Governance and bodies of a cooperative
As a minimum, a cooperative's governance consists of a Board of Directors and the cooperative’s General Meeting or its replacement, a Board of Representatives. The General Meeting of the cooperative has the highest decision-making power in matters that under the Co-operatives Act or the rules of the cooperative fall within its competence. A cooperative may also have a Managing Director leading the practical operations, and a Supervisory Board supervising the administration.
The cooperative should select a Board of Directors for itself. The Board of Directors ensures that the cooperative’s administration and operations are properly organised. The Board of Directors is responsible for the legality of the cooperative’s activities and financial control. Another important task of the Board is to align the cooperative's future operations and to ensure their viability.
The Board of Directors should have between one and five ordinary members. If there are fewer than three members, the Board must have at least one deputy member. If there is more than one member, the Board must select a chairperson. The number of members can be waived by the rules. Even if the Board of Directors only has one member and that person is nominated a chairperson, no entry about the chairperson should be submitted to the Trade Register.
Members of the Board of Directors are selected by the cooperative's general meeting, Board of Representatives or the Supervisory Board. A person for whom a Trustee has been assigned or who is bankrupt cannot work as member. Inform the Trade Register about the members and deputy members of the cooperative's Board of Directors as well as any related changes without delay. The cooperative’s members or related changes should not be entered into the Trade Register. The Board of Directors of the cooperative is responsible for keeping an up-to-date register of the members.
The Board discusses issues and makes decisions in Board meetings. The Board of Directors has a quorum, meaning it can make decisions, when more than half of its members are present. If members of the Board of Directors do not agree about a decision, the majority opinion wins. In the event of a tie, the decision is made by the chairperson’s vote.
The role of the Board is crucial in a cooperative. It manages the cooperative. In small cooperatives with no employed staff, management means practical work in addition to decision making.
The cooperative may also have a Managing Director, who shall attend to the cooperative's running administration in accordance with the instructions and regulations of the Board. The Managing Director’s tasks can include
- management and supervision of the practical operations of your company
- responsibility to take care of personnel matters
- planning and monitoring of finances
- ensuring that the cooperative fulfils its agreements and other obligations
- ensuring that the cooperative’s accounting is lawful and financial management has been arranged in a reliable manner
- ensuring that the cooperative’s Board of Directors receives sufficient information in order to carry out its duties
- representing the cooperative in matters which belong to the Managing Director by law.
In general, the Board of Directors selects the Managing Director. Inform the Trade Register about the selection of the Managing Director and their deputy, as well as any related changes without delay. If you select the Managing Director already at the start-up phase of your cooperative, record it in the Memorandum of Association.
The General Meeting is the highest decision-making body in a cooperative. It may decide on all matters that fall within the Co-operatives Act. Unless otherwise determined in the rules, each member has one vote in the General Meeting.
The ordinary General Meeting of the cooperative is always mandatory. The Board of Directors should convene it once a year, within six months after the end of the financial year. The Meeting makes decisions at least about the following: approval of the financial statement, distribution of profit, and selection of the Board of Directors, Supervisory Board, auditor or operations inspector. It also gives discharge to the Board of Directors, Supervisory Board and the Managing Director, which means that the actions they have taken are approved by the General Meeting
It is important to note that the cooperative's General Meeting does not make decisions on matters that belong to the Board of Directors. It is important to be aware of the division of labour between the cooperative’s General Meeting and the Board of Directors.
The cooperative may also hold extra cooperative meetings, if the rules so dictate, or if the Board of Directors, a member, an auditor or the Supervisory Board so require.
The cooperative's members may also decide about a matter belonging to the annual General Meeting even without organising a General Meeting, if there is a consensus on the matter.
You can also agree about other arrangements with regard to the General Meeting in the cooperative's rules.
Especially in larger cooperatives, a Board of Representatives may replace the General Meeting of the cooperative. On behalf of the members, the Board of Representatives makes decisions on either all or only some of the matters belonging to the General Meeting of the cooperative.
Decisions about the selection of the Board of Representatives should be recorded in the cooperative's rules. The Board or Representatives is elected by the members of the cooperative. The selected Board of Representatives can operate for up to six years. Each representative has one vote in the meeting.
Larger cooperatives in particular may also have a Supervisory Board, if it is indicated in the rules of the cooperative.
The main task of the Supervisory Board is to supervise the administration of the cooperative, which is the responsibility of the Board and the Managing Director. You can also assign other tasks to the Supervisory Board, such as the selection of the Board of Directors and the Managing Director. In order for the Supervisory Board to carry out its tasks, the Board or Directors and the Managing Director should provide it with the necessary information.
The General Meeting of the cooperative selects the Supervisory Board. The Supervisory Board must have at least three members. Enter the members into the Trade Register. Please note that the Managing Director or a member of the Board of Directors cannot be a member of the Supervisory Board, since no one can supervise their own activities.
The Supervisory Board usually elects a Chair from its members. The chair shall convene a meeting of the Supervisory Board as required.
You can also agree on alternative arrangements with regard to the Supervisory Board and its operations.