Incorporating your cooperativeReader Rating: 2.50Star

Policy Statement 17.1

Note

You are providing information required by the Coop Act. Note that both the Coop Act and the Privacy Act allow this information to be disclosed to the public. It will be stored in personal information bank number IC/PPU-049.

This policy is intended only as a guide; it does not replace or take precedence over the Coop Act.


Table of Contents

What is a cooperativeFootnote 1?

It is an enterprise, or business, owned by an association of persons seeking to satisfy common needs (access to products or services, sale of their products or services, employment, etc.). This association includes one or more kinds of users or stakeholders of the enterprise:

  • consumers who use the enterprise to acquire products or services (such as a retail, housing, health-care or day-care cooperatives);
  • producers (such as independent entrepreneurs, artisans, or farmers) who use the enterprise to process and market the goods or services they have produced, or to buy products or services necessary to their professional activities;
  • workers who use the enterprise to secure their employment and control their working conditions.

Cooperatives operate democratically (one person, one vote) through two bodies:

  • general meeting of the members or delegates, and
  • the board of directors composed of at least two-thirds members elected at a general meeting.

If the cooperative uses delegates, the delegate structure may reflect the size of the organization or the distance covered by the cooperative and may include more than one delegate for each organization or territory represented.

The cooperative's start-up capital usually comes from cooperative shares purchased by members. Federal cooperatives, however, can raise capital by issuing investment shares to members or non-members. Each member's liability is limited to the amount of his or her share in the capital. Each member has only one vote regardless of his or her capital contribution.

How is a cooperative different from other businesses?Footnote 2

How is a cooperative different from other businesses?
Cooperative business Investor-owned business Non-profit organization
Ownership
The share is listed in the member's name. Generally, a share carries no name. Unless registered, it belongs to the bearer. There is no ownership. Members are taken on (or membership accepted) when they agree to pay annual dues conferring member status, or a one-time membership fee.
In general, a membership share may not increase in value. It can usually only be redeemed by the coop at its par value. Some legislation allows for investment shares (non-par value) to members and/or non-members. A common share may increase in value. A shareholder may sell his or her shares to another person at an agreed upon price. Anyone may become a member, whether or not they use or benefit from the services provided by the organization, as long as they support the purpose of the organization.
Member's responsibility is limited to the amount of the shares he or she holds. Shareholder's responsibility is limited to the value of the shares he or she holds.
Voting
A member is entitled to only one vote at a general meeting, regardless of the number of shares he or she holds. A shareholder is entitled to a number of votes, equivalent to the number of shares he or she holds in the company. Generally, one person, one vote. Delegates or proxies may be used depending on the governing legislation.
Some cooperatives with a large and dispersed membership have a delegate structure for representing members (e.g., one delegate represents multiple members from a geographic district).
No proxy voting allowed. A shareholder may obtain a proxy to vote for other shareholders.
Holders of investment shares have restricted voting rights.
Sharing in the Surplus
Cooperative legislation may limit or prohibit the payment of interest on share capital. There is no limit on share dividend.
Surpluses may be paid into the reserve or to members in the form of patronage returns proportional to the business done by each member with the cooperative. Profits may be distributed in the form of dividends according to the provisions for each class of shares, or reinvested in the company. The value of shares reflects the net value of the corporation. Surpluses do not belong to individual members but to the organization. They may, therefore, not be redistributed among the members but must be returned in full to the indivisible general reserve of the organization.
Some legislation allows cooperatives that issue investment shares to allocate part of their surpluses as dividends on those shares.
Some provincial legislation may stipulate that a cooperative's general reserve is indivisible, or divisible in whole or in part. Shareholders may dispose of all of the assets of the business in accordance with certain legislative provisions.
Some cooperatives, such as housing, health and day-care cooperatives are structured as non-profit entities. Surpluses are not distributed to members.
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Can I operate as a cooperative3?

According to the Canada Cooperatives Act (Coop Act), the federal legislation governing cooperatives, to incorporate as a cooperative, your business must be organized and operated on a cooperative basis, as set out in section 7 of the Act. The definition of "cooperative basis" is based on principles laid out in the Statement of Cooperative Identity adopted by the International Cooperative Alliance in 1995.

A proposed federal cooperative under the Coop Act would be organized on a cooperative basis if it had the following features (for more detailed information, please refer to section 7 of the Coop Act):

  • open membership
  • one member, one vote
  • no proxy voting for members
  • limited interest on member loans
  • limited dividends on membership shares
  • to the extent feasible, members provide capital
  • distribution of surplus funds to develop the business, improve common services, provide reserves to pay interest on member loans, dividend on membership shares and investment shares, for community welfare or distribution among members as a patronage return; and
  • cooperative education

Further, a proposed federal cooperative wishing to incorporate under the federal legislation must be carrying on its business in two or more provinces and/or have a fixed place of business in more than one province. Under the Coop Act, at least 3 persons are required to incorporate a cooperative and they must be at least eighteen years of age, of sound mind and not a bankrupt. One or more federation(s) of cooperatives can also incorporate a cooperative.

What does incorporation mean?

The act of incorporating means that the cooperative becomes a legal entity. This means that the cooperative has the same rights as a natural person: it can acquire assets, go into debt, enter into contracts, etc. The act of incorporation limits the liability of a cooperative's members. As a general rule, members are not liable for a cooperative's debts. Finally, raising capital is easier for incorporated entities than for others.

What documents must I submit?

An application for incorporation must include:

  1. Form 3001: Articles of Incorporation (PDF Version, 857 KB, 4 pages)
  2. Statutory Declaration (See Annex A)
  3. A NUANS Name Search Report for the proposed name that is not more than 90 days old. If you have received prior approval of the name, attach a copy of the letter from Corporations Canada approving your name along with the copy of the NUANS Name Search Report
  4. Form 3003: Notice of Registered Office (PDF Version, 445 KB, 2 pages)
  5. Form 3006: Notice of Directors (PDF Version, 440 KB, 2 pages)
  6. the filing fee

Note that you do not need to use these pre-printed forms but that the documents used must conform closely to the forms.

Once approved by the Director, Corporations Canada issues a certificate of incorporation and the cooperative is entered on the corporate register.

Statutory Declaration

Your application must include a statutory declaration signed by the incorporators stating that, after incorporation, the cooperative will be organized and operated and will carry on business as a cooperative. The declaration must also state that the information contained in Form 3003 and Form 3006 filed with Form 3001- Articles of Incorporation must meet the requirements of the Act.

Non-profit housing cooperatives must also submit a declaration signed by the incorporators stating that, after incorporation, the cooperative will comply with Part 20 of the Act

Worker cooperatives must also submit a declaration signed by the incorporators stating that, after incorporation, the cooperative will comply with Part 21 of the Act.

Bilingual Name

If your cooperative intends to carry on business in a region or regions where both English and French are spoken, you may wish to consider adopting a bilingual name.

The procedure is the same as for a unilingual name, except that one NUANS Name Search Report is required for each name or variation requested. For example, two NUANS Name Search Reports must be filed in order to verify that the phonetically dissimilar English and French forms of a name are both distinctive.

Name Pre-approval

Corporations Canada offers a service where you can get pre-approval of your cooperative name before filing your Articles of Incorporation. This is recommended as it will avoid unnecessary rejection at the time you file your articles; if a name is not approved, articles will be rejected.

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How to fill out Form 3001 - Articles of Incorporation

Item 1 - Name of the Cooperative

  • The name must include one of the following words: "cooperative", "coop"; "coopérative"; "cooperative"; "united"; "pool" or "co-op". The same word must be used in both the English and the French forms of the name.
  • If the cooperative is a non-profit housing cooperative, paragraph 353(a) of the Act stipulates that its name must include the words: "non-profit," "not-for-profit," "not for profit," "sans but lucratif" or "à but non lucratif"; and "housing cooperative," "housing cooperative," "housing co-op," "coopérative d'habitation," "coop d'habitation," "co-op d'habitation," "coopérative de logement," "coop de logement" or "co-op de logement."
  • If the cooperative is a worker cooperative, section 361 of the Act stipulates that its name must include one of the following terms: "worker cooperative," "worker cooperative," "worker co-op," "coopérative de travailleurs," "coop de travailleurs," "co-op de travailleurs," "coopérative de travail," "coop de travail" or "co-op de travail."
  • If the business of the cooperative is restricted by its articles or by a resolution of its members to a specific business purpose, the cooperative must have as part of its name one or more words that suggest the nature of the restriction.

Item 2 - Municipality and Province of the Registered Office

  • The articles should specify (i) a city or a municipality and (ii) a province within Canada. (Do not specify a street address.)
  • The information provided here must be the same as the one provided in item 3 of Form 3003: Notice of Registered Office.

Item 3 - Number of Directors

  • The number can be fixed or a minimum and a maximum can be stated.
  • The minimum number of directors is 3. At least 25 percent of the directors must be resident in Canada. However, where the cooperative will only have 3 directors, at least one must be resident in Canada. [Subsection 76(1)].

Item 4 - Restrictions on the Business of the Cooperative

  • Mandatory for Housing Cooperatives: The articles state that the business of the Housing Cooperative is restricted to that of primarily providing housing to its members[Section 353(b)].
  • Other Cooperatives: Set out any restrictions on the business you want the cooperative to have. If there are no restrictions, mark "none".

Item 5 - Restrictions on the Classes of Membership

  • Mandatory for worker cooperatives: Ensure that the articles state the following:
  • No person may be admitted to membership unless the person is an individual and an employee of the cooperative [Subsection 359 (2)(a)].
  • The maximum membership investment payable by a person to be a member should not exceed more than fifty per cent of their expected annual salary during the first year of their membership, unless an amount in excess of that amount is also paid equally by all persons who are members [Subsection 359 (2)(b)].
  • Other cooperatives: Set out any restrictions on membership you may want the cooperative to have. If there are no restrictions, mark "none".

Item 6 - Membership Share Capital and Member Rights

A cooperative may be incorporated with or without membership shares [Section 9].

Incorporated without membership share capital

Incorporated without membership share capital
For cooperatives: The articles must state that:
where every member has only one vote (i.e., not federations or with members that are cooperative entities, where some members may have more than one vote) There is to be no membership share capital and the interest of each member as a member is the same as that of every other member.
that are federations where members or delegates have more than one vote, or if the cooperative was a former Act cooperative and prior to its continuance permitted members or delegates to have more than one vote. There is to be no membership share capital and, subject to the voting rights set out below for members or delegates, the interest of each member is the same as that of every other member. (Set out the voting rights on the form or in an attachment.)
that would include cooperative entities as members, and such members have more than one vote There is to be no membership share capital and, subject to the voting rights of a cooperative entity, the interest of each member as a member is the same as that of every other member. (Set out the voting rights for members that are cooperative entities on the form or in an attachment.)

Incorporated with membership share capital

Incorporated with membership share capital
Value of shares Number of shares
Non-profit housing cooperatives The cooperative may only issue membership shares on a par value basis [paragraph 354(b)] The articles must state whether the number of membership shares to be issued is limited or unlimited. If limited, the articles must include the maximum number of membership shares to be issued.
All other cooperatives The articles must state whether the shares are set at:
  • par value (the stated value of each share) or
  • no par value.

For cooperatives that do not use par value shares, the articles must state whether the membership shares are to be issued, purchased, redeemed or otherwise acquired at a fixed price or in accordance with a formula. The articles must describe any formulas used.

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Item 7 - Maximum Rate of Return (Optional)

The articles may state the maximum rate of return that may be paid on member loans or membership shares and may provide for the amount and payment schedule of the loans (with or without interest).

Item 8 - Distribution of Property in case of Dissolution (Optional)

Housing Cooperatives
Restriction: Housing cooperatives must distribute their assets among one or more non-profit housing cooperatives, cooperatives incorporated in a province that have similar objectives and limitations, or a specific charitable organization. [section 354(e)].
Worker Cooperatives
Note: Unless otherwise provided in the articles, at least 20 percent of the surplus must be distributed to another cooperative, a non-profit entity or a charitable entity after payment of its liabilities but before any distribution is made to a member or shareholder.
All Cooperatives
Subject to the above restrictions respecting non-profit housing and worker cooperatives, the articles of a cooperative may provide for distribution or disposal of a cooperative's property on dissolution of the cooperative, including distribution:
  1. among the members at the time of dissolution, in any manner, including equally among the members irrespective of the number of membership shares or amount of member loans, if any, held or made by a member;
  2. among the members at the time of dissolution on the basis of patronage returns accrued to those members during a stated period before dissolution; or
  3. to charitable organizations or cooperative entities.

The value of such property is determined after the payment of all debts and liabilities, including any declared and unpaid dividends, the amount to be paid to the holders of any investment shares and the amount to be paid on the redemption of membership shares. These distribution schemes are suggestions only; the decision rests with the cooperative. If there is no distribution scheme, mark "none." If no provisions are indicated in the articles, the remaining property of the cooperative is distributed among the members and shareholders, if any, according to their respective rights.

Item 9 - Investment Share Capital

A cooperative may be incorporated with or without the power to issue investment shares [Section 9].

Housing Cooperatives
Restriction: Housing cooperatives may not issue investment shares [Section 354(a)].
Other Cooperatives (Optional)
If the cooperative wants to have an investment share structure, the articles must state it and provide particulars:
  1. whether the investment shares may be issued to non-members;
  2. whether the number of investment shares is to be unlimited and, if not, the maximum number of investment shares that may be issued;
  3. the number of classes of investment shares; and
  4. the preferences, rights, conditions, restrictions, limitations and prohibitions attaching to the investment shares and, if there is to be more than one class, the designation of each class and the special preferences, rights, conditions, restrictions, limitations and prohibitions attaching to each class.

The Coop Act allows investment shares to be issued to members and non-members alike at the discretion of the cooperative. Investment shareholders have no right to vote at a meeting of a cooperative unless the articles specifically give them the right to vote and only in the following limited circumstances set out in the Act [subsections 124(2) to 124(4)]: the articles can give non-member investment shareholders the right to elect up to 20 percent of board members; that when the cooperative wants to change its structure in a way that affects investment shareholders, the Act gives shareholders the right to vote on those proposed changes.

These provisions are designed to provide more flexibility in the way cooperatives may raise capital and provide safeguards for investment shareholders, while keeping the control of the cooperative in the hands of the members.

Item 10 - Restrictions on Powers of Directors to Manage (Optional)

Include any provision by which members, other than by means of a unanimous agreement, restrict the powers of directors to manage the business of the cooperative. The powers may be restricted in whole or in part. If there are no restrictions, mark "none".

Item 11 - Other Provisions (Optional)

The articles may include any other provision permitted by the Act to be set out in the by-laws which members feel is necessary to be set out in the articles rather than in the by-laws.

Items 12/13 - Statements

These statements are required by the Act and are pre-printed on the form.

How to fill out Form 3003: Notice of Registered Office

Item 4 - Indicate the full address of the registered office.

The address must be within the municipality and province specified in Item 2 of Form 3001: Articles of Incorporation.

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How to fill out Form 3006: Notice of Directors

Item 3 - New Directors or Change of Address

  • Membership Requirement: Not less than two thirds of the directors or any greater proportion that is provided for by the articles must be:
    1. Members of the cooperative;
    2. Representatives of members that are legal entities; OR
    3. Members of cooperatives who are members [Section 77].
  • Note that up to one third of the directors may be non-members. For worker cooperatives, at least 80 percent of the directors must be members that are employees of the cooperative.
  • Directors have to be elected by the members, except where the cooperative chooses to allow directors to be elected by the investment shareholders [Subsection 78(5)]. Note that not more than 20 percent of the directors may be elected by investment shareholders who are non-members.
  • Residency requirement: At least 25 percent of directors must be resident in Canada. If the cooperative has only three directors, at least one director must be resident in Canada [Subsection 78(4)].

Item 4 - Directors being Removed

List the names of all individuals who are no longer directors.

By-laws

The by-laws do not need to be submitted when submitting a request for incorporation. The by-laws are nevertheless very important to the cooperative as they are the internal governance rules adopted for the cooperative.

The Act requires the by-laws to cover at least the following areas (section 15):

  • qualifications and procedures for acceptance of members;
  • rights of joint members, if any;
  • rights and obligations of members and, if any, auxiliary members;
  • transfer or assignment of members' interest;
  • selection, qualifications and term of office of directors;
  • distribution of any surplus earnings;
  • definition of any agency relationship the cooperative has with its members;
  • conditions of termination of membership; and
  • electronic voting at members' meetings, if permitted.

The by-laws may also address:

  • representation by delegates;
  • classes of membership;
  • dispute resolution process; and
  • any other matter that the members consider necessary or desirable.

In addition to the above, the by-laws of non-profit housing cooperatives and worker cooperatives must include certain provisions. Refer to section 355 of the Act for non-profit housing cooperatives and section 360 for worker cooperatives.

Related Information

How do I file my application?

What happens after I submit my application?

How to Reach Cooperatives Policy (formerly the Cooperative Secretariat)

For more information on cooperatives, you may also want to contact Cooperatives Policy at Industry Canada (formerly the Cooperative Secretariat with Agriculture and Agri-Food Canada):

Cooperatives Policy Strategic Policy Branch, Strategic Policy Sector Industry Canada 235 Queen Street Ottawa, Ontario K1A 0H5 Telephone: 613-954-5031 Toll-free: 1-800-328-6189 Fax: 613-954-2340 By Email: info@ic.gc.ca TTY (for hearing impaired): 1-866-694-8389
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Annex A — In the matter of the Canada Cooperatives Act and in the matter of an application

(Name of Applicant Cooperative)

Statutory Declaration

We, the undersigned, Do Solemnly Declare that:

  1. We are the incorporators of space to insert full cooperative name (the "Cooperative") and we have personal knowledge of the matters herein deposed to.
  2. The information contained in forms 3003 and 3006 filed with the articles of incorporation meets the requirements of the Act.
  3. Choose one of the following statements:
    • After incorporation, the Cooperative will be organized and operated and will carry on business on a cooperative basis.
    • (For non-profit housing cooperatives)

      After incorporation, the Cooperative will be organized and operated and will carry on business on a cooperative basis and the Cooperative will comply with Part 20 of the Canada Cooperatives Act.

    • (For worker cooperatives)

      After incorporation, the Cooperative will be organized and operated and will carry on business on a cooperative basis and the Cooperative will comply with Part 21 of the Canada Cooperatives Act.

And we make this solemn declaration conscientiously believing it to be true, and knowing that it is of the same force and effect as if made under oath and by virtue of the Canada Evidence Act.

(This declaration must be signed by all the incorporators of the Cooperative.)

Declared before me at the
City of space to insert city,
in the Province of space to insert province,
this space to insert day day of space to insert month, 20space to insert year.

space to insert signature
(signature of incorporator)

space to insert signature
A Commissioner, etc.

Declared before me at the
City of space to insert city,
in the Province of space to insert province,
this space to insert day day of space to insert month, 20space to insert year.

space to insert signature
(signature of incorporator)

space to insert signature
A Commissioner, etc.

Declared before me at the
City of space to insert city,
in the Province of space to insert province,
this space to insert day day of space to insert month, 20space to insert year.

space to insert signature
(signature of incorporator)

space to insert signature
A Commissioner, etc.

Annex B — Glossary of Terms

Articles lay out the general framework of the cooperative. Articles include the cooperative's name, share structure, directors and incorporators. Amendments to the articles require a special resolution of the members and, if investment shares are issued, a separate special resolution of shareholders. A special resolution is one requiring no less than two-thirds of the votes cast. Any amendments must be sent to the Director (see also by-laws).

Bankruptcy is the formal condition of an insolvent person being declared bankrupt under law. The legal effect is to divert most of the debtor's assets and debts to the administration of a third person, sometimes called a "trustee in bankruptcy," from which outstanding debts are paid proportionate to a certain rate. Bankruptcy forces the debtor into a statutory period during which his or her commercial and financial affairs are administered under the strict supervision of the trustee.

A body corporate includes a cooperative, a cooperative entity or any other body corporate wherever or however incorporated.

By-laws are internal to a cooperative. They generally pertain to the rules of operation. Cooperatives can make any by-law they wish, so long as they conform to the Canada Cooperatives Act. If members consider it necessary, they can decide to put in the articles anything that the act allows in the by-laws (see also articles).

A cooperative is a body corporate that is incorporated under the Act and not discontinued under this Act.

A cooperative entity is a body corporate that by the law under which it is organized and operated, must be organized and operated on — and is organized and operating on — cooperative principles.

The Director is the person appointed by the Minister of Industry, under the Canada Cooperatives Act, to administer the act.

An entity is a body corporate, a trust, a partnership, a fund or an unincorporated organization.

A non-profit housing cooperative is formed when people join with each other on a democratic basis to own or control the buildings in which they live. Under the Canada Cooperatives Act, there are certain restrictions pertaining to these cooperatives such as: they may not issue investment shares; they may only issue membership shares on a par value basis; and the property, on dissolution, is to be distributed to other non-profit housing cooperatives.

Par value shares are shares that have a stated face value expressed as a dollar amount per share. Shares that are without par value or "no par value shares" are shares with no stated face value. Member shares can be either par or no par value. If they are no par value, the articles of the cooperative must either state the fixed price or set out the formula to determine the price at which they can be sold or acquired. Under the Canada Cooperatives Act, investment shares must be no par value.

A unanimous agreement is a written agreement among all members and, if investment shares are issued, among all shareholders, that contains a provision restricting the discretion or powers of the directors to manage the affairs of the cooperative or vests the discretion or powers in the members. Members who are vested discretion or powers taken from the directors have all the duties and liabilities, along with the rights and privileges, of the directors.

A worker cooperative is a cooperative whose prime objectives are to provide employment to its members and to operate an enterprise in which control rests with the members. Under the Canada Cooperatives Act, members must be individuals and employees of the cooperative. However, the cooperative can provide employment to non-members as long as at least 75 percent of its permanent employees are members.

Footnotes

Footnote 1

Note that "cooperative" may also be spelled as "cooperative". Corporations Canada has chosen this spelling for consistency with the Act.

Return to footnote 1 referrer

Footnote 2

This information is from the Cooperatives Secretariat information kit entitled "Creating a Cooperative - An Information Guide". To obtain a copy of this publication, you can contact them at the address at the end of this document.

Return to 2 footnote 2 referrer

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