Author: Mim Dineen
Your community group is now well established and the nature of your project is outlined and progressing. How do you now move from being a community group to a renewable energy co-operative or company?
Establishing a steering committee from within the community group is a good way to manage this transition. What are the steps? What resources are available? Find out all the details in this article.
Why change from an association?
Most groups start out as incorporated associations. This structure gives the protection of a legal entity with a minimum of requirements. The simplicity to recruit members is a key benefit. Having an established membership is a powerful tool when lobbying for funding, during community engagement and working on your planning application.
It is not possible to raise capital through members of an association. When it's time to ask members to become shareholders and invest their own capital, a co-operative or corporation gives more robust governance and regulations.
When is the right time?
Becoming a co-operative too early might detract from the initial tasks of developing support and engaging the community. Forming a co-operative takes consideration and it is best to be clear on the nature and feasibility of the project.
It is essential to have formal governance so you can start capital raising. Don't let the formation of the co-operative and capital raising delay the project. Once a co-operative is formed, an extensive disclosure document will be required to attract shareholders. The development of this offer document alone can take months and requires rigorous financial modelling.
Making the transition
It can be a big shift in responsibility from a community group to raising capital in the millions, and having shareholders, directors and employees. Preparing a governance plan will outline your compliance and contract implications and not delay the project.
The initial community group could continue it's role under the association, whilst creating a separate, specific renewable energy co-operative, trust or corporation. This transition should include a handover of any existing contracts. Create clear legal divisions between the two entities through obvious differences in name and identity.
The formation of a co-operative or company can detract from project development. The use of a steering committee will ensure this transition is planned, considered and that all legal requirements are met.
Using a steering committee
Forming the steering committee
A community meeting is a good way to form a steering committee. By making this governance step public, you can show the project has direction and is really going to happen. It also gives a chance to update the community and maintain enthusiasm.
It's an excellent call for action for both existing and potential members. A steering committee may identify community members that aren't yet being utilised and identify possible co-operative/company directors.
It is essential to have at least two of the association committee members also on the steering committee for project knowledge and ensure consistency in objectives and approach.
Identify tasks and steps required
The tasks of the steering committee should be specific and easy to achieve. Some tasks for transition may include:
- research and/or recommend the appropriate legal structure
- research the statutory requirements such as the Co-operatives Act or Corporations Act
- draft rules
- recruit director nominees
- prepare and run the formation meeting.
Be realistic about what can be done, what the timeline is and set dates for important stages such as finalising rules and a formation meeting.These topics will be discussed in more detail below.
Skills and resources
There are bound to be members of your community with the skills and expertise that are required to drive these activities. You may not have people with specific knowledge of co-operatives or corporations law, however there are resources available to help community groups through this process.
Skills that are of benefit on a steering committee include:
- the capacity to consider statutory regulations and future implications
- experience in co-operatives, trusts or large business development
- legal background
- accounting and financial expertise especially when investigating legal structures and the implications on capital raising
- the capacity to identify, engage and recruit board nominees from within the community.
Researching alternative legal structures
Some groups may have a clear direction for what legal structure they will establish. Read Determining the right legal structure for more information. Be clear if the steering committee are to make the final decision or to report back to the association committee.
Statutory requirements
The co-ops and corporations acts are rigorous legal constitutions. It is not realistic to research and know them in full. It is however important to consider sections of the act that relate to any planned changes from the model rules.
Resources are available from the relevant government agencies including a guide to forming a co-operative. There are also other community based co-operative resources and lawyers that specialise in co-operatives law.
Co-operative rules
All states and territories have a set of model rules that can form the basis for a new co-operative. As a rule, it's best to only make changes deemed essential for the purposes of your group. For example, you may wish to increase the maximum number of directors from five to nine to ensure there are adequate resources for a hands-on board. Many of the model rules are based on the Co-operative Act and require detailed consideration before changes are made.
It is best to seek legal advice that understands the Co-operatives Act for any deviation from the model rule. Be specific with your request for counsel. Word the suggested change, provide an explanatory note and ask if there is anything in the act that would impact on the rule change.
For example, Hepburn Wind made only five initial modifications to the model rules, however required a further five changes after two years of operating to better meet the needs of a wind farm co-operative.
The draft co-operative rules must be submitted to the co-op registrar before a formation meeting can occur.
Recruiting director nominees
Your project could be several years old by the time you are ready to form a co-operative board. It is important to maintain deep project history and stability in leadership so your director nominees will most likely come from the existing association committee with some new players.
Advertise through the local media, through the existing group's database and through associated groups such as other local sustainability pioneers. It is essential to advertise these exciting new positions, but to also actively recruit from within your community and networks. Attributes for effective directors include:
- well established community links, varied across the directors
- expertise in a key area such as legal, accounting, technical
- willingness to represent the needs of the community
- ability to consider options and implications
- have links or reside local to the project site
- willingness to be active in street stalls, community engagement.
Invite interested directors to information nights. Running more than one of these increases the capacity for attendance and enables new people to get to know the community group and project. Ensure nominees are realistic about the nature of the role and are self driven and not just strongly encouraged.
The co-operative formation meeting
The formation meeting cannot occur until 28 days after the proposed rules have been submitted to the co-operatives registrar. When sending out the meeting agenda, include a bio on each director nominee.
The co-operative formation meeting is a statutory requirement and the agenda must include:
- Appointing a chair and secretary for the formation meeting (this should be preplanned but approved by the proposed members)
- Application for membership
- Nomination of directors
- Approval of the proposed rules that include the minimum share value and membership application
- Nomination for initial roles including secretary, chair of the board and a person to liaise with the co-operatives registrar (may be secretary).
To form the co-operative, there must be a minimum of five members who have subscribed to the minimum shares as per your rules.
This formation meeting should be advertised amongst your community group members. You may wish to keep it to just this group rather than becoming a full public meeting. The founding members are a pivotal group in supporting the formation, however, broader membership may be best delayed until the details of the capital raising and share offer are completed.
The method for voting is at the discretion of the group. It is best to keep it simple such as first over the post, with any draw being re-voted.
In the meeting agenda allow for an initial project introduction that includes the nature of the co-operative, the role of the directors and the initial tasks of the new board such as capital raising or contract consideration. Give each nominee a set time limit such as two minutes to present, this will also help with planning the meeting duration.
Allow and prepare attendees for at least a two hour meting. Try to create a welcoming environment with your location and adequate catering.
Read Co-operative formation and initial capital for more information.
More information
Business Council of Co-operatives and Mutuals
Justice Connect
Board building