REPUBLIC OF SOUTH AFRICA

CO-OPERATIVES BILL

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(As introduced in the National Assembly as a section 75-Bill; explanatory summary of Bill published in Government Gazette No. of 2003) (The English text is the official text of the Bill)

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(MINISTER OF TRADE AND INDUSTRY)

[B – 2002]

GENERAL EXPLANATORY NOTE:

To provide for the formation and registration of co-operatives, the establishment of a Co-operatives Advisory Board, the winding up of co-operatives and to provide for matters connected therewith.

PREAMBLE

• that a viable, autonomous, self-reliant and self-sustaining co-operative movement can play a major role in the economic and social development of South Africa, in particular by creating employment, generating income, facilitating broad-based black economic empowerment and eradicating poverty;

• that the South African economy will benefit from increasing the number and variety of viable and sustainable economic enterprises;

• that government is committed to providing a supportive legal environment to enable co-operatives to develop and flourish;

AND IN ORDER TO –

• ensure that international co-operative principles are recognised and implemented in South Africa;

• enable co-operatives to register and acquire a legal status separate from their members;

• facilitate the provision of targeted support for emerging co-operatives, particularly those owned by women and black people;

BE IT ENACTED by the Parliament of the Republic of South Africa as follows:-

CONTENTS

CHAPTER I

DEFINITIONS, PURPOSE AND APPLICATION

1. Definitions
2. Purpose
3. Compliance with co-operative principles
4. Forms and kinds of co-operatives
5. Application of the Act

CHAPTER 2

REGISTRATION, CONSTITUTION AND POWERS OF CO-OPERATIVE

PART 1 Application to register and name

6. Minimum number of persons to register a co-operative
7. Application procedure

8. Registration of co-operative
9. Effect of registration
10. Pre-incorporation contract
11. Name of co-operative
12. Directive from registrar to change the name
13. Unlawful use of the word "co-operative"

 

PART 2 Constitution and Powers of co-operative

14. Co-operative constitution
15. Compulsory provisions for all co-operatives
16. Compulsory provisions where members are required to hold shares
17. Compulsory provisions for secondary and tertiary co-operatives
18. Optional provisions for all co-operatives
19. Optional provisions for secondary or tertiary co-operatives
20. Consequences of invalidity
21. Amendment to constitution
22. Powers of a co-operative
23. Registered office of co-operative
24. Record keeping by a co-operative
25. Access to information

 

CHAPTER 3

MEMBERSHIP OF CO-OPERATIVES

 

26. Application for membership
27. Rights and obligations of members
28. Liability of members
29. Withdrawal of membership
30. Transfer of membership, membership loan or share
31. Termination of membership by members
32. Suspension of membership
33. Powers of registrar in the case of reduced number of members

CHAPTER 4

34. Structure for decision-making
35. General meetings
36. Annual general meetings
37. Notice of general meetings
38. Resolutions
39. Quorum for general meetings
40. Representation at meetings
41. Voting by show of hands or ballot
42. Resolution in lieu of meeting
43. Minutes of general meetings
44. Request for general meeting

 

CHAPTER 5

MANAGEMENT OF CO-OPERATIVES

45. Board of Directors
46. Persons competent to be directors
47. Vacation of office by directors and filling of vacancies
48. Chairperson, vice-chairperson and acting chairperson
49. Meetings and resolutions of board of directors
50. Minutes of directors' meetings
51. Board of directors may assign functions to a director or committee
52. Liability of directors and officers
53. Disclosure of interest
54. Acceptance of commission, remuneration or reward prohibited in certain circumstances
55. Returns relating to directors

CHAPTER 6

CAPITAL STRUCTURE

56. Capital of a co-operative
57. Membership shares
58. Issue of certificates in respect of membership shares or member loans
59. Members’ funds
60. Patronage proportion
61. Prohibited loans and guarantees

CHAPTER 7

CO-OPERATIVE AUDIT

62. Audit
63. Approval of auditors report and financial statements
64. Auditor disqualified from acting
65. Appointment of auditor
66. Removal of auditor
67. Attendance of meeting by auditor
68. Right to information
69. Notice of error
70. Exemptions

CHAPTER 8

AMALGAMATION, CONVERSION AND REORGANISATION

71. Amalgamation
72. Approval of amalgamation
73. Effect of registration of amalgamated co-operative
74. Division of co-operatives
75. Approval of Division
76. Effect of registration of co-operatives constituted in terms of a division
77. Conversion of co-operative to any other kind or form of juristic person
78. Transfers
79. Protection of creditors
80. Registration of property

 

CHAPTER 9

WINDING-UP OF CO-OPERATIVES

81. Modes of winding-up
82. Winding-up by order of court
83. Winding-up by order of Minister
84. Transitional provisions
85. Special provisions
86. Admission and proving of claims against co-operative being wound up
87. Distribution account
88. Contribution account

CHAPTER 10

JUDICIAL MANAGEMENT

89. Circumstances in which co-operatives may be placed under judicial management
90. Transitional provisions relating to the judicial management of co-operatives

 

CHAPTER 11

ADMINISTRATION OF ACT

91. The Registrar of Co-operatives
92. Seal and official stamp of registrar
93. Register of co-operatives to be kept by registrar
94. Publication upon deregistration
95. Submission to registrar
96. Inspection of documents
97. Form of records kept may be prescribed
98. Investigation by registrar

CHAPTER 12

THE CO-OPERATIVES ADVISORY BOARD

99. Establishment of co-operative advisory board
100. Functions of Advisory Board
101. Members of Advisory Board
102. Term of Office and Conditions of Service of Members of Advisory Board
103. Meetings of Advisory Board
104. Public Hearings

CHAPTER 13

MISCELLANEOUS PROVISIONS

 

105. Offences
106. Appeal to the Minister
107. Exclusion of Insurance Act
108. Regulations
109. Delegation by Minister of his or her powers under this Act
110. Transitional Provisions
111. Repeal of laws and savings
112. Short title and commencement

SCHEDULES

SCHEDULE 1: General powers of a co-operative

SCHEDULE 2: Part 1 – Housing Co-operatives

"this Act" includes the Schedules to this Act and any regulations made in terms of this Act;

2. The purpose of this Act is to -

1. Promote the development of economically sustainable co-operatives, thereby increasing the number and variety of economic enterprises operating in the formal economy;
2. Encourage persons and groups who subscribe to values of self-reliance and self-help, and who choose to work together in democratically controlled enterprises, to register co-operatives in terms of this Act;
3. Enable such co-operative enterprises to register and acquire a legal status separate from their members;
4. Promote greater participation by black persons, especially those in rural areas, women, persons with disability and youth in the formation of and management of co-operatives.
5. Establish a legislative framework that will preserve the co-operative as a distinct legal entity.
6. Facilitate the provision of support programmes that target co-operatives specifically co-operatives that create employment or benefit disadvantaged groups.

1. to develop its business;
2. to provide or improve services to members;
3. to provide for reserves, to be set aside in a reserve fund, a part of which must not be divisible amongst the members;
4. to provide for the payment of interest on member loans or on membership shares;
5. for community welfare or the promotion of co-operative enterprises; or
6. as a distribution amongst its members as a patronage return.

1. it provides education and training to its members and employees in the principles and methods of co-operation and in all fields relevant to the operation of the co-operative.

1. Despite sub-section 1(a), the constitution of a co-operative may restrict the persons eligible for membership if the restriction –

1. reasonably relates to the business of the co-operative as set out in its constitution and to the commercial ability of the co-operative to provide services to prospective members;
2. does not constitute unfair discrimination.

1. Despite subsection (1)(b), the constitution of a secondary or tertiary co-operative may provide that the members have more than one vote.

1. a primary co-operative;
2. a secondary co-operative;
3. a tertiary co-operative.

1. housing co-operative;
2. workers’ co-operative;
3. social co-operative;
4. agricultural co-operative;
5. financial services co-operative;
6. consumer co-operative
7. marketing co-operative.

5. Application of the Act

1. This Act applies to all co-operatives registered in terms of this Act subject to subsection (2).
2. This Act does not apply to a financial services co-operative that is required to register with the Registrar of Banks in terms of legislation applicable to co-operative banks, provided that;

1. The constitution of such co-operatives complies with the provisions of Chapters 1 to 5 of this Act;
2. Such co-operative is registered with the Registrar of Banks.

1. Schedule 2 to this Act further regulates particular kinds of co-operatives.
2. The Minister may, after consulting any other relevant Minister and the Advisory Board, make regulations regarding any matter relating to the operation or administration of particular forms and kinds of co-operatives.
3. This Act does not apply to a co-operative apex organisation that is not registered as a co-operative, but does apply to a tertiary co-operative having the objects of a co-operative apex organisation.

1. a minimum of five persons that intend to found a primary co-operative;
2. a minimum of two primary co-operatives that intend to form a secondary co-operative; or
3. a minimum of two secondary co-operatives that intend to form a tertiary co-operative.

1. the constitution of the co-operative, signed by the founder members;
2. a list of the founder members;

1. a constitution of the proposed co-operative is adopted;
2. an initial plan of operation is presented; and
3. the first directors are elected.

1. the application has been made in accordance with the Act;
2. the constitution complies with the Act and with the co-operative principles in section 3; and
3. the proposed name of the co-operative complies with section 10(1).

1. the co-operative is bound by the contract; and
2. the person who originally entered into the contract ceases to be bound by the contract.

11. (1) The proposed name of a co-operative must not be –

1. the same or so similar to that of an existing co-operative that it may be misleading; or
2. a name that is undesirable, prohibited or calculated to deceive, or otherwise, mislead.

1. A co-operative must have the words –

1. "co-operative" or "co-op" as part of its name; and
2. the word "limited" or the abbreviation "ltd" as the last word of its name, unless the constitution of a co-operative does not limit the liability of its members.

1. A secondary co-operative must have the words "secondary co-operative as part of its name and a tertiary co-operative must have the words "tertiary co-operative" as part of its name.
2. A co-operative must set out its name in legible characters in all contracts, invoices, negotiable instruments, letters, orders and places of business.

1. the registrar may issue a certificate of amendment revoking the name of the co-operative and assigning a new name; and
2. from the date of the certificate of amendment, the constitution of the co-operative is deemed to be amended to reflect the name assigned to it in the certificate.

1. hold itself out as carrying on the business of a registered co-operative;
2. subject to sub-section (2), to use or authorise the use of the terms "co-operative", "co-op", "co-operative limited", "co-operative ltd", or "co-op ltd" as part of its name.

1. Subsection (1)(b) must not be construed as preventing any organisation that is not registered as a co-operative but that offers support services to co-operatives, from using the terms "co-operative" or "co-op" as part of its name.

14. (1) A co-operative that is registered in terms of this Act must adopt a constitution that

1. This Part contains provisions that are compulsory for all co-operatives, provisions that are compulsory for co-operatives where the members are required to hold shares, provisions that are compulsory for secondary and tertiary co-operatives, and provisions that are optional.
2. A co-operative may include in its constitution any of the optional provisions, to the extent provided in this Part.
3. A co-operative may in addition to the matters listed under the optional provisions adopt any other provision that is not inconsistent with this Act.
4. The Minister may publish, by notice in the Gazette, model constitutions that may be used by co-operatives

15. (1) The constitution of a co-operative must include the following provisions -

1. the name of the co-operative;
2. whether it is a primary co-operative, a secondary co-operative, or a tertiary co-operative;
3. the main objectives of the co-operative;
4. a description of the business of the co-operative, including any restrictions on the business of the co-operative;
5. a provision stipulating that each member has one vote in all meetings of the co-operative at which that member is entitled to be present and to vote, except in the case of secondary or tertiary co-operatives;
6. the minimum period of notice to be given of general meetings;
7. the place where the registered office of the co-operative will be located;
8. the minimum and maximum number of directors;
9. the term of office of directors, which may not be more than four years, and whether a director may be re-appointed for a second or further term of office;
10. the powers and restrictions on the directors of a co-operative to manage the business of the co-operative;
11. the requirements for membership of the co-operative, subject to section 3(2);
12. the requirements for withdrawal of membership of a co-operative, including any provisions relating to the liability of a member for a specified period after the date of withdrawal, subject to section 28;
13. provision for a specified percentage of the surplus to be transferred to a reserve fund, the proceeds of which may not be divided amongst the members;
14. provision for a specified percentage of the surplus to be used for the education and training of its members;
15. provision for the distribution of the assets of the co-operative on its dissolution; and
16. the financial year of the co-operative.

1. the minimum number of membership shares to be issued to each member;
2. the nominal value of the shares;
3. whether the membership shares are to be issued fully paid up or not fully paid up, and the conditions under which shares are to be paid for;
4. the circumstances under which additional shares may be issued to members.
5. the maximum percentage of the share capital of a co-operative a member may hold, except in the case of a secondary or tertiary co-operative;
6. the circumstances under which shares issued to a member may be redeemed.

17. (a) The main objective of a secondary co-operative must be to provide

18. The constitution of a co-operative may include the following -

1. the further objectives of the co-operative;
2. provisions dealing with the liability of its members, which provisions may exclude the application of section 27, in whole or part;
3. the amount of business allowed with non-members, subject to the provisions of this Act;
4. where a co-operative has members in more than one region, the holding of regional general meetings and a conference of delegates as contemplated in section 34(3);
5. provision for a member to appoint a proxy to attend and vote at a general meeting in that member’s stead, or for postal votes;
6. provisions setting out the conditions on which non-members may become directors, provided that the number of non-member directors does not exceed one third the number of directors;
7. provision for people who want to provide support to the co-operative without themselves becoming members, to be appointed as associate members;
8. the establishment of a supervisory committee;
9. the power of the board of directors to delegate to a sub-committee or director, and the limitations on that power;
10. provisions regulating the appointment of a general manager or executive manager by the board of directors;
11. provision to make rules consistent with the constitution and this Act concerning the holding of meetings or any other matter of procedure; and
12. provision for the resolution of disputes between members of the co-operative, or between a member of the co-operative and the co-operative itself, by way of arbitration or otherwise.

20. The constitution of a co-operative –

1. containing a provision which is inconsistent with the provisions of this Act, is notwithstanding such provision, valid in so far as the other provisions of the constitution are consistent with this Act;
2. is not invalid by reason only of the fact that it does not provide for a matter for which it must provide in terms of this Act.

1. Notice of the general meeting at which a proposal to amend the constitution is to be considered must set out the proposed amendment.
2. An amendment of a constitution comes into operation –

1. on the date it is registered by the registrar; or
2. on the date specified in the special resolution.

1. The registrar must register an amendment to the constitution submitted in the prescribed form if the registrar is satisfied that –

1. the amendment complies with the Act and with the co-operative principles set out in section 3;
2. there has been compliance with the provisions of this section.

2. The registrar must advise a co-operative in writing of the reasons for refusing to register an amendment.
3. No amendment to the constitution affects an existing cause of action or claim or liability to prosecution in favour of or against the co-operative or its directors or any civil, criminal, administrative, investigative or other action or proceeding to which a co-operative or its directors is a party.

24. (1) A co-operative must keep at its offices the following -

1. the co-operative's constitution and rules, if any, including any amendments;
2. the minutes of general meetings in a minute book, as envisaged in section 43;
3. the minutes of meetings of the board of directors in a minute book, as envisaged in section 50;
4. a list of its members, setting out -

1. the date on which each member became a member;
2. if applicable, the date a person’s membership was terminated;
3. the amount or number of any membership fees paid, membership shares owned or member loans;

1. a register of its directors, setting out -

1. the date on which he or she became or ceased to be directors;

1. a register of directors' interests in contracts or undertakings, as envisaged in section 53;
2. adequate accounting records, including records reflecting the transactions between each member and the co-operative for the purpose of calculating the patronage proportion.

1. A co-operative must retain its accounting records –

1. in the case of a co-operative the main object of which involves its members conducting transactions with it, for a period of five years after the end of the financial year to which they relate;
2. for all other co-operatives, for a period of three years after the end of the financial year to which they relate;

1. The registrar may issue guidelines to co-operatives regarding the manner in which the records referred to in (1) above must be kept, including guidelines allowing a co-operative to keep records in an electronic format.
2. A co-operative or director who fails to comply with any provision of subsection (1) is guilty of an offence.

1. the person has applied for membership in writing;
2. the application has been approved by the board of directors; and
3. the person has complied with the membership provisions required by the constitution.

1. An individual who has not yet attained the age of majority may make an application under paragraph (a) of subsection (1) with the consent of that individual’s guardian or parents.
2. The board of directors may make the admission of the member effective –

1. from the date of the application;
2. from the date on which that person complies with any conditions of membership; or
3. from any other date, provided that that date is within six months of the date on which the co-operative received the application for membership.

1. to attend and vote at general meetings;
2. to submit a written resolution on any matter that a member proposes to raise at a general meeting;
3. to be elected to the board of directors or, where applicable, to a supervisory committee, or as a delegate to a conference of delegates as envisaged in section 34;
4. to information, subject to section 25;
5. to share in the distribution of any surplus;
6. to transfer his or her shares to another person, subject to section 30; and
7. to appoint a nominee to take over the member’s shares when the member dies, subject to section 30.

1. A withdrawal of membership is effective on the date on which the co- operative receives the notice.
2. The co-operative must within a reasonable period, but not longer than two years after the date a member’s withdrawal becomes effective, repay the member –

1. the nominal value of that member’s shares;
2. all other amounts held to the member’s credit including any member loan;
3. any interest accrued on those amounts up to the date of the payment.

1. Notwithstanding subsection (3), if a co-operative determines on reasonable grounds that the repayment envisaged in sub-section (3) would adversely affect the financial well-being of the co-operative, it may direct that the repayment be deferred for a period not exceeding four years after the effective date of a notice of withdrawal.
2. Unless the co-operative determines otherwise, the withdrawal of a member from the co-operative does not release the member from any debt or obligation to the co-operative or any contract between the member and the co-operative.

1. the nominal value of that member’s shares;
2. all other amounts held to the member’s credit including any member loan;
3. any interest accrued on those amounts up to the date of the payment.

1. A member whose membership may be terminated, must be given –

1. reasonable notice of the intention to terminate that member’s membership;
2. reasons for the proposed termination;
3. the right to attend and address the general meeting at which the member’s termination is to be discussed.

1. the member’s membership may be terminated by the members in terms of section 31;
2. a delay in terminating the membership of the person as a result of having to wait until the next general meeting of members, would have a detrimental effect on the co-operative.

1. Before taking a decision to suspend the membership of a member, the directors must give that member the right to be heard.
2. A decision to suspend a member remains valid until the next general meeting of members which must either –

1. terminate the membership of the member in terms of section 31;
2. lift the suspension of the member.

1. the co-operative is deemed to be de-registered in terms of this Act;
2. the co-operative must convert into another legal entity, in accordance with the provisions of Chapter 8, or be wound up in accordance with the provisions of Chapter 9; and
3. the members of that co-operative may be held personally liable for any loss or damage which may occur as a result of any activities of the co-operative thereafter.

1. The highest decision-making structure of a co-operative is a general meeting of members.
2. Despite sub-section (2), if it is not practical for the members to attend a single general meeting, a constitution may provide for –

1. two or more regional general meetings to be held instead of a general meeting; and
2. decisions of regional general meetings to be submitted to a conference of delegates.

(5) The Board of Directors is accountable to –

1. the general meeting; and
2. between general meetings to the supervisory committee, if a supervisory committee is provided for in the constitution.

35. (1) A general meeting must be held in the Republic at –

1. a place provided for in the constitution;
2. in the absence of such a provision, at the place where the registered office of the co-operative is located; or
3. any other place that a general meeting approves.

1. A co-operative must hold –

1. at least one general meeting every calendar year, known as the annual general meeting;
2. such other general meetings as the constitution may provide for.

1. Special general meetings may be called at any time.
2. The chairperson of the board of directors must chair general meetings unless a general meeting otherwise decides.
3. Subject to the constitution of a co-operative and this Act, a member of a co-operative may attend a meeting of the co-operative by means of a telephonic, electronic or other communication facility, if this facility permits participants to communicate adequately with each other during the meeting.

1. its first annual general meeting ("AGM") within eighteen months of being incorporated;
2. subsequent AGMs, within six months after the end of the preceding financial year.

1. The AGM must -

1. appoint an auditor, subject to section 65;
2. approve a report by the board on the affairs of the co-operative for the previous financial year;
3. approve the financial statements and auditors report, where applicable, for the previous financial year;
4. elect directors;
5. elect a supervisory committee, if required by the constitution;
6. decide on the co-operative’s future business;

1. The constitution of a co-operative that provides for holding regional AGMs must provide in addition -

1. that a conference of delegates is held within two months of the last regional general meeting;
2. for each regional general meeting to appoint delegates to the conference of delegates.

1. the date, time and place of the meeting, and
2. the agenda.

1. A minimum period of notice to be given in terms of subsection (1) must be specified in the constitution.
2. The fact that a member has not received notice of a meeting does not invalidate the meeting.
3. If a meeting of a co-operative is adjourned for less than thirty days, it is not necessary, unless the constitution provides otherwise, to give notice of the adjourned meeting other than by announcement at the meeting that is adjourned.
4. Sub-sections (1) to (4) apply to a conference of delegates held in terms of a co-operative’s constitution, read with the changes required by the context.

1. the particulars of the resolution; and
2. that the resolution is proposed as a special resolution.

(3) A special resolution must be approved by at least –

1. two-thirds of the members present at the general meeting ; or
2. 75 percent of all the members of the co-operative, in the event of a resolution to convert a co-operative into another corporate form, or to wind up the co-operative.

1. If the constitution of a co-operative provides for holding a conference of delegates, a special resolution must be passed by a two-thirds majority of the delegates present at the conference of delegates.

39. (1) The quorum for meetings of a co-operative must be –

1. for general meetings, not less than one third of the total membership of the co-operative;
2. for a conference of delegates, not less than one third of the number of delegates.

1. the total membership of a co-operative is determined at the time notice of the meeting is given;
2. apologies submitted by members that are acceptable to the board must be deducted from the number of those who would otherwise be entitled attend the meeting;

1. must adjourn the meeting to a determined date, time and place;
2. may not transact any other business.

1. Despite sub-section (1), voting must be by ballot if five percent of the members present and entitled to vote at the meeting request a ballot either before or after a vote by show of hands.

42. (1) Unless the constitution provides otherwise, the board of directors may give

1. cause minutes of general meetings to be kept in one of the official languages of the Republic; and
2. keep the minutes at its registered office in accordance with section 21.

1. Minutes in respect of any general meeting must be –

1. provided to members on request; and
2. presented for approval at the next general meeting.

1. On receipt of a request, the board of directors must call a general meeting to transact the business stated in the request unless –

1. the board of directors have called and given notice of a general meeting;
2. the meeting is requested for a purpose which it is not within the powers of the members to determine.

1. the co-operative, in the case of a primary co-operative;
2. a member co-operative, in the case of a secondary or tertiary co-operative.

1. The following persons are not competent to be directors:

1. a minor;
2. a person of unsound mind;
3. an unrehabilitated insolvent;
4. a person who has 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.

1. dies;
2. becomes incompetent to be a director in terms of section 46(2);
3. has been absent from more than three consecutive meetings of the board of directors of the co-operative without the board’s leave;
4. resigns as a director;
5. is removed from office under sub-section (4);
6. unless the constitution provides otherwise, ceases to be a member of the co-operative.

1. The board may not grant a director leave for more than six consecutive meetings, unless the director is absent on the affairs of the co-operative.
2. A director who resigns as a director, ceases to be a director 30 days, or any shorter period the board may approve, after giving notice of resignation.
3. A director may at any time be removed from office by an ordinary resolution passed at a general meeting of the co-operative.
4. Any vacancy on the board of directors of a co-operative must be filled in the manner provided in the constitution, and every director so appointed holds office for the unexpired portion of the period of office of the director being replaced.

1. at its first meeting after incorporation; and
2. thereafter, as often as is necessary.

1. If both the chairperson and the vice-chairperson are absent or unable to perform the functions of the chairperson, the board must elect another director to act as chairperson during their absence or incapacity.
2. The chairperson and vice-chairperson –

1. hold office until the first meeting of the board after an annual general meeting; and
2. subject to the constitution, are eligible for re-election.

1. ceasing to be a director of the co-operative; or
2. resigning as chairperson or vice-chairperson.

1. the board or the chairperson of the board;
2. or by any two directors.

1. Unless the constitution provides otherwise –

1. a majority of all directors constitutes a quorum for any meeting of a board of directors;
2. the decision of the majority of the directors present at a meeting of a board constitutes a resolution of the board; and
3. in the event of an equality of votes, the chairperson or the person acting as chairperson, as the case may be, has a casting vote in addition to a deliberative vote.

1. taken in one of the official languages of the Republic; and
2. kept at the registered office of the co-operative in accordance with section 24.

1. The minutes must indicate which directors were present at the meeting.
2. Minutes in respect of any meeting of a board of directors must be –

1. circulated to the directors as soon as possible after the meeting; and
2. presented for approval at the next board meeting.

1. constitutes a decision of the board; and
2. must be entered in the minute book referred to in sub-section (1).

1. delegate any of its powers to a director or a committee of directors or a manager of the co-operative;
2. authorise a director or a committee of directors or a manager to perform any of the board’s duties or act as the co-operative’s representative or agent.

2. A delegation or authorisation under sub-section (1) does not prevent the exercise of the relevant power by the board itself.
3. The provisions of section 49 apply, with such changes as the context may require, to a committee of directors referred to in sub-section (1).

1. wilful misconduct, dishonesty, gross negligence or reckless conduct;
2. wilfully contravening or refusing to comply with a provision of this Act or the constitution of the co-operative;
3. conduct intended to defraud any person or for any other fraudulent purpose.

1. the nature and extent of any interest that they have in a material contract or transaction, or a proposed material contract or transaction, with the co-operative; and
2. any material change to such interest.

1. This section does not require the disclosure of an interest in a contract or transaction that is available to and customarily entered into between the co-operative and its members, if the contract or transaction is on terms generally available to members.
2. Any disclosure must be recorded in the minutes of the meetings of directors.

(4) A disclosure that is required to be made in terms of this section, must be made -

1. at the first meeting of directors, at which the proposed contract or transaction is first considered;
2. if the director or manager did not have an interest in the proposed contract or transaction at the time of the meeting referred to in paragraph (a), at the first meeting after the director or manager acquired an interest in it;
3. if there is a material change in the interest, of the director or manager at the first meeting after the change;
4. if the director or manager acquires an interest in the contract or transaction after it is made, at the first meeting after the director or manager acquires that interest;
5. if the director or manager had an interest in the contract or transaction before becoming a director or manager, at the first meeting after becoming a director or manager; or
6. if the contract or the transaction is one that would in the ordinary course of business not require the approval of directors, as soon as the director or manager becomes aware of the contract or transaction.

54. (1) A director or manager of a co-operative may not accept any commission,

55. (1) A co-operative must notify the registrar in writing within 30 days of -

1. the full name, address and identity number of each person elected or appointed to hold office as a director;
2. any change of address of a director upon being informed of such change by a director;
3. any director vacating office.

1. entrance fees;
2. membership fees or subscriptions;
3. the consideration for membership shares or additional shares in a co-operative;
4. member loans; and
5. member funds, as provided in section 60.

1. Each member must at all times hold the minimum number of membership shares prescribed by the constitution.

 

2. The constitution may permit additional shares to be issued to members.

1. membership shares issued to that member;
2. member loans by that member.

1. the name of the co-operative;

1. that the co-operative is subject to this Act;
2. the name of the person to whom it is issued;
3. that the certificate represents membership shares in or member loans to the co-operative, and the number of the membership shares or the amount of the member loan.

1. the number of membership shares held by the member; and
2. the amount of any member loan by the member.

1. contributions made by the member to that fund;
2. any amount set aside for future payment to members including –

1. interest on an amount paid upon the member’s shares;
2. any patronage return allocated to the member;
3. any amount paid to the member after reducing share capital;

1. any other money due to the member the payment of which is deferred.

(2) The money standing to the credit of a member in a members’ fund –

1. may be applied for any purpose permitted in terms of the constitution except for writing off a loss;
2. must be paid to the member in the manner and at the time provided for in the constitution;
3. may bear interest at a rate fixed in terms of the constitution;
4. may on the due date be set off against a debt owing by the member to the co-operative.

1. For the purpose of sub-section (1), the board of directors, when determining the amount of business done by each member with a co-operative in a financial year, must take into account –

1. the quantity, quality, kind and value of things bought, sold, handled, marketed or dealt in by the co-operative;
2. the services rendered -

1. by the co-operative on behalf of or to the member; and
2. by the member on behalf of or to the co-operative.

1. giving notice to each member of the number of shares purchased or to be purchased for the member;
2. the manner of issuing or transferring shares; and
3. if applicable, issuing and forwarding share certificates to members.

1. any person in the ordinary course of business if the lending of money is part of the ordinary business of the co-operative;
2. any person on account of expenditures incurred or to be incurred on behalf of the co-operative;
3. employees of the co-operative or of any of its members -

1. to enable or assist them to purchase or erect living accommodation for their own occupation; or
2. in accordance with a plan for shares of the co-operative or any of its members to be held by a trustee;

1. members, or members of member co-operatives, if the financial assistance is available to all members on substantially the same terms.

1. the co-operative after giving the financial assistance, is or would be, unable to pay its liabilities as they become due; or
2. the realisable value of the co-operative's assets, after giving the financial assistance, would be less than the aggregate of the co-operative's liabilities, share capital and reserves.

1. ensure that financial statements are drawn up in conformity with generally accepted accounting practices;
2. verify that the co-operative has maintained adequate records in accordance with the requirements of its constitution and this Act;
3. report generally as to whether the assets and facilities of a co-operative are being properly managed and the operations of a co-operative are being conducted in accordance with co-operative principles; and
4. report on any other matter the auditors are required to report on in terms of a co-operative’s constitution.

1. A co-operative that is not able to afford the costs of an annual audit may apply in writing to the registrar for an exemption in terms of section 71.

1. approved by the AGM and signed in accordance with subsection (2); and
2. accompanied by a report of the auditor.

1. submit a copy of the financial statements and auditors’ report to the registrar within fifteen days of approval; or
2. if for any reason an AGM fails to approve the financial statements and auditors’ report, notify the registrar within fifteen days of the reasons for that failure, and the action the co-operative proposes to address the situation.

64. (1) A person is disqualified from being an auditor of a co-operative-

1. if that person has a personal or material interest in the co-operative or in any of the affiliates of a co-operative or in any subsidiary of a co-operative or in the business of any of its directors or senior employees ; or
2. in any other circumstances that are considered to constitute a conflict of interest in terms of accounting practice.

65. (1) The members must appoint an auditor-

1. at a meeting of interested persons, as envisaged in section 7(2) above, to hold office until the first annual general meeting;
2. at each annual general meeting, to hold office until the close of the next annual general meeting.

66. (1) The members may by ordinary resolution remove an auditor from office.

1. A vacancy created by the removal of an auditor must be filled –

1. at the meeting at which the auditor is removed; or
2. if not so filled, within 30 days of the vacancy arising by the board of directors, subject to the registrar’s approval.

67. (1) The auditor of a co-operative is entitled –

1. to be given notice of any general meeting at which a report of the auditor is to be discussed;
2. to attend such a meeting, at the expense of the co-operative;
3. to address the meeting on matters relating to the auditor's duties.

1. At the request of the auditor, the directors must obtain from any present or former directors, employees, agents or mandataries of the co-operative the information and explanations that such persons are reasonably able to provide and that are, in the auditor's opinion, necessary for the purposes of the audit.

1. prepare and issue revised financial statements; or
2. inform the members and the registrar of the error or misstatement.

1. of the co-operative;

(b) the co-operative has maintained adequate financial records, and is able to

prepare annual financial statements;

(c) having regard to the size and kind of co-operative, the interests of members

3. are adequately protected.

1. at a period of longer than one year but not exceeding three years; or
2. by a suitably qualified person other than an auditor;

1. The board of directors of a co-operative that is exempted in terms of this section are nevertheless required to prepare annual financial statements for submission to an AGM, and to submit a copy to the registrar within fifteen days of the AGM approving such financial statements.
2. In the event that an AGM fails to approve the financial statements referred to in subsection (3), the board of directors are required to comply with the provisions of paragraph (b) of subsection (6) of section 64 in the same manner as would apply to audited financial statements.
3. The provisions of section 65 also apply to any person appointed in terms of (b) of subsection (2).
4. The registrar may stipulate conditions to an exemption granted in terms of this section, if the registrar considers that it will serve the purpose of the Act to do so.

1. the constitution of the amalgamated co-operative;
2. the manner in which the shares of each amalgamating co-operative are to be converted into membership shares of the amalgamated co-operative or, if applicable, other securities of the amalgamated co-operative;
3. if any membership share of an amalgamating co-operative is not to be converted into shares of the amalgamated co-operative, the amount of money that the holders of those shares are to receive in addition to or instead of shares of the amalgamated co-operative;
4. the continuation of the members’ respective interests in a members’ fund of the amalgamated co-operative;
5. the application of any surplus or loss which may have resulted from the operations of the amalgamating co-operatives; and
6. the name and address of each proposed director of the amalgamated co-operative.

1. the amalgamated co-operative will be able to pay its liabilities as they become due;
2. the realisable value of the amalgamated co-operative's assets will not be less than the total of its liabilities, share capital and reserves;
3. the interests of creditors will be protected in compliance with section 79.

1. the amalgamating co-operatives have complied with all the relevant provisions of their constitutions and this Act;
2. the name and constitution of the amalgamated co-operative comply with this Act.

73. As from the date stated on the certificate of registration -

1. the amalgamation of the amalgamating co-operatives and their continuance as one co-operative becomes effective,
2. the registration of the amalgamating co-operatives is cancelled;
3. members of the amalgamating co-operatives become members of the amalgamated co-operative;
4. the assets, rights, liabilities and obligations of the amalgamating co-operative become the assets, rights, liabilities and obligations of the amalgamated co-operative.

1. An agreement to divide a co-operative envisaged in sub-section (1) must set out the terms of the division, and the means by which it will be effected, including the following -

1. the provisions of the constitutions of each of the co-operatives to be constituted by the proposed division;
2. the members of the co-operative that will become members of the co-operatives to be constituted by the division;
3. the manner in which the assets, rights, liabilities and obligations of the co-operative are to be divided between the co-operatives to be constituted by the division;
4. the business of each of the co-operatives constituted by the division and the area or sector in which they are to operate;
5. the name and address of the proposed directors of the co-operatives to be constituted.

1. A copy or summary of the proposed agreement to divide the co-operative must accompany the notice of such meeting.
2. An agreement to divide a co-operative must be adopted by a special resolution.
3. After the members of the co-operative have approved the division, the constitutions of the co-operatives to be constituted must be submitted to the registrar for approval together with a notice of registered office and a notice of the directors of the co-operatives concerned.
4. The following declarations must also be submitted to the registrar –

1. a declaration by the directors of the co-operative being divided, establishing that the relevant provisions of its constitution have been complied with in approving the division;
2. a declaration by the directors of each co-operative constituted by the division, establishing that there are reasonable grounds to believe that –

(i) the co-operatives to be constituted will be able to pay their liabilities as they become due;

(ii) the realisable value of the assets of the co-operative to be constituted will not be less than the total liabilities, share capital and reserves;

(iii) the interests of creditors will be protected in compliance with section 79.

5. The registrar must issue a certificate of registration in the name of the co-operatives to be constituted if satisfied that -

1. the co-operative has complied with all the relevant provisions of its constitution and the Act in approving the division;
2. the constitutions of the co-operatives to be constituted comply with the Act.

1. the registration of the co-operative being divided is cancelled;
2. the members of that co-operative become the members of the co-operatives constituted in terms of the division, in accordance with the agreement to divide;
3. the assets, rights, liabilities and obligations of the co-operative being divided become the assets, rights, liabilities and obligations of the co-operatives constituted by the division in accordance with the agreement to divide.

1. convert into any other form of corporate body or unincorporated in accordance with the applicable legislation; and
2. cancel its registration as a co-operative.

1. compliance with the relevant provisions of this Act and their constitutions;
2. that the interests of creditors will be protected in accordance with section 79.

1. cancel the registration of the co-operative; and
2. remove its name from the register of co-operatives.

1. the co-operative ceases to exist;
2. all assets, rights, liabilities and obligations of the co-operative vest in the corporate body or unincorporated association of persons into which the co-operative is converted, if it is by virtue of its constitution capable of owning property separate from its members;
3. if the co-operative is converted into a company, all members of the co-operative become shareholders of the company.

1. there has been compliance with the relevant provisions of this Act and their constitutions;
2. that the interests of creditors will be protected in accordance with section 79.

1. at least three months’ written notice of the proposal has been given to each known creditor who has a claim against any of the co-operatives affected exceeding one thousand rands or such other amount as the Minister may from time to time prescribe;
2. any creditors who have demanded payment of any amount due to them have been paid or will be paid before the amalgamation, division, conversion or transfer is effected;
3. no creditor will be prejudiced by the amalgamation, division, conversion or transfer.

(2) The court considering an application in terms of sub-section (1) may –

1. adjourn the hearing thereof conditionally or unconditionally; or
2. prior to granting or refusing the application, make any provisional or other order it may deem fit.

1. obtained registration through fraud;
2. was formed for a particular period or until the occurrence of a particular event, and that period has expired or that event has occurred;
3. has not transacted business during a continuous period of two years;
4. is not operating in accordance with its constitution or in accordance with this Act.

2. Before making an order in terms of sub-section (1), the Minister must give the relevant co-operative a right to be heard.

1. the admission and proving of claims against a co-operative being wound- up;
2. the distribution of any residue, in terms of a distribution account;
3. the recovery of a contribution, in terms of a contribution account.

1. specifying the amount of the claim together with any supporting documents;
2. containing any prescribed particulars relating to the claim.

1. A claim in terms of sub-section (1) must be lodged –

1. within 90 days of the publication of the notice appointing the liquidator;
2. with the consent of the registrar, within a further period of 30 days.

1. The liquidator may –

1. admit or refuse to admit the co-operative's liability for the amount of a claim in terms of sub-section (1); or
2. admit the co-operative's liability for any portion of such an amount.

1. in the case of a co-operative the main object of which involves its members conducting transactions with it, in accordance with the patronage proportion;
2. in the case of any other co-operative, in accordance with the constitution.

1. the period specified in the constitution of the co-operative, which must be at least five years;
2. the period that the co-operative has existed.

(6) For the purposes of sub-sections (4) and (5) -

1. the value of the transactions conducted by a former member with a co-operative during the period referred to in sub-section (5) may be added to the value of the transactions of a member who is entitled to an allocation under sub-section (4) if -

1. the former member, or the executor or representative of a deceased member, has consented in writing to that effect to the co-operative within 90 days after the former member ceased to be a member of the co-operative; and
2. the constitution of the co-operative so provides;

1. a co-operative registered in consequence of a division of a co-operative in terms of this Act is deemed to have existed as from the date of registration of the co-operative that was divided;
2. a co-operative by virtue of an amalgamation of two or more co-operatives in terms of this Act will be deemed to have existed as from the date of registration of the most recent of those co-operatives;
3. the value of the transactions conducted by a member through any co-operative contemplated by sub-paragraphs (b) and (c) during the appropriate period must be taken into account in determining a member’s allocation.

1. is unable to pay its debts or is probably unable to meet its obligations; and
2. has not become or is prevented from becoming a viable co-operative; and
3. there is a reasonable probability that, if it is placed under judicial management, it will be able to pay its debts or to meet its obligations and become a viable co-operative; and
4. it appears just and equitable to do so.

1. by a co-operative voluntarily after a special resolution to that effect;
2. by any interested person; or
3. by the Minister on the recommendation of the registrar.

1. must appoint an officer in the public service as the registrar of co-operatives, with the authority to exercise the powers and perform the functions conferred on the registrar by or in terms of this Act;
2. may appoint as many persons as the Minister deems necessary as deputy registrars of co-operatives, to assist the registrar perform the functions of the registrar and to exercise such powers as have been delegated to the deputy; and
3. may from time to time designate such other officers in the Department as may be necessary to assist the registrar.

1. If the registrar has reason to believe the either of the circumstances set out in paragraph (b) and (c) of subsection (1) of section 83 prevail, the registrar may give send such co-operative a written notice requiring it to provide a written statement, signed by at least two directors, indicating that the co-operative is still operational.
2. If no statement as envisaged in subsection (3) is received within 30 days, the registrar may remove such co-operative from the register.

98. (1) The registrar may order an investigation into the business of a co-operative, if the

1. The registrar may make any recommendation the registrar considers appropriate following an investigation in terms of subsection (1), including –

1. a recommendation to the co-operative concerned;
2. a recommendation to the Minister in terms of section 82;
3. a recommendation to the relevant prosecuting authority.

100. (1) The functions of the Advisory Board are to advise the Minister generally, and to

make recommendations, with regard to -

1. co-operative development policy in the Republic;
2. the application of any of the provisions of this Act or any other law on matters affecting co-operatives;
3. the publication of any regulations in terms of this Act that may be necessary or desirable;
4. the provision of support programmes targeting co-operatives that create employment, benefit disadvantaged groups or lead to greater participation in the economy by women and black people;
5. the establishment of guidelines for co-operative audits;
6. any matter referred to the Advisory Board by a co-operative or proposed co-operative or member of a co-operative, that relates to promoting the development of co-operatives; and
7. any decision the Minister is required to take in terms of this Act, on the request of the Minister.

101. (1) The Minister must appoint as members of the Advisory Board five persons

(2) The Minister must designate one of the members of the Board as chairperson.

102. (1) The Minister must determine:

1. the term of office of members of the Advisory Board, which may not be more than three years;
2. with the concurrence of the Minister of Finance, the remuneration and allowances to be paid to members of the Advisory Board; and
3. any other conditions of appointment not provided for in this section.

1. A person whose period of office has expired, is eligible for reappointment.
2. Members of the Advisory Board may resign in writing.
3. The Minister may remove a member of the Advisory Board from office for –

1. serious misconduct;
2. permanent incapacity; or
3. engaging in any activity that may undermine the integrity of the Advisory Board.

1. Meetings of the Advisory Board must be held at such time and place as may be determined by the chairperson of the Advisory Board in accordance with its rules.

1. to the extent that it may be necessary for administering this Act;
2. for the purposes of the administration of justice;
3. at the request of the Minister, the registrar or any other person entitled to the information.

1. prescribing the fees or the manner of determining the fees that may be charged in respect of the filing, verification or copying of a document in terms of this Act, or in respect of any services rendered by the registrar;
2. regulating the payment of any prescribed fees, including the time when and the manner in which the fees are to be paid, the additional fees that may be charged or payable for late payment of fees and the circumstances in which any fees previously paid may be refunded in whole or in part;
3. prescribing criteria with respect to exemptions permitted by this Act;
4. prescribing the standards of accounting by a co-operative to be followed for the purposes of Chapter 7;
5. categorising specific forms of co-operatives;
6. regulating the operation or administration of specific forms of co-operatives; and
7. prescribing where required by this Act, a threshold based on number of members or annual turnover of a co-operative. Different thresholds may be prescribed for different purposes.;
8. regulations arising from, or consequential to, the transitional provisions set out in section 108.

1. amend its constitution to the extent necessary to comply with the requirements of this Act; and
2. submit its constitution, to the registrar for registration in terms of section (8), read with the changes required by the context.

(3) On receipt of an application in terms of sub-section (2)(b) the registrar must –

1. issue the co-operative with a certificate stating that its constitution complies with the provisions of this Act; or
2. issue a directive to the co-operative specifying in what respect the co-operative’s constitution fails to comply with the provisions of this Act.

112. This Act is called the Co-operatives Act, 2004 and comes into operation on a date

determined by the President by proclamation in the Gazette.

1. A person whose membership is terminated in terms of sub-item (1) –

1. to undertake the marketing of any agricultural product or anything that is derived from an agricultural product;
2. to acquire or acquire control over any agricultural product or anything derived from an agricultural product, for the purposes referred to in sub- paragraph (i), and dispose of it;
3. to process an agricultural product or anything derived from it, manufacture it and dispose of the end product or of the agricultural product and anything derived from it;
4. to hire, buy, produce, manufacture, let, sell or supply services or things required for purposes of farming;
5. to hire, buy, acquire, produce, manufacture, let, sell or supply any article for consumption;
6. to hire, establish, erect, use or make facilities available for use in connection with farming;
7. to render services which are necessary and useful in farming;
8. to render any other services, including services which relate to buying, selling and hiring of fixed agricultural property;
9. to farm and dispose of farming products, process products or manufacture articles and dispose of them;
10. to undertake insurance business which relates to farming risks for farmers.

1. fuel, spare parts, fertilisers, plants materials, agricultural remedies, packing materials, livestock, feeding stuff, fumigating, spraying or cleansing operations or repair services, electricity, or money advanced for purposes of production.

1. If a co-operative gives assistance to a farmer or member-

1. the products produced or acquired by the farmer or member are deemed to be pledged to the co operative as if they were delivered to the co-operative, under the principles applicable in the law of pledge in the Republic;
2. the farmer or member is prohibited from selling the products referred to at sub-paragraph (a) or using them as security to a third party without the co-operative's written consent.

1. the products or livestock will be deemed to be pledged to the co operatives jointly to the extent of the indebtedness by the farmer or member;
2. the co-operatives must share the proceeds of the products or livestock proportionate to their claims irrespective of which co-operative has possession of them;
3. an affected co-operative must send notice to the other affected co-operatives disclosing its interest and proof of its claim.

1. the third party and the farmer or member must ask a co-operative which has a deemed pledge over the farmer or member's products to waive its rights; and
2. a co-operative may not refuse the request unless the estimated value of the products on the farm are insufficient to cover its debts and those of the third party.

1. If a co-operative agrees to waive its rights in terms of sub-section (6), the third party may only sell in execution (pursuant to a court order) agricultural products or livestock with the written consent of the co-operative, and thereafter pay to the co-operative what is due to it.
2. A co-operative may refuse to give permission for a sale in execution referred to in subsection (7) if it is of the view that the sale in execution will prejudice its claim for the debt owing and secured by the deemed pledge.
3. If there is a dispute regarding the estimated value of products –

1. the insurer of products must be requested to evaluate;
2. the value given by the insurer will be final and binding to all parties as an expert;
3. the request and valuation must be completed within seven (7) working days.

1. The farmer or member may use the products referred to in this section for consumption with his workers and family within reason.
2. Anyone who contravenes sub-items (1), (2) and (3) of this section is guilty of an offence.