Legal requirements involved in creating a cooperative in Manitoba
 

A cooperative can be formed under the federal Canada Cooperatives Act or under provincial statute, such as the Cooperatives Act in Manitoba.  (In Saskatchewan, the applicable legislation is The New Generation Co-operatives Act).  Cooperatives that incorporate under federal legislation must carry on business in two or more provinces and have a fixed place of business in more than one province.  Most cooperatives choose to incorporate under provincial legislation. 

A cooperative incorporated under Manitoba legislation can conduct business in Manitoba and areas outside of Manitoba, to the extent that is permitted by legislation in those areas.  Even if a cooperative qualifies for federal incorporation, there may be reasons to incorporate provincially instead.  For instance, there may be certain financial or legal advantages to choosing one jurisdiction over another.  Legal advice should be sought to identify which jurisdiction will be the most appropriate for the cooperative.

If a cooperative formed under any legislation other than the Manitoba Cooperatives Act wants to carry on business in Manitoba, it has to register under The Corporations Act (Manitoba).

Since most cooperatives choose to incorporate under provincial legislation, this section will focus on provincial rather than federal legislation.  The following concerns the applicable Manitoba legislation, namely the Cooperatives Act. 
 

Who can incorporate a cooperative?

In Manitoba, application to incorporate a cooperative must come from either
 

  • three or more individuals who are 18 years of age or older and who are not bankrupt; or
  • two or more corporations; or
  • one or more cooperatives.


Name search and reservation

Before preparing articles of incorporation, a name search and Request for Corporate Name Reservation must be carried out at the Companies Office.  The name chosen for the cooperative also requires the approval of the Registrar of Cooperatives (see below).  Since a small fee will apply for the name reservation, it is best to obtain the approval of the Registrar before undertaking the Request for Corporate Name Reservation at the Companies Office.

The Companies Office is located at:
 

1010 - 405 Broadway,
Winnipeg, MB R3C 3L6
Phone: 945-2500
Toll-free: 1-888-246-8353 (in Manitoba)
e-mail:  companies@cca.gov.mb.ca


Information about the Companies Office and various forms are located online at www.gov.mb.ca/cca/comp_off.html . 

The results of the name search and reservation must be submitted, along with the articles of incorporation, to the Registrar of Cooperatives.
 
 

Articles of Incorporation

Application for incorporating a cooperative occurs by sending articles of incorporation to the Registrar of Cooperatives.  The Registrar is located at:
 

315 – 258 Portage Avenue
Winnipeg, MB  R3C 0B6
Phone: (204) 945-4466
Fax: (204) 945-0864
e-mail: coop-cu@cca.gov.mb.ca


Various Cooperatives Act legal forms, including those relating to articles of incorporation, are available from the Registrar.  These forms can be found online at the Registrar's web site.
 

The articles of incorporation outline the nature of the cooperative and its fundamental components.

The articles must set out:
 

  • the name of the cooperative.  The corporate name of a cooperative must follow certain guidelines. 
  • the location of the cooperative’s registered office in Manitoba
  • whether the cooperative will be incorporated with or without membership share capital.  Where there is membership share capital, the articles must set out
    • the par value of the membership shares
    • the limit (if any) on the number of membership shares to be issued
    • the limit of individual holdings of membership shares
  • whether or not the cooperative will issue investment shares
    • If the articles provide for the issuance of investment shares, then the particulars of the investment shares must be set out.  The articles must set out the number of classes of investment shares and the preferences, rights, conditions, restrictions, limitations, and prohibitions attaching to the investment shares in each class.  The articles would have to indicate whether or not investment shares may be issued to non-members. 
  • a statement regarding the nature of any restrictions placed on the issue, transfer, or ownership of shares (both membership shares and investment shares)
  • the number, or the minimum and maximum number, of directors.  In addition, the names and addresses of the first directors of the cooperative need to be included. 
  • a statement that the cooperative will issue share capital
  • any restrictions placed on the business that the cooperative may carry on
  • any restrictions on or qualifications for membership in the cooperative
  • a statement that the cooperative will be organized and operated on a cooperative basis
  • the maximum rate or return payable on membership shares, member loans, and patronage loans.  Note that the regulations of the Cooperatives Act have set a maximum rate of return on these instruments at the Bank of Canada rate plus four percent per year.
  • provisions for the distribution of the cooperative’s property upon dissolution.  The articles may provide that each member who owns special investment shares is entitled, on the liquidation and dissolution of the cooperative, to a pro rata share, dependent on the number or percentage of special investment shares owned, of all remaining property of the cooperative after payment of all debts and liabilities.


In addition to the above provisions, the articles of incorporation may also 
 

  • restrict, in whole or in part, the powers of the directors to manage the business of the cooperative; and
  • include any provisions that might normally be set out in the by-laws.


The articles of incorporation must be signed by the incorporators.  In addition, the articles must have attached to them the consent of any first directors who were not incorporators of the cooperative.  If the Registrar is satisfied with the articles of incorporation and is also satisfied that the cooperative will be organized and operated, and will carry on business, on a cooperative basis, then a certificate of incorporation will be issued for the cooperative.
 

Organizational meeting

After the certificate of incorporation has been issued for the cooperative, the directors must hold a meeting to conduct any business that is needed in order to organize the cooperative.  For instance, the directors may
 

  • pass by-laws
  • authorize the issue of securities of the cooperative
  • admit persons to membership in the cooperative and issue membership shares
  • appoint officers of the cooperative
  • make banking arrangements for the cooperative
  • establish what the fiscal year for the cooperative will be
  • approve any agreements necessary to adopt and implement the business plan of the cooperative

 

Member meeting

After holding the organizational meeting, the directors will call a meeting of the members without delay.  At their first meeting, the members of a cooperative will
 

  • confirm by-laws for the cooperative;
  • elect directors; and
  • appoint an auditor.  Note that a cooperative that does not issue securities to the public may resolve not to appoint an auditor.

 

By-laws of the cooperative

The by-laws indicate the rules and procedures under which the cooperative will operate.  There are several mandatory provisions that must be included in the by-laws. 

The by-laws must provide for the following:
 

  • the qualifications, and the procedures for acceptance, of members
  • the rights of persons who hold memberships jointly
  • membership obligations, including any obligation to use the services of the cooperative or pay fees
  • whether a member’s interest can be transferred or assigned and, if so, any conditions or restrictions that apply
  • the conditions on which membership may be terminated, whether by withdrawal or by involuntary termination
  • details involving member meetings:
    • the mode of holding member meetings
    • the quorum for the meetings
    • the voting rights of members
    • procedures for making, repealing, and amending by-laws or regulations
    • the right to vote by ballot or mail, or both; and
    • the manner, form and effect of votes at meetings
  • details about directors, committee members, and officers:
    • the election, qualifications, and term of office of these positions
    • the removal and replacing of persons in these positions
    • the powers, duties, and remuneration of these positions
    • the procedure and quorum at board of directors meetings
  • the terms of any contract between the cooperative and its members that all members may be required to sign, and the terms of any renewals of such contracts
  • the appointment of auditors
  • the refunds, interim, and final payments to be made to members; and
  • the distribution of surplus earnings


In addition to the mandatory provisions, the by-laws of the cooperative may also include other provisions that the members feel are necessary or desirable.  For instance, the by-laws may provide for the referral of disputes between the cooperative and a member to a process of dispute resolution.

The cooperative needs to send a copy of the by-laws to the Registrar within 30 days after they have been adopted by the members.  The Registrar may order changes to the by-laws if the by-laws are not consistent with the Cooperatives Act and Regulations.

Model by-laws can be obtained from the office of the Registrar or from the Cooperative Development Services branch of the department of Industry, Trade and Mines.
 
 

Directors of a cooperative

A cooperative must have at least three directors.  Before a person can be elected as a director, he or she must meet some basic qualifications.  The Cooperatives Act stipulates that the person must be an individual who is 18 years of age or older and who is not of unsound mind or bankrupt.  A cooperative may also include additional qualifications or disqualifications of its directors in its by-laws, so long as they are consistent with applicable human rights laws.  The Cooperatives Act stipulates in section 184(3) that, unless it is a worker cooperative,  the majority of directors may not be full-time officers or employees of the cooperative.  In addition, a majority of the directors must be resident in Canada. Directors, other than those who are elected by the cooperative’s investment shareholders, must be members of the cooperative.

Members elect directors at the first member meeting as well as each succeeding annual meeting at which an election is required.  The term for which a director is elected must expire no later than the close of the third annual meeting of its members following the election.  The mechanics of proper elections are covered in the Cooperatives Act. 

Investment shareholders may be permitted to elect one or more directors of their own.  If this right is provided for in the cooperative’s articles, the investment shareholders will vote at an election that is separate from the election of directors by the members.  There is no member requirement for directors who are elected by investment shareholders.  However, in cooperatives where investment shareholders are allowed to elect directors, not less than 80 percent of the cooperative’s directors must be members.  There is also a maximum placed on the percentage of directors that can be elected by investment shareholders.  According to the Cooperatives Act, investment shareholders cannot elect more than 20 percent of the board of directors.
 
 

Corporate name

The Cooperatives Act sets out some requirements for the corporate name to be used by a Manitoba cooperative:
 

  • the corporate name must include the word “Cooperative”, “Co-operative”, “Coopérative”, “Pool”, or the abbreviation “Co-op”.
  • If the cooperative has share capital, then the corporate name must end with the word “Limited” or “limitée” or the abbreviation “Ltd.” or “ltée”.
  • The corporate name of a cooperative without share capital (i.e. not an NGC) must end with the word “Incorporated” or “Incorporée”, or the abbreviation “Inc.”.
  • The name must include one or more words that suggest what type of cooperative it is.


A cooperative can carry on business under or identify itself by a name other than its corporate name, as long as the name is approved by the Registrar. 

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Sources:

Co-operatives Secretariat. Date of publication unknown.  Forming our co-operative: Information kit for entrepreneurs. Government of Canada. Online. www.agr.ca/policy/coop/kitcoop/sphashe.html. Retrieved May 3, 2000. 

Industry Canada. 1999. Your guide to government of Canada services and support for small business. Chapter entitled “Your business and federal legislation”. Online. http://strategis.ic.gc.ca/SSG/mi02983e.html. Retrieved May 10, 2000.

Manitoba Cooperatives Act. S.M. 1998, c. 52 – Cap. C223.