Loomio
Tue 13 Dec 2016 2:54AM

Questions on Model Rules for a FairShares Coop

GC Gordon Casey Public Seen by 79

I've been going through the Model Rules and adapting them for the Brave coop. I wanted to ask some specific questions around certain clauses, hoping you can help:

  1. Article 11, a, ii: what does it mean to say the Investor Shares can be "withdrawn" after 3 years. And what is the purpose of this clause?

  2. Article 40: how is the Labour and User Share Fraction determined in this instance?

  3. Do you foresee any potential issues with using no par value shares for all classes?

Thanks in advance for help!
Gordon.

R

Rory (FSA) Tue 3 Oct 2017 7:15AM

Hi Kim - not sure what this is in response to, but thought I would comment. I've observed huge variations in this principle from 0% retention in the work of Gabor (have I spelt that right), up to retentions over 80% in Italy. In Gabor's argument, all surplus should be returned to members. In Italy, the laws allow exemptions from corporation tax on any surpluses that are retained as cooperative capital in an indivisible reserve (described by John Restakis's book) - so they tend to hold it in the coop, not distribute it to members. In Spain's Mondragon regions, there are distributions of between 40 - 70% to members, with the remainder held in individual cooperative reserves, or invested into secondary cooperatives.

I don't think you can say that 10% is any kind of norm, or that the norm in cooperatives is to prioritise individual member profits over the profits of the cooperative (what about community benefit societies in the UK, and 'non-profit' cooperatives that are commonplace in parts of Africa). Secondly coops tend to operate as non-profits, whilst primary cooperative distribute their surpluses to members.

On your other point:

"FairShares are not considered to be co-ops in most countries because shareholders have veto powers like the security council in the UN."

I think you mean 'would not be considered' rather than 'are not considered' - the evidence is not out there yet, and you ignore that 'shareholders' may be comprised entirely of producers and users (it is the interests that are recognised, not necessarily discrete groups of people). This is why FairShares does have the .coop domain because it is recognised by the ICA as a promoter of co-operative values and principles.

The pipeline of FairShares enterprises is showing a much higher percentage of people seeking to incorporate under cooperative law than alternatives (which I find interesting).