Regulations > Principles of Good Governance for Co-operatives

The self-assessment checklist aims to guide co-operatives in ensuring compliance to minimum legislative requirements in terms of the minimum legislative requirements for the different disciplines in co-operative governance.

12.1	Self-Assessments Checklists to ensure legislative requirements in terms of co-operative constitutions

These self-assessment checklists will assist co-operatives to ensure compliance to the legislative requirements pertaining to the constitutions of co-operatives. The checklists covers the minimum legislative requirements for co-operative constitutions; legislative requirements for co-operative constitutions that makes provision for associate members; legislative requirements for co-operative constitutions where co-operatives are required to hold shares; legislative requirements for constitutions of secondary, tertiary and the national apex co-operative; and requirements a co-operative constitution may provide for (9.1.5).

12.1.1

Co-operative constitution must comply with the following:

SELF-ASSESSMENT QUESTION

YES

Does the constitution stipulate the name of the co-operative?

Does the constitution stipulate whether it is a primary, secondary or tertiary co-operative or the national apex co-operative?

Does the constitution stipulate whether it is a co-operative that concludes transactions with both members and non-members of that co-operative or a co-operative that does not conclude transactions with persons who are not members of the co-operative

Does the constitution stipulate the main objectives of the co-operative?

A description of the business of the co-operative, including any restrictions on the business of the co-operative

Does the constitution have a provision stipulating the voting rights of ea h member as contemplated in section 3?

Section 3 stipulates that in the case of category A and category B primary co-operatives, each member has only one vote. Section 3 enables the constitutions of category C primary, secondary, tertiary or the national apex co-operative to provide that members may have more than one vote provided that where a co-operative has—

(a)	Three members, no member has voting rights in excess of 40 per cent;

(b)	Four members, no member has voting rights in excess of 30 per cent;

(c)	five members, no member has voting rights in excess of 25 per cent and

(d)	Where there are more than five members, no member has more than 17 percent of the votes of all members in the co-operative.

(e)

In addition to the aforementioned, voting rights in respect of category C primary co-operatives, secondary and tertiary co-operatives registered in terms of applicable legislation prior to Co-operatives Amendment Act, 2013, are regulated by the provision on voting rights contained in their constitutions as they were immediately prior to the commencement of Co-operatives Amendment Act, 2013.

Does the constitution stipulate the minimum period of notice of general meetings?

Does the constitution stipulate the place where the registered office of the co-operative is located?

The minimum and maximum number of directors;

10.

Does the constitution stipulate the term of office of directors, which must be reasonable, and whether a director may be re-appointed for a consecutive term of office, provided that the manner for rotation of directors is stipulated in the constitution of the co-operative?

11.

Does the constitution stipulate the powers and restrictions on the directors of the co-operative to manage the business of the co-operative?

12.

Does the constitution stipulate the requirements for membership of

the co-operative, subject to section 3(2)?

Section 3 (2) enables a co-operative to restrict the persons eligible for membership if the restriction—

(a)	Reasonably relates to the business of a co-operative as set out in its constitution and to the commercial ability of a co-operative to provide services to prospective members; and

(b)	Does not constitute unfair discrimination.

Does the constitution stipulate the conditions for the withdrawal of membership of a co-operative, including the necessary period for the notice of withdrawal and repayment of shares, and any provisions relating to the liability of a member for a period after the date of withdrawal, subject to section 23?

13.

Does the constitution make provision for the extension of the period for the repayment of the nominal value of membership shares in the event of the death of a member of the co-operative, provided that such period must not exceed two years;

14.

Does the constitution stipulate the percentage of the surplus that must be kept in the indivisible reserve? Section 46(1) determines that that the indivisible reserve must not be less than 1% of the co-operatives net asset value and need not to be more than 5% of its net asset value as reflected in its most recent audited report, independently reviewed report or annual report.

15.

Does the constitution make provision for the distribution of assets of the co-operative on its dissolution?

16.

Does the constitution stipulate the financial year of the co-operative?

17.

Does the constitution provide for the procedures for the application of membership to the co-operative that should be in accordance with co-operative principles;

18.

Does the constitution make provision for the rights and obligations of members?

19.

Does the constitution make provision for the transfer of membership, members’ loan and membership share?

20.

Does the constitution stipulate the conditions and processes for the termination of membership?

21.

Does the constitution stipulate the conditions and processes for the suspension of membership?

22.

Does the constitution stipulate the conditions and processes for the forfeiture membership?

23.

Does the constitution make provision for the structure for decision making whereby members can participate in decision-making processes in a democratic and participatory manner?

24.

Does the constitution make provision for annual general meetings and special general meetings, including the manner in which such meetings are convened, the necessary period of notice, the election of a chairperson and provisions for the proposal of resolutions that should ensure democratic decision making?

25.

Does the constitution make provision for the period of notice for general meetings and does it state the conditions and processes to be followed when requesting a general meeting?

26.

Does the constitution make provision for the tabling and adoption of resolutions?

27.

The determination of quorums for general meetings and must ensure that the quorum provides for adequate member control and decision making?

28.

Does the constitution make provision for the manner in which voting may be conducted?

29.

Does the constitution stipulate the conditions under which a resolution in lieu of a meeting may be held and passed?

30.

Does the constitution stipulate conditions and the process for requesting a general meeting?

31.

Does the constitution make provision for the election of directors, executive and non-executive directors, on condition that only members may be appointed as directors or executive directors?

32.

Does the constitution provide for the conditions for vacation of office by directors and the filling of any vacancies in a manner that ensures democratic accountability to the members?

33.

Does the constitution provide for the conditions and processes for the appointment of the chairperson. Vice-chairperson and acting chairperson?

34.

Does the constitution provide for the conditions under which a board of directors may delegate functions to a director or committee or manager?

35.

Does the constitution make provision for the manner in which a portion of the surplus that is transferred to the reserve fund may be utilised?

36.

If the co-operative wants to use a trademark name registered by it by the registrar, does the constitution authorises the use of such trademark name?

12.1.2

The constitution of a co-operative that provides for associate members must comply with the following:

	SELF-ASSESSMENT QUESTION	YES	NO
1.	Does the constitution provide for temporary membership for a period of 12 months to persons to provide support to the co-operative without becoming a member of the co-operative, i.e. does the co-operative provide for associate members?
2.	Does the constitution provide for associate members to benefit from the co-operative without becoming a member of the co-operative?
3.	Does the constitution allow for associate members to apply for full membership at any time?
4.	Does the constitution provide for associate members to become full members after 12 months or to have their associate membership renewed for a further 12 months subject to the approval by members?
5.	If the co-operative has associate members, has this been indicated in the financial reporting system of the co-operative?
6.	Does the constitution stipulate that associate members do not have voting rights?

12.1.3

The constitution of a co-operative where members are required to hold shares must comply with the following:

	SELF-ASSESSMENT QUESTION	YES	NO
1.	Does the constitution of the co-operative stipulate the minimum number of membership shares to be issued to each member?
2.	Does the constitution provide for the nominal value of the shares?
3.	Does the constitution stipulate whether the shares are to be issued fully paid up or not fully paid up, and the conditions under which are to be paid?
4.	Does the constitution provide for the circumstances under which shares are to be paid?
5.	Does the constitution provide for the maximum percentage of the share capital of a co-operative a member may hold, except in the case of a secondary and tertiary co-operative?
6.	Does the constitution provide for the circumstances under which shares issued to members may be redeemed?

12.1.4

The constitution of a secondary, tertiary or the national apex co-operative must provide for the following:

	SELF-ASSESSMENT QUESTION	YES	NO
1.	Does the constitution of the secondary, tertiary or the national apex co-operative provide for the further objectives of the secondary, tertiary or national apex co-operative provided that such objectives may not include any activity that is inconsistent with the objectives of any of its members and which is not undertaken for their exclusive benefit?
2.	Does the further objectives of a tertiary or the national apex co-operative include representing the interests of co-operatives within the sector or region, providing assistance for education and training, establishing a guarantee fund to facilitate external financing of its members, and the establishment of an audit fund to assist members to have their operations audited?

12.1.5

The constitution of a co-operative where members are required to hold shares must comply with the following:

	SELF-ASSESSMENT QUESTION	YES	NO
1.	Does the constitution of the co-operative provide for the additional objectives of the co-operatives, objectives in addition to the minimum legislative requirements?
2.	Does the constitution allow for the amount of business allowed with non-members, subject to the provisions of the act?
3.	In the case of a co-operative having members in more than one region, does the constitution provide for the holding of regional general meetings and a conference of delegates?
4.	Does the constitution make provision for a member to appoint a proxy to attend and vote at a general meeting on that member’s behalf, or for postal votes provided that no person may act as a proxy for more than the percentage provided for in section 28(5), or for such lesser percentage of members as may be stipulated in the constitution of the co-operative?
5.	Does the constitution make provision for people who want to provide support to the co-operative without themselves becoming members to be appointed as associate members?
6.	Does the constitution make provision for the manner in which the supervisory committee may be constituted?
7.	Does the constitution make provisions for the appointment of a general manager or executive manager by the board of directors?
8.	Does the constitution make provision for the board to make rules consistent with the constitution and the Co-operatives Act 2005 as amendment by Co-operatives Amendment Act, 2013 concerning the holding of meetings or any other matter of procedure?
9.	Does the constitution make provision for the settlement of disputes between members of the co-operative, between a member of the co-operative and the co-operative itself, or between the co-operative and any other interested persons?
10.	Does the constitution make provision for determining whether the co-operative may allow for the appointment of non-executive independent directors, provided that non-executive independent directors may only be selected from associate members of the co-operative?
11.	A co-operative may provide in its constitution that whole, or a part, of the patronage portion of a member, determined by the board in respect of a financial year, must be applied to purchase membership shares in the co-operative for the member.
12.	The constitution of a co-operative may stipulate that the surplus that is not in an indivisible reserve and not set aside in any additional reserve required by any other applicable law or the constitution of the co-operative, or is not used for the purchase of membership shares, may be placed in such funds and used for such purpose as are authorised by the co-operatives constitution.

12.2	Annual general meetings

	SELF-ASSESSMENT QUESTION	YES	NO
1.	Has the first annual general meeting been held within 18 months of the registration of the co-operative?
2.	If the constitution of the co-operative provides for a Supervisory Committee to be established, has the supervisory committee been elected at the first annual general meeting?
3.	Have subsequent annual general meetings taken place within six month after the end of the preceding financial year?
4.	Has the annual general meeting appointed an auditor if it is a category A primary co-operative, secondary co-operative, tertiary or the national apex co-operative or an independent reviewer if it is a category B primary co-operative?
5.	Has the Board informed the registrar of the appointment of the auditor or independent reviewer within 30 days of the appointment of the auditor or independent reviewer in the prescribed manner?
6.	Has the annual general meeting considered and approved a report of the board on the affairs of the co-operative for the previous financial year?
7.	Has the annual general meeting considered and approved an activity plan for the next financial year that sets clear business goals as well as how funds in the co-operative will be utilised?
8.	Has the annual general meeting approved the financial statements and considered the auditor’s report if it is a category A primary cooperative, secondary co-operative, tertiary co-operative or the national apex co-operative or approved the financial statements and considered the independent reviewers report if it is a category B primary co-operative?
9.	Has the annual general meeting considered the annual report prepared by the board if it is a category A primary co-operative
10.	If the annual general meeting has resolved to delay the auditors or independently reviewed report, has the board informed the registrar within 15 days of the resolution of the annual general meeting?
11.	Has the annual general meeting elected directors subject to the requirements of the constitution of the co-operative?
12.	If the constitution of a co-operative provides for a supervisory committee, has the annual general meeting elected the members of the supervisory committee subject to the requirements of the constitution of the co-operative?
13.	Have minutes of all general meetings prepared and presented at the next general meeting for approval?
14.	Are minutes of the general meetings kept at the registered office of the co-operative?
15.	Are minutes of the all general meetings made available to members on request?
16.	What will the cost be for a member, should the member want copies of the minutes?

12.3	Appointment of directors

	SELF-ASSESSMENT QUESTION	YES	NO
1.	Has the director been elected at the annual general meeting?
2.	Is the person elected to be a director of sound mind?
3.	Is the person elected to be a director solvent or has the director been rehabilitated?
4.	Has the person elected to be a director at any time been convicted (whether in the Republic or elsewhere) of theft, fraud, forgery, perjury or any offence involving dishonesty in connection with the formation or management of a co-operative or other corporate entity?
5.	Has the director been appointed in terms of the conditions and for the period as stipulated in the constitution of the co-operative?
6.	If the board has by way of a resolution appointed a director to fill a vacancy, has the resolution to appoint the director been ratified at the first general meeting after the resolution have been taken?

12.4	Risk plans

	QUESTIONS THAT WILL HELP WITH THE DEVELOPMENT OF A RISK PLAN
1.	What are the possible risks that might hinder the co-operative in achieving its objectives?
2.	What is the probability of the risk — need to assess the likelihood of the risk happening
3.	What will the impact be — how does the cost of the risk happening weigh up against the benefit for the co-operative in achieving the objective?
4.	How can the risk be mitigated and what will the costs and benefits be?
5.	To ensure contingency – how can the impact of the risk be reduced?
6.	Taking into consideration the mitigation and contingency plans to what level can the risk be reduced?
7.	To what extent will the co-operative be exposed to the risk, i.e. the part of the risk that cannot be mitigated or reduced?
8.	Develop risk mitigation or risk reduction strategies in terms of each identified risk
9.	Monitor and review risks

Co-operatives Act, 2005 (Act No. 14 of 2005)

Regulations

Principles of Good Governance for Co-operatives

12. Self-Assessment Checklists