The first major rewrite of Canada’s co-operatives legislation in 27 years is poised to receive House of Commons support and head to the Senate for final approval later this month.
The version now making its way toward law has Alberta and Manitoba wheat pool leaders smiling more than they were when the government first produced its proposals.
Earlier, MPs on the House of Commons industry committee accepted a proposal from the two prairie wheat pools, later confirmed by the Commons, which give co-ops more leeway when dealing with dissenting members.
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The bill’s original version provided for the first time a right for co-op members opposed to a fundamental change of direction approved by the majority of their group to withdraw and to demand their equity back, with interest. The payout would have had to come within five years.
MPs agreed the payout period could be extended to 10 years if the co-op followed strict rules, including having the 10-year option in the bylaws and requiring the board to prove the interests of the co-op could be damaged by the shorter time period requirement.
Representatives of the two pools said they did not oppose “dissenters’ rights” but worried that a controversial decision facing a large disagreeing minority could undermine the co-op’s ability to survive.
Anders Bruun, of Manitoba Pool Elevators, cited the example of a grain company whose members decide it should invest in a flour mill.
“If 20 or 30 percent of the members decide to withdraw their equity from the co-operative at this stage, the co-operative may very well be crippled financially,” he said. “In this case, the co-operative’s only course of action may be to abandon the plans for expansion.”
The same would hold true if two weak or struggling co-ops decided to merge but a large minority objected and wanted out.
“Our thought is not to take advantage of people,” said John Pearson, vice-president of Alberta Wheat Pool. “But we don’t want to be taken advantage of either by people who see a chance to get some money.”
The Canadian Co-operatives Association, which had helped write the original version of the bill with the five-year clause, supported the pools.
MPs also accepted an amendment that interest owing on equity being paid out be fixed by regulation and tied to the prime rate. The original version suggested a 10 percent interest rate.
Necessary move
The CCA, along with MPs, endorsed the new co-operatives legislation as a needed modernization of the rules.
It will allow federally chartered co-ops to merge, to raise money from outside non-voting investors, to select up to one-third of directors from outside the membership and to give non-member investment shareholders up to 20 percent of board seats.
Glen Tully, chair of the Manitoba Co-op Council and vice-chair of Federated Co-operatives Ltd., said the new flexible rules are needed to help co-ops battle corporate competitors.
The old rules held the sector back.
“Based on the outdated legal concept that government must provide co-operatives with close direction, the current act demands complex, time-consuming and costly procedures and is burdensome and restrictive,” he said. “C-5 enables co-operatives to modernize while enhancing and enshrining in statute co-operative principles.”
