REPUBLIC OF SOUTH AFRICA
(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)
(MINISTER OF TRADE AND INDUSTRY)
[B – 2002]
GENERAL EXPLANATORY NOTE:
[ ] Words in bold type in square brackets indicate omissions from existing enactments.
_________ Words underlined with a solid line indicate insertions in existing enactments.
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.
AND IN ORDER TO –
BE IT ENACTEDby the Parliament of the Republic of South Africa as follows:-
DEFINITIONS, PURPOSE AND APPLICATION
REGISTRATION, CONSTITUTION AND POWERS OF CO-OPERATIVE
PART 1 Application to register and name
PART 2 Constitution and Powers of co-operative
MEMBERSHIP OF CO-OPERATIVES
MANAGEMENT OF CO-OPERATIVES
AMALGAMATION, CONVERSION AND REORGANISATION
WINDING-UP OF CO-OPERATIVES
ADMINISTRATION OF ACT
THE CO-OPERATIVES ADVISORY BOARD
SCHEDULE 1: General powers of a co-operative
SCHEDULE 2: Part 1 – Housing Co-operatives
Part 2 – Worker Co-operatives
Part 3 – Financial Co-operatives
Part 4 – Agricultural Co-operatives
DEFINITIONS, APPLICATION AND PURPOSE OF ACT
Definitions and interpretation
1. (1) In this Act, unless the context indicates otherwise –
"auditor" means a person registered as such in terms of the Public Accountants’ and Auditors’ Act, 1991 (Act No. 80 of 1991), and includes a firm as defined in that Act, and, where appropriate, any other person authorised by regulation to conduct an audit of a cooperative;
"agricultural co-operative" means a primary co-operative producing, processing or marketing agricultural products, or a secondary co-operative providing services to primary agricultural co-operatives;
"consumer co-operative" means a primary co-operative providing services to its members as consumers, or a secondary co-operative providing services to primary consumer co-operatives;
"co-operative" means an autonomous association of persons united voluntarily to meet their common economic and social needs and aspirations through a jointly owned and democratically controlled enterprise organised and operated on co-operative principles;
"co-operative apex organization" means a organisation formed by at least five co-operatives whose membership is open to all co-operatives within a specific sector or area, whose objects include representing the interests of co-operatives within that sector or area;
"co-operative principles" means the internationally accepted principles of co-operation, and as exemplified by the principles adopted by the International Co-operative Alliance;
"Department" means the Department of Trade and Industry;
"Director-General" means the Director-General of Trade and Industry;
"financial services co-operative" means a primary co-operative whose main objective is to provide financial services to its members, or a secondary co-operative that provides services to a primary co-operative;
"general meeting" means a meeting of the members of a co-operative, and includes, as the context indicates, an Annual General Meeting ("AGM"), a special general meeting or a regional general meeting.
"housing co-operative" means a primary co-operative which provides housing to its members, or a secondary co-operative that provides services to primary housing co-operatives;
"marketing co-operative" means a primary co-operative which markets goods produced by its members or services provided by its members, or a secondary co-operative producing services to primary marketing co-operatives;
"member loan" means a loan by a member to a co-operative;
"membership share" means a share issued to a member of a co-operative as a requirement of membership of the co-operative;
"Minister" means the Minister of Trade and Industry;
"ordinary resolution" means a resolution passed at a general meeting by the majority of the members present;
"patronage proportion" means the proportion which the value of the transactions conducted by a member with a co-operative during a specified period bears to the value of the transactions conducted by all members with the co-operative during the same period;
"person" means a natural or juristic person;
"prescribed" means prescribed by regulation;
"primary co-operative" means a co-operative, other than a secondary co-operative or a tertiary co-operative, whose object is to provide employment or services to its members;
"registrar" means the Registrar of Co-operatives and "deputy registrar" has a corresponding meaning;
"secondary co-operative" means a co-operative whose members are primary co-operatives and whose object is to provide services to its members;
"share" includes membership shares and any additional shares that may be issued by a co-operative;
"social co-operative" means a primary co-operative whose members provide community or social services, or a secondary co-operative providing services to primary social co-operatives;
"special resolution" means a resolution passed at a general meeting by not less than two thirds of the members present, or such greater majority as may be specified in the constitution of a co-operative;
"surplus" means the financial surplus arising from the operations of a co-operative in a financial year;
"supervisory committee" means a committee of members that may be constituted in terms of the constitution of a primary co-operative to exercise supervision over the board of directors;
"tertiary co-operative" means a co-operative whose members are secondary co-operatives, or both primary and secondary co-operatives, and whose object is to provide services to its members.
"this Act" includes the Schedules to this Act and any regulations made in terms of this Act;
"transport co-operative" means a primary co-operative whose members are engaged in the provision of transport services and a secondary co-operative providing services to primary transport co-operatives.
"worker co-operative" means a primary co-operative whose main objectives is to provide employment to its members, or a secondary co-operative providing services to primary workers co-operatives.
(2) This Act must be interpreted to give effect to its purpose as set out in section 2, and to develop the co-operative principles referred to in section 3.
2. The purpose of this Act is to -
3. (1) For the purposes of this Act, a co-operative is deemed to comply with co-operative principles if –
Forms and kinds of co-operatives
4. (1) This Act provides for the registration of the following forms of co-operatives –
(2) Without limiting the number and variety of different kinds of co-operatives, a co-operative registered in terms of this Act may be a:
5. Application of the Act
REGISTRATION, CONSTITUTION AND POWERS OF CO-OPERATIVE
PART 1: APPLICATION TO REGISTER AND NAME
Minimum number of persons to register a co-operative
6. An application to register a co-operative must be made by -
7. (1) An application to register a co-operative must be submitted to the registrar in the prescribed form, and must be accompanied by –
(c) a list of the directors;
(d) the prescribed fee.
(2) Before submitting an application to found a co-operative there must be at least one meeting of interested persons at which –
Registration of co-operative
8. The registrar must register the co-operative and issue a certificate of registration with a registration number, if the registrar is satisfied that -
Effect of registration
9. (1) A co-operative will be incorporated as a legal person with effect from the date on which it is registered, as reflected on its registration certificate.
(2) A co-operative that is registered in terms of this Act, may qualify for any targeted support that may be facilitated or provided to registered co-operatives by the Department.
10. (1) A person who enters into a written contract for or on behalf of a co-operative before it is registered, is personally bound by the contract, unless the contract expressly provides otherwise.
(2) A co-operative may, within a reasonable time after its registration, ratify the contract referred to in sub-section (1) by ordinary resolution at a general meeting.
(3) If the co-operative ratifies the contract under this section -
(4) If the co-operative does not ratify the contract, the person who originally entered into the contract continues to be bound by the contract, unless the contract expressly provides otherwise.
Name of co-operative
11. (1) The proposed name of a co-operative must not be –
(5) A secondary co-operative or tertiary co-operative must indicate its status as a secondary co-operative or tertiary co-operative on the documents listed in subsection (4)
(6) If the name of a secondary or tertiary co-operative indicates a restriction on the business that may be carried on by the co-operative, the constitution of the co-operative may not be amended to remove that restriction unless its name is also amended.
Directive from registrar to change the name
12. (1) The registrar may direct a co-operative to change its name if the co-operative’s
name contravenes section 10.
(2) If a co-operative does not comply with a directive issued in terms of sub-section (1) within sixty days of receiving the directive –
(3) On issuing a certificate of amendment under subsection (2), the registrar must publish the change of name in a publication generally available to the public in the area(s) where the majority of the members reside.
Unlawful use of the word "co-operative"
13. (1) It is an offence for any entity other than a co-operative registered in terms of this Act to –
PART 2: CONSTITUTION AND POWERS OF CO-OPERATIVE
14. (1) A co-operative that is registered in terms of this Act must adopt a constitution that
complies with this Part.
Compulsory provisions for all co-operatives
15. (1) The constitution of a co-operative must include the following provisions -
Compulsory provisions where members are required to hold shares
16. Where a member is required to hold shares in a co-operative upon application or acceptance as a member, the constitution of a co-operative must provide as follows -
Compulsory provisions for secondary and tertiary co-operatives
17. (a) The main objective of a secondary co-operative must be to provide
services to the primary co-operatives that are its members, which services must be specified.
(b) The main objectives of a tertiary co-operative must include providing services to the primary and/or secondary co-operatives that are its members, which services must be specified;
(c) A secondary or tertiary co-operative must specify the number of votes a member has in proportion to the number of its members
Optional provisions for all co-operatives
18. The constitution of a co-operative may include the following -
Optional provisions for secondary or tertiary co-operative
19. (a) The further objectives of a secondary or tertiary co-operative may include any
activity that is not inconsistent with the objectives of any of its members, and which is undertaken for their exclusive benefit;
(b) The further objectives of a tertiary co-operative may include representing the interests of co-operatives within a sector or region, assisting in the provision of education and training, establishing a guarantee fund to facilitate external financing of its members, and the establishment of an audit fund to assist members have their operations audited.
Consequences of invalidity
20. The constitution of a co-operative –
Amendment to constitution
21. (1) The constitution of a co-operative may be amended by the co-operative by special resolution.
Powers of a co-operative
22. (1) A co-operative may do all things necessary to carry out its objectives, subject such limitations on its powers as are imposed by its constitution, this Act and any other law.
(2) If a co-operative performs any act for which it does not have the power, the co-operative and each director of the co-operative who authorised, or participated in authorising, the performance of that act, or who performed that act, or participated in the performance of that act, knowing that the co-operative was not empowered to perform such act, will be guilty of an offence.
Registered office of co-operative
23. (1) A co-operative must maintain a registered office in the place set out in its constitution.
(2) A co-operative must notify the registrar of the physical address of its registered office, as well as any electronic address, telephone or telefax numbers, in the prescribed form.
(3) A co-operative must notify the registrar in the prescribed form within fifteen days if the physical or electronic address as notified in subsection (2) changes.
Record keeping by a co-operative
24. (1) A co-operative must keep at its offices the following -
(i) the name and address of each member;
(i) the name, address and identity number of each past and present director;
(iii) the name and address of any other co-operative or company or close corporation of which they are (or were in the case of former directors) a director or member, as the case may be;
Access to information
25. (1) Subject to subsections (3) and (4), members of a co-operative may examine the records referred to in paragraphs (a) to (f) of subsection (1) of section 24 during the normal business hours of the co-operative and have copies of records, or extracts from records made, after payment of a reasonable fee.
(2) Despite subsection (1), the board of directors may not make any information available that is confidential or privileged.
(3) Despite subsection (1), the board of directors may withhold information relating to any current commercial transaction for a reasonable period of time.
(4) Where the constitution of a co-operative provides for the establishment of a supervisory board, the supervisory board must determine whether information is confidential or privileged, or whether the board of directors is entitled to withhold information in terms of subsection (3).
MEMBERSHIP OF CO-OPERATIVES
Application for membership
26. (1) No person may be admitted to membership in a co-operative unless -
Rights and obligations of members
27. (1) A member of a co-operative must exercise his or her rights in accordance with the constitution and this Act.
(2) A member has the right to participate in the decision-making processes and business of the co-operative. This includes but is not limited to the following rights -
(3) A member is bound by the constitution of the co-operative, and by resolutions adopted by the co-operative in accordance with the constitution.
Liability of members
28. Unless the constitution provides otherwise, the liability of a member of a co-operative is limited to an amount equal to the nominal value of the shares that member holds in the co-operative for which that member has not paid.
Withdrawal of membership
29. (1) A member may withdraw his or her membership in a co-operative by written notice to the co-operative.
Transfer of membership, membership loan or share
30. (1) No transfer of a membership, a member loan or a membership share in a co-operative is valid unless the transferee has applied for membership of the co-operative and been accepted as a member, and has complied with the requirements for membership as set out in the constitution of the co-operative and this Act.
(2) If a member dies and that member’s nominee has applied for membership of the co-operative, and complies with the provisions for membership as set out in the constitution and this Act, the co-operative must admit that person as a member.
(3) If a member dies and that member’s nominee does not apply for membership, or if the nominee applies for membership but does not comply with the requirements for membership as set out in the constitution and this Act, the co-operative must within a reasonable period, but not longer than two years after the date of the member’s death, pay the member’s estate -
(4) Notwithstanding sub-section (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 repayment be deferred for a period not exceeding four years after the date of death of its member.
Termination of membership by members
31. (1) Unless the constitution or this Act provide otherwise, the membership of a
member may be terminated by special resolution of the members.
(3) The provisions of this section must not be construed as preventing a general meeting from adopting a resolution to terminate a member’s membership in the member’s absence.
(4) If the membership of a member is terminated in terms of this section, the co-operative must inform the member concerned of the termination and the reasons for the termination.
(5) A person whose membership has been terminated in terms of this section may only be re-admitted to membership by special resolution of the members.
Suspension of membership
32. (1) The board of directors may suspend the membership of a member if they have reason to believe that –
Powers of registrar in the case of reduced number of members
33. If the membership of a co-operative is reduced to a number less than the number required for registration, and after six months it remains at less than that number -
Structure for decision-making
34. (1) A co-operative’s decision-making structure provided for in its constitution must conform with the requirements of this section.
(4) A decision of a regional general meeting confirmed at a conference of delegates has the same status as a decision of a general meeting.
(5) The Board of Directors is accountable to –
35. (1) A general meeting must be held in the Republic at –
(6) A person participating in a meeting referred to in sub-section (5) is deemed to be present at the meeting.
(7) The constitution of a co-operative may permit a member to appoint a proxy to attend and vote at a general meeting on the member’s behalf provided that no person may act as a proxy for more than twenty percent of the members entitled to vote at the meeting, or such lesser percentage of members stipulated in the co-operative’s constitution.
(8) This section applies to a conference of delegates held in terms of a co-operative’s constitution, read with the changes required by the context.
Annual general meetings
36. (1) A co-operative must hold –
Notice of general meetings
37. (1) Members must be given written notice of a general meeting, specifying –
38. (1) A general meeting may adopt a resolution by a simple majority of members present at the meeting.
(2) A general meeting may adopt a special resolution if the notice of that general meeting specified -
(3) A special resolution must be approved by at least –
(4) The constitution of a co-operative may require a larger majority for any specific purpose.
Quorum for general meetings
39. (1) The quorum for meetings of a co-operative must be –
(2) Despite sub-section (1)(a), the registrar may approve a provision in a constitution for a quorum for a general meeting of less than one-third but not less than twenty percent of the members entitled to attend the meeting, taking into account –
(a) the size of the co-operative;
(b) the geographic location of its members;
(c) the possibility for that co-operative’s members to participate in meetings by way of an electronic, telephonic or other communication facility.
(3) For the purposes of calculating the quorum –
(c) persons participating by telephonic, electronic or other communication facility or who have submitted a postal vote or nominated a proxy in accordance with the constitution are deemed to be present.
(4) If a quorum is present, the members present may proceed with the business of the meeting even though a quorum is not present throughout the meeting, unless the constitution provides otherwise.
(5) If a quorum is not present at the time the meeting is called, or within a reasonable period of time thereafter stipulated in the constitution, the members present -
(6) At a meeting adjourned in terms of sub-section (5), the persons present at the date, time and place to which the meeting is adjourned constitute a quorum and may transact business set out in the initial notice.
Representation at meetings
40. A juristic person entitled to vote at a meeting of a co-operative may be represented by any person authorised to do so.
Voting by show of hands or ballot
41. (1) Unless the constitution provides otherwise, voting at a general meeting or conference of delegates may take place by show of hands.
Resolution in lieu of meeting
42. (1) Unless the constitution provides otherwise, the board of directors may give
twenty one days written notice of its intention to adopt a resolution in lieu of a general meeting.
(2) A notice in terms of sub-section (1) must include the resolution and a brief motivation for adopting the resolution in this manner.
(3) A resolution circulated in accordance with subsection (1) and signed by a majority of members entitled to vote at a general meeting, is valid as if it had been passed at such a meeting.
(4) A copy of every resolution contemplated in subsection (1) must be kept with the minutes of the general meetings.
Minutes of general meetings
43. (1) The board of directors must –
(3) The minutes of any general meeting, signed by the chairperson of the meeting, or a resolution adopted in terms of section 42, signed by the chairperson of the board, are in the absence of evidence to the contrary, proof of the outcome of the vote or the resolution.
(4) The provisions of sub-sections (1) to (3) shall apply to a conference of delegates held in terms of a co-operative’s constitution, with such changes as the context may require.
Request for general meeting
44. (1) Ten percent of the members of a co-operative may request in writing the calling of a general meeting for a purpose stated in the request.
(3) If the board of directors does not call a meeting within twenty-one days after receiving a request in terms of sub-section (1), any person who signed the request may call the meeting.
(4) Unless the persons who are present and entitled to vote at a meeting called under subsection (3) resolve otherwise, the co-operative must reimburse the persons who signed the request for the expenses reasonably incurred by them in requisitioning, calling and holding the meeting.
(5) A meeting called under this section must be called as nearly as possible in the manner in which meetings are to be called pursuant to the constitution and this Act.
MANAGEMENT OF CO-OPERATIVES
Board of directors
45. (1)The affairs of a co-operative must be managed by a board of directors consisting
of such number of persons as the constitution of the co-operative permits.
(2) The board of directors must exercise and perform the powers and duties of the co-operative subject to this Act and the constitution of the co-operative.
(3) The board of directors must be elected for such period as may be set out in the constitution, which period may not be more than four years.
Persons competent to be directors
46. (1) Unless the constitution allows a non-member to be a director, a director must be a member of –
Vacation of office by directors and filling of vacancies
47. (1) A person ceases to be a director of a co-operative if that person –
Chairperson, vice-chairperson and acting chairperson
48. (1) Unless its constitution provides otherwise, the board of a co-operative must elect from its members a chairperson and vice-chairperson of the board –
(4) The chairperson and vice-chairperson of the board of a co-operative vacate office on–
(5) The chairperson or vice-chairperson of a board of directors may at any time be removed from office by the board.
Meetings and resolutions of board of directors
49. (1) A meeting of the board of a co-operative must be held at a date, time and place determined by-
(3) For the purposes of determining whether there is a quorum in terms of sub-section 2(a), directors participating by telephonic, electronic or other communication facility are deemed to be present, unless the constitution of the co-operative provides otherwise.
(4) A resolution passed by a board of directors or act performed under the authority of a board of directors is not invalid by reason only of the fact that when the resolution was passed or the act was authorised there was a vacancy on the board or a person not entitled to sit as a director sat as a director, if the resolution was passed or the act was authorised by the requisite majority of the directors entitled to sit as directors who were present at the time.
(5) Unless the constitution provides otherwise, a resolution in writing signed by all directors entitled to vote on that resolution at a meeting of the board is valid as if it had been passed at such a meeting.
Minutes of meetings of board of directors
50. (1) The board of directors must cause minutes of board meetings to be –
(4) A resolution of a board of directors in the form of a written resolution signed by all directors –
(5) The minutes of any meeting of a board purporting to be signed by the chairperson of the board or a person who acted as chairperson, as the case may be, will in any court constitute proof, on the face of it, of what took place at that meeting.
Board of directors may assign functions to a director or committee or manager
51. (1) Subject to any limitations or qualifications set out in the constitution of the co-operative, the board of directors may-
Liability of directors and employees
52. (1) A director or manager or other employee of a co-operative is not liable to any person in their personal capacity for any loss or damage which may occur in or in connection with the performance of their duties, unless the loss or damage is due to –
(2) Without prejudice to any other criminal liability incurred, any director or manager who was knowingly a party to the carrying on of the business in any manner contemplated in (a) to (c) of sub-section (1) is guilty of an offence.
Disclosure of interest
53. (1) A director or manager of a co-operative must disclose in writing to the co-operative in accordance with this section –
(4) A disclosure that is required to be made in terms of this section, must be made -
(5) If the person making the disclosure is not a member of the board of directors, the disclosure must be made in writing for submission to the board.
(6) The board of directors must keep in accordance with section 21 a register of directors' and managers’ interests in contracts or undertakings containing full particulars of every disclosure of interest made in terms of this section.
Acceptance of commission, remuneration or reward prohibited in certain circumstances
54. (1) A director or manager of a co-operative may not accept any commission,
remuneration or reward from any person for or in connection with any transaction to which the co-operative is a party unless such commission, remuneration or reward is paid or given in the course of the director or employee’s usual business or profession and the director or employee has disclosed his or her interest to the co-operative.
(2) A director or employee who contravenes a provision of sub-section (1) is guilty of an offence.
Returns relating to directors
55. (1) A co-operative must notify the registrar in writing within 30 days of -
(2) A director must inform the co-operative in writing of any change of address within 30 days.
(3) A co-operative that fails to comply with a provision of sub-section (1) and a director who fails to comply with a provision of sub-section (2) will be guilty of an offence.
Capital of a co-operative
56. The capital contributed by members may comprise any of the following:
57. (1) The constitution of a co-operative may provide for membership shares to be issued to members.
(4) All shares issued must be of the same class and ranking
(5) Interest on membership shares is only payable on shares, or that portion of shares, that are paid up.
(6) A transfer of membership shares is valid only if it complies with section 27 and any restrictions set out in the constitution.
Issue of certificates in respect of membership shares or member loans
58. (1) Unless the constitution of a co-operative provides otherwise, a member is entitled to a certificate in respect of –
(2) The face of each certificate that the co-operative issues in terms of sub-section (1) must state -
(3) If the constitution does not require the issue of certificates, the co-operative, on the request of a member, must issue a statement of –
59. (1) The constitution of a co-operative may provide for one or more members’ funds to be established in which the member of a co-operative may be credited with –
(2) The money standing to the credit of a member in a members’ fund –
(3) Actions of a co-operative in terms of this section are not deemed to be activities prohibited by the Banks Act, 1990 (Act No.94 of 1990) by reason only of the fact that the co-operative administers a members' fund.
60. (1) A co-operative may allocate and credit or pay to its members that portion of the surplus which is not transferred to an indivisible reserve fund in terms of the constitution, allocated in proportion to the business done by the members with the co-operative in that financial year.
(3) A co-operative may provide in its constitution that the whole, or a part determined by the board, of the patronage proportion of a member in respect of a financial year must be applied to purchase membership shares in the co-operative for the member.
(4) If the provisions of sub-section (3) apply, the constitution must further provide for–
Prohibited and permitted loans and security
61. (1) A co-operative may give financial assistance by means of a loan or the provision of security to -
(2) A co-operative may not give financial assistance, whether directly or indirectly, by means of a loan or the provision of security for any purpose if there are reasonable grounds to believe that -
(3) In determining the realisable value of the co-operative’s assets for the purposes of sub-section (2)(b), the amount of any financial assistance in the form of a loan and in the form of assets pledged or encumbered to secure a guarantee, must be excluded.
62. (1) An audit of the affairs of a co-operative must be conducted annually in respect of each financial year, in order to -
Approval of auditors report and financial statements
63 (1) A co-operative may circulate draft financial statements to its members prior to an
(2) The AGM must consider approval of the auditor’s report and financial statements.
(3)The chairperson of the board, or the person who chaired the meeting at which the auditor’s report and financial statements were approved, must sign the auditor’s report and financial statements to confirm their approval
(4) A co-operative may not issue, publish or circulate copies of the financial statements unless the statements are -
(5) The auditor’s report and financial statements must be made available for inspection at the registered office of the co-operative for at least twenty-one days after their approval.
(6) The board of directors must –
Auditor disqualified from acting
64. (1) A person is disqualified from being an auditor of a co-operative-
Appointment of auditor
65. (1) The members must appoint an auditor-
(2) Despite sub-section (1), if an auditor is not appointed at any meeting, the incumbent auditor continues in office until a successor is appointed.
(3) If a co-operative fails to appoint an auditor in accordance with sub-sections (1) and (2), the registrar may approve the person nominated by the board of the co-operative to audit the books of a co-operative for one financial year.
(4) The fee payable to the auditor appointed in terms of sub-section (3) must be approved by the registrar.
(5) An auditor of a co-operative ceases to hold office when the auditor dies, resigns or is removed under section 66 or is struck from the roll of auditors in terms of the laws of the Republic.
(6) A resignation of an auditor becomes effective on the date on which a written resignation is received by the co-operative, or on the date specified in the resignation, whichever is later.
Removal of auditor
66. (1) The members may by ordinary resolution remove an auditor from office.
(3) An auditor appointed to fill a vacant post holds office for the unexpired term of his or her predecessor.
Attendance of meeting by auditor
67. (1) The auditor of a co-operative is entitled –
(2) A director or member of a co-operative may require the auditor or former auditor to attend a general meeting at the expense of the co-operative and answer questions relating to the auditor's duties, provided the auditor or a former auditor of the co-operative is given ten days written notice of such meeting.
(3) A director or member that sends a notice referred to in sub-section (2) must send a copy of the notice to the co-operative at the same time.
Right to information
68. (1) At the request of the auditor, the members, directors, employees, agents or mandataries of a co-operative must provide any information, explanations, and access to any documents of the co-operative or any of its subsidiaries that are, in the opinion of the auditor, necessary for the purposes of the audit.
Notice of error
69. (1) A director or employee who becomes aware of any error or misstatement
in a financial statement that the auditor or former auditor has reported on, must notify the auditor without delay.
(2) An auditor or former auditor of a co-operative who is notified of, or in any other way becomes aware of, a material error or misstatement in a financial statement on which they have reported, must inform the board of directors accordingly.
(3) When the auditor or former auditor informs the board of directors of an error or misstatement in a financial statement in terms of sub-section (2), the directors must -
70. (1) Upon application in terms of subsection (2) of section 63 and subject to the
requirements of subsections (2) and (3), the registrar may exempt a co-operative from full compliance with the requirements of this Chapter if satisfied-
(a) the costs of an annual audit would materially affect the financial sustainability
(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
(2) When exempting a co-operative in terms of this section, the registrar must either require such co-operative to be audited
AMALGAMATION, DIVISION, CONVERSION AND TRANSFER
71. (1) Two or more co-operatives may agree in writing to amalgamate provided the
co-operative to be constituted by the amalgamation ("the amalgamated co-operative") will comply with the requirements for a co-operative to be registered in terms of the Act.
(2) An agreement to amalgamate envisaged in sub-section (1) must set out the terms of the amalgamation, and the means by which it will be effected, including the following -
Approval of amalgamation
72. (1) The board of directors of each amalgamating co-operative must submit the proposed agreement to amalgamate to a general meeting of each amalgamating co-operative.
(2) A copy or summary of the proposed agreement to amalgamate must accompany the notice of such meeting.
(3) An agreement to amalgamate must be approved by special resolutions of each amalgamating co-operative.
(4) After approval of an agreement to amalgamate, the constitution of the amalgamated co-operative must be submitted to the registrar for approval, together with a notice of registered office, a notice of the directors of the amalgamated co-operative and the prescribed fee.
(5) A declaration by the directors of each amalgamating co-operative must be attached to the constitution submitted in terms of sub-section (4), establishing that the relevant provisions of their constitutions have been complied with in approving the amalgamation, and that there are reasonable grounds to believe that -
(6) The registrar must issue a certificate of registration in the name of the amalgamated co-operative if satisfied that -
(7) For the purposes of sub-section (6), the registrar may rely on the constitution and the declarations contemplated in sub-section (5).
Effect of registration of amalgamated co-operative
73. As from the date stated on the certificate of registration -
Division of co-operatives
74. (1) A co-operative may decide to divide into two or more co-operatives, if each co-operative will comply with the requirements for a co-operative to be registered in terms of this Act.
Approval of Division
75. (1) The board of directors must submit a proposed agreement to divide a co-operative to a general meeting.
(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.
Effect of registration of co-operatives constituted in terms of a division
76. As from the date of the last registration of a co-operative constituted in terms of a division -
Conversion to any other kind or form of juristic person
77. (1) A co-operative may apply to –
(2) An application in terms of sub-section (1) may only be made if the board of directors has submitted a proposal to a general meeting, detailing the reasons for and terms of the proposed conversion.
(3) A copy of the proposal referred to in sub-section (2) must be attached to the notice of the general meeting, and must be adopted by special resolution in accordance with section 36(3).
(4) A declaration by the directors of the co-operative concerned must be attached to an application in terms of sub-section (1), establishing –
(5) The registrar may require the directors to submit such proof as the registrar requires in respect of any matter contained in a declaration referred to in sub-section (4).
(6) If the registrar is satisfied that there has been compliance with the provisions of this Act, the registrar must –
(7) As from the date on which the registration of a co-operative is cancelled -
78. (1) A co-operative may apply to transfer its assets, rights, liabilities and obligations by mutual agreement to any other co-operative.
(2) If a transfer in terms of sub-section (1) is contemplated, a copy or summary of the proposed agreement to transfer, and the reasons for the transfer, must be sent to the members of the co-operatives concerned together with the notice of the general meeting at which transfer is to be considered.
(3) A transfer in terms of sub-section (1) must be approved by special resolution of each of the co-operatives concerned.
(4) A declaration by the directors of each of the co-operatives concerned must be attached to an application in terms of sub-section (1), establishing that –
(5) The registrar may require the directors to submit such proof as the registrar requires in respect of any matter contained in a declaration referred to in sub-section (4).
(6) The registrar must approve the application if satisfied that there has been compliance with the relevant provisions of the Act and the constitution.
Protection of creditors
79. The registrar may not register any amalgamation, division, conversion or transfer in terms of this Chapter unless the registrar is satisfied that –
Registration of property upon amalgamation, division, conversion or transfer
80. (1) Any property or right which vests in a co-operative or a corporate body by virtue of any provision of this Chapter must be transferred to that co-operative or corporate body, as the case may be, without payment of transfer duty, stamp duty or any other fee or charge.
(2) On submission of a certificate of amalgamation, division, conversion or transfer, as the case may be, the registrar of deeds must endorse and make entries in any relevant register, title deed or other document in his or her office or laid before him or her, to register the property in the name of the co-operative or corporate body concerned.
WINDING-UP OF CO-OPERATIVES
Modes of winding-up
81. (1) A co-operative may be wound up voluntarily by a special resolution of its members.
(2) A co-operative must be wound up if ordered by a court or the Minister, as provided for in this Chapter.
Winding-up by order of court
82. (1) The High Court may, on application by any interested person, order that a co-operative be wound up, if
(a) a co-operative is unable to pay its debts; and
(b) there is no reasonable probability that it will be able to pay its debts or
become a viable co-operative; and
(c) it appears just and equitable to do so.
(2) The court considering an application in terms of sub-section (1) may –
Winding-up by order of Minister
83. (1) The Minister may, on the recommendation of the registrar, order that a co-operative be wound up if the Minister has reason to believe that the co-operative -
Transitional provisions relating to the winding-up of co-operatives
84. The winding up of a co-operative must be effected in accordance with a law of general application to be enacted regulating the law of insolvency and the winding-up of legal persons, including co-operatives. Pending the enactment of such a law, the provisions of Chapter 10 of the Co-operatives Act, 1981 (Act 91 of 1981) shall continue to apply as if they had not been repealed.
Special provisions relating to the winding-up of co-operatives
85. Having regard to co-operative principles and notwithstanding the enactment of any law of general application regulating the law of insolvency and the winding-up of legal persons, the following matters must be dealt with in accordance with this Act -
Admission and proving of claims against co-operative being wound up
86. (1) Any person who has a claim, excluding a claim against a members' fund, against a co-operative that is being wound up, must lodge an affidavit with the liquidator -
(4) (a) Any person aggrieved by a decision taken by a liquidator under sub-section (3) in connection with that person’s claim may within 30 days after being notified of that decision appeal to the registrar against such decision.
(b) The registrar may, after consideration of the grounds of the appeal and the liquidator's reasons for his or her decision, confirm the decision or set the decision aside and order the liquidator to admit the claim or to admit it to the extent determined by the registrar.
(5) A member who does not want his claim against a members' fund to proceed must inform the liquidator in writing thereof.
(6) The provisions of this subsection do not prevent a creditor from proving a claim in any court.
87. (1) A distribution account must provide for any residue remaining after the payment
of any claims that are secured in law or that are proved, to be applied according to the provisions of this section.
(2) The residue referred to in sub-section (1) must in the first place be applied in paying back the paid-up share capital of the co-operative to members of the co-operative.
(3) If the residue is less than the paid-up share capital, the amount to be paid to a member out of the residue must bear the same ratio to the amount of the residue as the paid-up value of the member’s shares bear to the paid-up share capital.
(4) If the residue exceeds the paid-up share capital, the balance remaining after the paid-up share capital has been paid back must, subject to sub-section (7), be allocated to the members of the co-operative -
(5) The patronage proportion referred to in sub-section (4)(a) must be determined with reference to the shorter of –
(6) For the purposes of sub-sections (4) and (5) -
(7) If the constitution of a co-operative provides that an amount must be paid to any particular person or for any particular purpose in the event of the co-operative being wound up, the balance referred to in subsection (4) must in the first place be applied for the payment of such an amount.
88. (1) A contribution account must provide for the recovery of contributions from such persons as are liable for the payment thereof.
(2) A contribution account must, in respect of each contributory, indicate the ground on which he or she is liable for the payment of contributions, the amount for which he or she is liable and the contribution to be paid by him or her in terms of that contribution account and, in the case of a second or later contribution account, the contribution recovered from him or her in terms of a previous contribution account.
Circumstances in which co-operatives may be placed under judicial management
89. (1) The High Court may grant a judicial management order in respect of a co-operative, when that co-operative by reason of mismanagement or for any other cause -
(2) An application to the High Court for a judicial management order in respect of a co-operative may be made-
(3) When an application for the winding-up of a co-operative is made to the High Court and it appears to that Court that if the co-operative concerned is placed under judicial management the grounds for its winding-up may be removed and that it will become a successful concern, and that the granting of a judicial management order would be just and equitable, such Court may grant such an order in respect of that co-operative.
Transitional provisions relating to the judicial management of co-operatives
90. The judicial management of a co-operative shall be regulated in accordance with a law of general application to be enacted regulating the law of insolvency and the winding-up of legal persons, including co-operatives. Pending the enactment of such a law, the provisions of Chapter 11 of the Co-operatives Act, 1981 (Act 91 of 1981) shall apply, notwithstanding its repeal in terms of this Act.
ADMINISTRATION OF THIS ACT
The registrar of co-operatives
91. (1) The Minister –
(2) The registrar may, from time to time, delegate any power conferred upon the registrar by or under this Act, to any officer in the public service.
(3) A delegation under sub-section (2) does not prevent the exercise of the relevant power by the registrar himself or herself.
Seal and official stamp of registrar
92. (1) The Minister must determine a seal of office for the registrar, which must be placed on the registration certificate of co-operatives and in so far as it may be required in terms of any provision of this Act or otherwise as prescribed, on any other document issued by the registrar in terms of this Act.
(2) The placing of the seal of the office of the registrar will be judicially noticed in evidence.
Register of co-operatives to be kept by registrar
93. (1) The registrar must keep a register to be known as the register of co-operatives in the prescribed manner, in which particulars of all registered co-operatives are entered.
(2) The register of co-operatives or any extract or a copy of that register signed by the registrar is, on the face of it, proof of the particulars contained in the register.
Publication of de-registration
94. The registrar must publish the names of any co-operative that is deemed to be de-registered by virtue of paragraph (a) of section 32, or that is removed from the register in terms of section 93 in a publication generally available to the public in the area(s) where the majority of the members live.
Submission to registrar
95. Any documentation or information that a co-operative is required to submit to the registrar must be submitted in such form and manner as may from time to time be prescribed.
Inspection of documents
96. (1) A person who has paid the prescribed fee is entitled to examine any document a co-operative has sent to the registrar as required in terms of this Act, except a report relating to transactions between a co-operative and its members, and to make copies of it or take extracts from it.
(2) The registrar must on receipt of a written application accompanied by the prescribed fee, provide any person with a copy, extract, certified copy or certified extract of any document a co-operative has sent to the registrar as required in terms of this Act, except a report relating to transactions between a co-operative and its members.
Form of records kept may be prescribed
97. The registrar must keep records in such form, system or device as may from time to time be prescribed.
Investigation by the registrar
98. (1) The registrar may order an investigation into the business of a co-operative, if the
registrar has reason to believe that the co-operative is not conducting its affairs in accordance with co-operative principles or contravening any provision of this Act.
THE CO-OPERATIVES ADVISORY BOARD
Establishment of co-operative advisory board
99. The Co-operatives Advisory Board ("Advisory Board") is hereby established.
Functions of Advisory Board
100. (1) The functions of the Advisory Board are to advise the Minister generally, and to
make recommendations, with regard to -
(2) Subject to the laws governing the public service, the Minister must provide the Advisory Board with the staff that the Minister considers necessary for the performance of its functions.
(3) The expenses of the Advisory Board are to be met by money appropriated by Parliament for that purpose and which is subject to auditing by the Auditor General.
Members of Advisory Board
101. (1) The Minister must appoint as members of the Advisory Board five persons
capable of representing the interests of co-operatives in the Republic.
(2) The Minister must designate one of the members of the Board as chairperson.
Term of office and conditions of service of members of Advisory Board
102. (1) The Minister must determine:
Meetings of Advisory Board
103. (1) The Advisory Board may make rules in relation to the holding of, and procedure at, meetings of the Advisory Board, which rules are subject to the approval of the Minister.
104. The Advisory Board may hold public hearings at which co-operatives or interested parties may make oral representations on any matter it is considering in terms of this Chapter.
105. (1) Subject to the provisions of the Promotion of Access to Information Act, 2000, a person commits an offence by disclosing information obtained by that person in performing any function contemplated in this Act except –
(2) Any person who knowingly makes or assists in making a report, return, notice or other document to be sent to the registrar or any other person as required by this Act that contains an untrue statement of a material fact or a material omission is guilty of an offence.
(3) Any person convicted of an offence under this Act is liable to imprisonment for a period not exceeding 24 months or to a fine or both such fine and such imprisonment.
Appeal to the Minister
106. (1) Any person may appeal to the Minister on any decision of the registrar.
(2) An appeal in terms of this section must be delivered to the Minister within 30 days of receipt of the registrar’s decision.
Exclusion of insurance legislation
107. The provisions of the Long-term Insurance Act, 1998 (Act No.52 of 1998) do not apply to co-operatives in respect of their activities in so far as they relate to a scheme or arrangement in terms of the constitution of the co-operative under which the amount of the benefits afforded by such scheme or arrangement is not guaranteed and the liability to the amount standing to the credit of a fund is specially maintained in respect of such claim.
108. The Minister may make regulations with regard to any matter that is necessary or expedient to prescribe in order to give effect to the purpose and provisions of this Act to ensure the proper implementation of this Act, including -
Delegation by Minister of his or her powers under this Act
109. (1) The Minister may delegate any power conferred upon the Minister by or under this Act, to the registrar, or any officer in the Public Service, except the power to make regulations.
(2) A delegation under subsection (1) will not prevent the exercise of the relevant power by the Minister himself or herself.
110. (1) Subject to this section and notwithstanding the repeal of the Co-operatives Act, 1981 (Act 91 of 1981), a co-operative registered in terms of that Act may continue to operate as if that Act had not been repealed, except that any reference in that Act to –
(a) the Registrar of Co-operatives must be read as a reference to the registrar appointed in terms of section xx of this Act;
(b) the Minister of Agriculture must be read as a reference to the Minister of Trade and Industry in this Act.
(2) A co-operative referred to in subsection (1) must, within three years of this Act coming into effect, -
(3) On receipt of an application in terms of sub-section (2)(b) the registrar must –
(4) A directive issued in terms of paragraph (b) of subsection (3), may stipulate a time within which the co-operative must comply with the directive.
(5) The registrar may require a co-operative that fails to comply with a directive issued in terms of subsection (3)(b), or which fails to comply with subsection (2), to -
(6) This Act, rather than the Co-operatives Act, 1981 will apply in respect of a co-operative from the earlier of –
(a) the date on the certificate issued in terms of sub-section 3(a);
(b) three years after this Act comes into effect.
Repeal of laws and savings
111. (1) Subject to subsection (2) the laws specified in Schedule 4 are repealed by this
(2) Anything which could have been done under the provisions of the laws repealed by subsection (1) and which could be done under the provisions of this Act, is deemed to have been done under this Act.
Short title and commencement
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.
SPECIAL PROVISIONS RELATING TO CERTAIN KINDS OF CO-OPERATIVES
PART 1. HOUSING CO-OPERATIVES
Application of this schedule
1. (1) This Part applies to housing co-operatives which must -
Constitution of a Housing Co-operative
3. In addition to the other requirements of this Act, the constitution of a housing co-operative must include the following provisions -
4 (1) A use agreement must be concluded between a primary housing co-operative and each of its members.
(2) A use agreement must set out the terms and conditions on which the member occupies a housing unit.
Termination of membership
5. Notwithstanding any other provisions of this Act, the membership of a member of a primary housing co-operative may be terminated without a special resolution of the members, in accordance with the following provisions:
(1) If a member is in arrears with payments due in terms of a use agreement and is served with a written notice to pay those arrears by a date specified in the notice, that member’s membership will terminate automatically upon failure to effect payment by the date so specified.
(4) A member whose membership is terminated in terms of sub-item (3) may appeal to a general meeting, within a time limit prescribed in the constitution.
(5) A decision of the directors to terminate the membership of a member is confirmed if the members, at a duly called general meeting, do not reverse the directors’ decision.
(6) If a general meeting is duly called to consider the appeal of a terminated member and a quorum of members is not present, the decision of the directors is deemed to have been confirmed.
(8) Once a person no longer has a right to occupy a housing unit, the co-operative may regain possession by consent or by obtaining an order of court from a Magistrate’s Court to evict that person.
(9) Nothing in this section precludes the board of directors of a primary co-operative from entering into an agreement with a secondary housing co-operative that the secondary housing co-operative will manage on behalf of the primary co-operative –
6. The provisions of the Share Block Control Act, 1980 (Act 59 of 1980) shall not apply to a housing co-operative registered in terms of this Act.
PART 2. WORKER COOPERATIVES
Application of this Part
1. (1) This Part applies to worker co-operatives which must –
Requirements of constitution
3. (1) In addition to the other requirements of this Act, the constitution of a worker co-operative must provide that:
(2) The constitution of a worker co-operative may provide:
Termination of membership
4. (1) Notwithstanding any other provisions of this Act, the constitution of a workers’ co-operative may give the directors the power to terminate the membership of a member if there is good reason to do so.
(b) reasons for the proposed termination which, in the case of a member that
has served a period of probation, must relate to the conduct or capacity of
the member to carry out his duties, or to the operational requirements of the
(3) A member whose membership is terminated by the directors must have a right to appeal to a general meeting, which right must be exercised within the time limit prescribed in the constitution.
(4) A decision of the directors to terminate the membership of a member is confirmed on appeal, if the members, at a duly called general meeting, do not reverse the directors’ decision.
(5) If a general meeting is called to consider the appeal of a terminated member and a quorum of members is not present, the decision of the directors is deemed to have been confirmed.
5. (1) A temporary lay-off of a member does not result in termination of that member’s membership.
(2) If a member is laid off and two years have elapsed since the date of the lay-off without the member having resumed employment with the co-operative, the board of directors may, in accordance with the constitution, terminate the membership of the member.
(3) The provisions of sub-items (2) to (6) of item 4 apply to the termination of a member’s membership in terms of this item.
Application of labour legislation
6. (1) A member of a workers’ co-operative is not an employee as defined in terms of the Labour Relations Act,1995 (Act 66 of 1995) and the Basic Conditions of Employment Act, 75 of 1997.
(2) Notwithstanding subsection (1), for the purposes of the Acts listed in this sub-
section, a workers’ co-operative is deemed to be the employer of its members who work for the co-operative -
PART 3. FINANCIAL SERVICES COOPERATIVES
Application of this part
1 (1) This part applies to financial services co-operatives in addition to the requirements of
(2) A financial services co-operative is a co-operative whose main objective is to provide
financial services to its members, and includes a credit union, co-operative bank,
savings and credit co-operative or other financial services.
Requirements of Constitution
2. (1) In addition to the other requirements of this Act, the constitution of a financial
services co-operative must specify the financial services the co-operative provides to its members, which may include the following:
(2) The co-operative must not receive deposits from the general public or any person who is not a member.
3. A financial services co-operative that to which legislation governing co-operative banks applies is required to register in terms of the Banks Act, 1990 (Act 94 of 1990) notwithstanding its registration in terms of this Act.
Establishment of a self-regulatory body for financial co-operatives
4. (1) The Registrar may, in conjunction with the Registrar of Banks, direct that
all co-operatives to whom this part applies belong to a secondary co-operative that is accepted by the Registrar of Banks as representing a self-regulatory body, in compliance with the requirements for exemption from the provision of the Banks Act.
(2) The Registrar has the power to de-register any co-operative to whom this part applies that refuses or fails, within a reasonable period of time, to become a member of a secondary co-operative that meets the requirement of the Registrar of Banks to be a self-regulatory body.
5. The Minister may, in consultation with the Department of Finance, make regulations
regarding any matter relating to the operation or administration of financial services co-
PART 4. AGRICULTURAL CO-OPERATIVES
Application of this part
1. (1) This Part applies to agricultural co-operatives which must -
2. The name of an agricultural co-operative must include the following words:
Objectives of an agricultural co-operative
3. (1) The main objectives of a primary agricultural co-operative must be one or more of the following -
(2) The main objectives of a secondary agricultural co-operative are to -
Security for production credit and loans
4. (1) A co-operative retains ownership in respect of any debt owed to it by a farmer or member if the debt arises from any transactions related to farming or agricultural purposes, including the provision of the following:
For the purposes of this part –
"agricultural product" means any article derived from farming operations and any product derived from the processing or manufacturing of that article, and declared to be an agricultural product from time to time by the Minister responsible for agriculture by notice in the Gazette.