- Kyle White

Getting guidance is good practice

“[Incorporating a co-op] was a process that really was not that difficult once we had some guidance.” – Maggie Bluewaters, the Food Forest and Learning Centre Co-op

 

The process of setting up a co-op seems simple enough. In fact, if you have the right supports and a clear vision, it can be fairly straight-forward. However, it’s common for groups to encounter barriers. Some confusion and delays are possible.

Here are three areas that trip up co-op newbies (plus a few helpful tips and resources to overcome them).

Legal jargon

A common source of frustration when incorporating a co-op is the jargon or legalese involved. Depending on your circumstances, some of it can be figured out with a bit of guidance. For others, the application of legislation is not always very clear, so a lawyer may be needed.

In either case, you will – for sure – need to navigate a few do’s and don’ts. From naming the business to figuring out the restrictions involved in transferring member loans, government isn’t here to make your life easy.

The language in many government documents makes it seem like you need to be a lawyer to understand them. The Government of Canada’s Corporations website even suggests “consulting a lawyer or another professional advisor to ensure that the specific needs of your co-operative are met”. However, it might not always be necessary.

Lawyers are expensive. Plus, finding capital and financing is generally a concern for most folks starting a co-op. Adding lawyer fees to a cash-strapped venture can keep the project from moving forward.

Beyond the financial strain, outsourcing these tasks means the incorporators have less influence over the structure of their co-op. In these situations, steering committee members lose out on the chance to understand their organization at a fundamental level. This should be avoided.

While lawyers can play an important role in navigating the do’s and don’ts, the group forming the co-op should make sure their views are reflected in the business structure. A bit of outside guidance like those below can help.

Bylaws

Perhaps nothing is more intimidating than a blank page. Being asked to create ‘membership share capital and member rights’ from scratch can damage confidence and interfere with the development process.

Sample bylaws or templates can be helpful starting points (and we have some available.) Without proper context, though, they may simply create more questions like: “Do we need to issue investment shares?” or “What if we don’t want to appoint an auditor?”. Asking for a bit of guidance is often a good idea.

That said, governments sometimes provide the basics. In BC, the province has a standard set of Rules of Association (a.k.a bylaws). Groups starting co-ops in BC will need to review, edit and submit these (so, no starting from scratch in that province). While this is helpful, combing through 25 pages of legalese and over 170 provisions to determine what applies to them can present some issues. Outside guidance in this case can help.

Incorporation

To incorporate a co-op, you need to submit paperwork to the government’s “corporate registry.” Each province has one, as does the federal government.

Running into issues when drafting and submitting these incorporating documents can make an impact. An error identified by the corporate registrar’s office — like a period in the wrong place in a co-op’s name or the wrong number of directors — can delay the process. With an average wait time between 2 and 8 weeks, added delays can become significant and create problems.

In short, governments expect groups forming co-ops to have a basic understanding of co-op legislation, or to hire someone to complete the process for them. With or without support, we feel the folks involved in the incorporation process should ensure the co-op reflects the values and ideas of those forming it. If you have a lawyer, make sure the incorporating group guides and determines how the co-op will function.

Help is out there

Setting up a co-op can be frustrating and confusing, but help is out there. Quite often our team works alongside steering committees filling out incorporating documents. We try to de-mystify the process, offer best-practice examples, ensure compliance with legislation and provide help with wording. By asking the right questions, we find groups can articulate their vision and better understand internal procedures — something vital once they’re operational.

For those a bit more independent, we also launched the Co-op Creator, an online resource library designed to support co-operatives at all stages of business development.

Included on the website are templates, how-tos and answers to commonly asked questions – all in what we hope is plain language.

We’re by no means the only ones. CoopZone has a network of developers that can support new co-operatives. Conexus is building an amazing business incubator for new entrepreneurs. Vancity and the BC Co-op Association have Co-operate Now, an excellent networking and workshop resource for budding co-ops. Plus, each province in western Canada has a co-op association with resources, tools, and supports. (Here’s Saskatchewan’s, Alberta’s, BC’s, and Manitoba’s). Likewise, the Centre for the Study of Co-operatives and Co-operatives and Mutuals Canada have great historical resources. If you need research or teaching aids, they have that too.

From a business perspective, the Community Futures Network across rural Canada is an amazing resource for any entrepreneur. Most provinces also have business data organizations for early market analysis. The legal teams at MLT Aikens or Bridgewater Law have folks that understand co-ops.

If you have questions or want a connection to any of these organizations, contact us. We can help.