financial records, reports and audits
Cooperatives must keep financial records, prepare financial reports and get these financial reports audited. The last day of the cooperative´s financial year should be specified in the rules.
Registers
Registers are a record of information, usually on financial transactions, and can be kept on a range of subjects.
The Act requires cooperatives to keep certain information on a register, and specifies that some registers must be available for members to inspect. Members should be able to inspect these registers for free, but the cooperative can charge a fee if members wish to take a copy.
Registers must be kept containing information on:
- loans, securities, debentures and deposits that the cooperative has issued or received
- fixed assets
- subordinated debt.
You don´t need to make this information available to members for inspection.
Members must be able to inspect registers that hold information on:
- charges
- directors, members and shares
- cancelled memberships, showing the last activity date for cancelled members
- notifiable interests
- loans made or guaranteed by the cooperative, and securities taken by the cooperative
- names of people who have provided financial accommodation (loan or credit) to the cooperative that is subordinated debt
- names of people who have given loans or deposits to, or hold securities or debentures issued by, the cooperative.
The Act also requires cooperatives to keep these registers in a certain way and contain specific information.
All registers must be kept in Queensland at:
- the cooperative´s registered office
- the cooperative´s principal place of business
- an office where the work involved in maintaining the register is done
- another office approved by us.
Shares in trading cooperatives
The Act places restrictions on the number of shares or the amount of ´interest´ which can be held in a trading cooperative.
A person´s share value should not amount to more than 20 per cent of the total nominal value of the share capital issued by the cooperative.
The nominal value of the share capital, equals the number of shares issued multiplied by the nominal value of each share. The nominal value of each share is set out in the cooperative´s rules.
However, we or the cooperative (by special resolution) can increase the 20 per cent limit on shares. We must approve the special resolution, and may impose certain
conditions.
For the resolution to be effective submit Cooperatives Form 11 - Application for registration of a special resolution (other than for altering rules) and Cooperatives Form 11a - Statutory declaration in support of special resolution.
Notice must be given by members to the cooperative, of voting interest and substantial share interest. This is known as a notifiable interest, and the cooperative must keep a register of these interests.
Fundraising
Occasionally, a cooperative may need to raise money to fund certain activities or purchase items such as equipment. The Act regulates the way cooperatives can raise money through fundraising provisions.
The fundraising provisions allow cooperatives to raise money through:
- shares
- debentures
- additional funds.
Contact us for more information on fundraising provisions.
Charges
If your cooperative wants to borrow funds, a charge may be registered against cooperative property as security for the debt.
A charge is a form of security over a cooperative´s debt that has priority over other unsecured debts. Having charges registered over the property means that if the cooperative goes out of business, its debts will be paid in priority order.
If a creditor wants to ensure they get paid if the cooperative suffers financial difficulties, they can take a charge over property of the cooperative and register it with us.
If the cooperative cannot pay the creditor, the charged property can be sold to repay the creditor in priority to claims of other creditors.
The creditor or other interested party can register a charge with the Personal Property Securities Register (PPSR) which is the register where details of security interests in personal property can be registered and searched. The Insolvency and Trustee Service Australia (ITSA) is the Australian Government agency responsible for administering the PPSR.
The PPSR can be contacted on 1300 007 777 and further information is available at www.ppsr.gov.au.
We recommend that you seek legal advice regarding this matter.
Last reviewed 25/03/2013 |
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