Definition of a Co-operative
A co-operative is an autonomous association of
persons united voluntarily to meet their
common economic, social, and cultural needs
and aspirations through a jointly-owned and
International Co-operative Alliance, ICA, 1995
By their own efforts, but joined together!
Pellervo Society in the early 20th century
Finland, the Country with the Strongest
• A co-operative is a business form and model that has been in
use for a long time worldwide – like a limited company.
• Over 700 million people are members of co-operatives. Half
the world’s population is influenced by co-operatives. There
are co-operatives all over the world.
• Within the EU there are 300,000 co-operatives with 140 million
• Worker and social co-operatives employ 1,5 million people in
• In the USA there are nearly 50,000 co-operatives with 150
• Finland has the strongest co-operative membership; 59 % of
the population say they are members of a co-operative.
• International Co-operative Alliance (ICA) unites co-operatives
in different countries. ICA has members in 94 countries -
Co-operative Values and Principles
Co-operatives are based on the following values:
Self-help, self-responsibility, democracy, equality, equity, solidarity,
honesty, openness, social responsibility and caring for others.
The co-operative principles are guidelines by which co-operatives
put their values into practice:
Voluntary and open membership, democratic member control, member
economic participation, autonomy and independence, education,
training and information, co-operation among co-operatives and
concern for community.
Basic co-operative values were implemented in the Co-operatives
Act. A co-operative can find original success factors and competitive
edge by adhering to the Co-operatives Act and by adopting the
basic, co-operative idea.
Features of a Co-operative (1)
• A co-operative is a business enterprise with economic interests that
is owned and democratically controlled by its members. The
starting point is equal cooperation of the members.
• The purpose is to promote the members’ economy by using the
services provided by the co-operative. Profit-making is not the main
• Power of decision is exercised by the principle: one member, one
vote even if the members have different number of shares. The
power of decision can, however, be differentiated by rules.
• Membership and share capital have not been determined in
• A co-operative shall, however, have no less than three members.
• There is no requirement for minimum share capital in a co-operative
(in contrast to 2 500 € in a limited company).
Features of a Co-operative (2)
• A co-operative can admit new members, membership is
voluntary and one can resign from a co-operative. One
can also be expelled from it.
• The surplus generated is normally allocated in
proportion to the members’ transactions with the
• The members are not personally liable for the obligations
of the co-operative, unless extraordinary payments are
stipulated in the rules.
• All co-operatives have their own rules written with the
particular co-operative in mind.
• The Act applies to all co-operatives.
Different Types of Co-operatives
• Consumer co-operative (for instance a retail co-operative)
where a customer of the co-operative is also a member.
• Service co-operative (for instance a co-operative bank or an
indemnity insurance company), where those using the
services of the co-operative are members.
• Producer co-operative (for instance a co-operative creamery),
where the producers of raw material are members .
• Consumer and producer co-operatives have their roots in the
early 20th century when the Finnish co-operative movement
• New generation co-operatives are ”new wave” co-operatives that
have been set up in different lines of business since the late
Second Coming of Co-operatives
• During the last 20 odd years nearly 3,000 new co-
operatives have been set up.
• They are being set up in the countryside as well as in
• Co-operatives are being set up in nearly all lines of
business but mainly in the service sector.
• The biggest groups are worker co-operatives and water
• This development is a result of changes in society.
Co-operative as a Business Form –
• Cooperation, combining know-how and support received
from the others empower and encourage. A lower threshold
to become an entrepreneur.
• Co-operative values are manifested in democratic decision-
making and equal opportunities for work, which motivate the
• You can get started even with less capital if the line of
business allows it. The Co-operatives Act prescribes no
minimum share capital.
• Cooperation decreases the costs per member, which reduces
the entrepreneurial risks.
• A business form with limited liability: A member of a co-
operative is liable for the obligations of the enterprise with his
or her share price, unless the rules stipulate extraordinary
• A flexible business form: a flat and flexible organization that
promotes innovative ideas; easy to join, easy to resign; also
possible to expel a member.
Co-operative as a Business Form –
• A way to employ oneself, for instance when studies are
• The members can maintain their professional skills and
• The right to unemployment security continues if the co-
operative has at least 7 members (= the share per
member is then less than 15 %).
• Easy for the purchaser to make use of the services when
the co-operative organises the members’ work and the
purchaser has only one invoice to pay (the co-operative
takes care of the employer obligations).
Success Factors behind a Skills-based
• Ongoing development of the activities
• Good financial management
• Thorough preparations before setting up the business
• Entrepreneurial attitude and perseverance central
• One or two key figures that exercise leadership suitable
for the co-operative business form.
• Innovativeness – co-operative as a business form
promotes an innovative approach.
• Wide networks
• All these success factors relate to the members’ skills and
Source: Eliisa Troberg, Helsinki School of Economics and Business
Co-operative Management –
Signals of Problems in a Co-operative
• Members are not fully committed to the activities. There are
both active and passive members.
• Passive members expect that the others will take care of
common matters relating to entrepreneurship on behalf of
• Entrepreneurial attitude may be lacking in leadership and
working. Co-operative is not considered as an enterprise.
• Especially multibranch co-operatives have different areas of
interest, goals and people. This may lead to lack in
• Equal voting rights can cause the problem ”A house without a
leader”, that is, the co-operative does not have a key figure
responsible for the operative management.
• Deficient leadership can weaken the members’ motivation and
• Activities can die out when the members find employment
Stages in Setting up a Co-operative
• A viable business idea and a well-thought-out business plan
• Securing sufficent financing
• Incorporation documents: incorporation instrument, rules,
minutes of the board meeting
• Notification for registration
• Finding out if the activities eventually are subject to license
• Organising internal supervision, accounting and audit
• Sufficient insurance.
Setting up a Co-operative
• To set up a co-operative, an incorporation instrument is
drawn up and the rules of the co-operative are appended.
• Also appended are the minutes of the first meeting of the
board of directors and the minutes of the eventual meeting
where the chief executive officer was appointed.
• A co-operative shall be notified for registration within six
months of the signing of the incorporation instrument.
• Notification is done in writing to the Trade Register. It goes
also to the VAT Register, the Prepayment Register and
possibly to the Employer Register.
• The members of the board of directors, the eventual CEO and
the auditors shall produce a written document that they
consent to being appointed to the position.
• Liability for obligations undertaken after the signing of the
incorporation instrument shall lie with the co-operative once
it has been registered.
To be Included in the
Rules of a Co-operative
• the trade name of the co-operative
• the municipality in Finland where the seat of the co-operative
• the line of business of the co-operative
• the nominal value of a share (share price), the time and
manner of the payment thereof
• the financial year of the co-operative.
= ”the Penny Pincher Model”
• In practice it is sensible to have more paragraphs that direct
the day-to-day activities.
• Every co-operative stipulates its own rules with that
particular co-operative in mind.
Member Agreement can be of Use
• Member agreement consists of a set of internal rules for the
co-operative, not included in the rules of the co-operative.
• The agreement requires that all the members know the goals
of the co-operative and their own goals.
• The agreement can take up for instance
Commitment of the members and the added value generated by the
membership of the co-operative
Daily routines and how to take care of them – sharing of the duties
and the responsibilities
Dealing with problems and setting the atmosphere
Taking care of the clients, maintaining the client list
Ensuring the quality
Scheduling duties, price setting and budget.
• Member agreements of limited companies can be used as a
Management of a Co-operative
• The members exercise their rights at the general meeting of
the co-operative in person by the principle one member, one
vote, unless otherwise stipulated in the rules (not more than
ten times the number of votes of another member).
• The members can exercise their rights also by delegates
elected among the members.
• A co-operative has a board of directors chosen by the general
meeting of the co-operative.
• In addition to the board of directors, a co-operative can also
have a supervisory board.
• The general meeting of a co-operative appoints at least one
auditor and one alternate auditor.
• The board of directors can, and normally does, appoint a chief
General Meeting of a Co-operative
• The general meeting of a co-operative is a forum where
the members can use their power of decision in matters
concerning the co-operative.
• Every year is held at least one ordinary general meeting
of the co-operative or a meeting of the delegates.
• It is possible to hold extraordinary meetings.
• Unanimous decision of the members may decide in the
competence of the general meeting of the co-operative.
• The main rule is that every member has one vote in all
matters (if not otherwise stipulated).
• The general meeting of a co-operative has to be held in
the municipality where the seat of the co-operative is
located (if not otherwise stipulated).
Duties of the General Meeting
of a Co-operative
• The general meeting shall decide on the important resources
of the co-operative.
• The ordinary general meeting has to be held within six
months from the end of the financial year
to approve the income statement and the balance sheet
to decide on measures in view of surplus
to discharge from liability
to choose the members of the board of directors or
possibly the supervisory board and the auditors.
• In addition, the general meeting decides on the amendments
to the rules, deregistration of the co-operative and on the
increase of the share price, among other things.
The Board of Directors
• A co-operative shall have a board of directors that represents the co-
operative and decides on the management of it and also on the
arrangement of its operations.
• The board of directors consists of at least one and at most seven
members, even more if so stipulated in the rules. If the board
consists of several directors, one director shall chair its meetings.
• All the members of the board of directors shall be called to the
meeting, otherwise it is illegal. The board of directors has a quorum
with more than half the directors present.
• The term in office of the directors continues until further notice. It is
possible to stipulate freely the length of the term.
• There can be alternate directors in the board of directors. If the
board consists of fewer than three directors, it shall have at least one
• The Act does not impose specific qualifications for the board of
directors. Each director and alternate director shall produce a duly
dated and signed document where he or she consents to being
appointed to the position.
Chief Executive Officer (CEO)
• A co-operative may have a chief executive officer.
• The chief executive officer may also be appointed by the board of
directors without a specific stipulation thereof in the rules.
• The chief executive officer can be a member of the board of directors
but not of the supervisory board.
• The duties are to promote the interests of the co-operative and to see
to the running management of it in accordance with the orders and
instructions of the board of directors.
• The CEO is entitled to represent the co-operative in a matter that
according to the Co-operatives Act and the rules belongs to his or
• The CEO shall produce a duly dated and signed document to the
effect that he or she consents to being appointed to the position.
Joining a Co-operative
• Becoming a member of an already existing co-operative
is an alternative when co-operative entrepreneurship is
of interest but there is no group to set one up with.
• Many co-operatives are on the lookout for new, suitable
• It pays off to do the groundwork in advance, to be in
touch with the co-operative and to get to know how it
• Application for admission is filed with the board of
directors that decides on admission of a new member.
• In addition to the share price there is also an admission
charge that will not be returned.
• Co-operative is successfully being used as an environment for studies in
• Co-operative is a genuine enterprise, not a virtual or training enterprise,
regulated by general laws on business activities.
• It is a question of real entrepreneurship, though with less pressure to get
• It is important to review the liabilities of the members of the board of
• Organising the daily routines: financial management, insurance,
• The prices of the products and services generated by an educational co-
operative shall not differ too much from the normal market price in the
municipality. A lower price can, to a degree, be explained by the fact that
the students are not yet expected to be fully qualified.
• While working, a member of a co-operative has an employment
relationship with the co-operative with all its obligations.
• An underage person can not be an incorporator or a member of the board of
directors but can join a co-operative.
Services of the Pellervo Society
• Information online for co-operatives - www.pellervo.fi/
• A step-by-step guide in Finnish to setting up a co-
• Incorporation and legal advice
• The magazine Osuustoiminta – for professionals in
management and administration
• Efficent shareholder management (Tehokas
omistajahallinto), a handbook for co-operative
• Education in the PI Leadership Academy