Having to refer to “The Act” is often an unpleasant (but necessary) process for those starting or running a co-op.
Let’s look at how to make this process a bit less painful and confusing.
What IS legislation, anyway?
Legislation is rules designed to regulate people’s behavior. In democracies, these rules are made up (and in some way agreed to) by elected officials.
In Canada, each set of rules is called an Act. Some Acts you might expect, such as the Immigration Act or Labour Standards Act. Others are a bit odd. (Ever heard of the Auctioneers Act? Or the Horse Racing Regulations Act? Neither had we). Over time, like sediment, layer upon layer of rules accumulate, which can make them difficult to navigate and understand. Enter the lawyers.
Not surprisingly, co-operatives also have legislation to follow. To keep things complicated, each province, plus the federal government, have their own unique set of rules for co-ops.
Most often called the Cooperatives Act, some of the technicalities and processes co-ops are asked to follow include things like how and when to provide notice of an annual general meeting and what words need to be included in a co-op’s name. Important stuff to be sure.
Who needs to read this stuff?
Few people sit down to read hundreds of pages of legal jargon. More generally, “the Act” is used as a reference. People look up specific information in the Act when a situation requires a look at the rules (for example, if the board is wondering how to distribute unallocated earnings).
When starting a new co-op, expect to spend a fair amount of time referencing the Act, because you’ll want to set up articles and bylaws that comply with legislation.
At Co-operatives First, we have three professionals with Master-level policy degrees to navigate this stuff and sometimes we still have to hire a lawyer for help. But, in general, with a bit of patience and more than one set of eyes, the rules can be deciphered by anyone.
How should I read this stuff?
As mentioned, don’t read legislation from start to finish. Navigating an Act that’s a couple hundred pages long is intimidating and time-consuming.
Here’s a few tips to save you time and frustration:
- Approach legislation one problem at a time. Identify the section you need to find and only focus on that. For example, if you need to know how many members you need to make quorum at annual meetings, use the table of contents to find that particular section.
- Legislation can be like a puzzle, so make sure you’re not missing a piece. For example, Section 107 in Saskatchewan’s Act says that quorum may be “the lesser of 15 members and 10% of the membership”. However, beneath that, Subsection 6 says that quorum must be present at the beginning of the meeting, and Subsection 5 says quorum doesn’t have to be present for the entire meeting. You need to read the whole section to know how many people need to be there at the beginning, and to know that they don’t all need to stay until the end.
- If you don’t understand a term, Google it. People that write laws use a lot of jargon. Don’t be discouraged if you aren’t familiar with terms like “special resolution” or “indemnity”, or words that don’t come up in day-to-day conversation like “fiduciary” or “cessation”. These are fancy ways of saying something simple and a quick search of the term will help.
What do I need to know for my start-up?
You’re going to spend the most time looking at legislation when you’re first setting up a co-op. Everything you need to know about naming your co-op, filing the Articles of Incorporation, and creating your bylaws is in there.
Some provinces are more helpful than others. Manitoba and British Columbia, for example, provide sample documents or instructions. Other provinces are somewhat less helpful. Luckily, you can find guides for each western province on CoopCreator.ca.
Why should I care?
In general, co-ops (especially start-ups) should pay attention to legislation because breaking the rules can have consequences. Pleading ignorance will only get you so far.
For example, if you don’t use the proper wording to set up a legal name for your organization, the name request you send in will be rejected. The whole incorporation process could be delayed by weeks because of this simple oversight.
Likewise, despite the apparent frivolity of the items in these documents, and the frustrating way things are presented, most are designed to protect the co-op, individuals in the co-op, and individuals and organizations doing business with the co-op. So, to avoid lawsuits, it’s worth paying attention to legislation.
If legislation is so important, why isn’t it easier to understand?
Frankly, we’re not sure why legislation isn’t easier to understand, but it’s a reality for co-op entrepreneurs. Often groups turn to legal experts or consultants to help them. We sometimes turn to them for support too.
We do our best to reduce these costs for co-op start ups. That’s why we’ve built the Co-op Creator, a one-stop resource website with lots of information and guidance around incorporating a co-op in western Canada. If you need some extra support, contact us. Our policy experts are here to help.