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The End of the 50% Rule as We Know It

1 minute read

At long last it appears the Provincial government is going to make some much needed changes to the Co-operative Corporations Act (the “Act”).

Bill 138 is intended to amend certain provisions of the Act.  Perhaps the most prominent change is to the business with members or “50% Rule”.

The Bill, if and when passed, will not result in the abolition of the 50% Rule.  Variations of the Rule will still apply to housing and worker co-operatives.  However, for other types of co-operatives the co-operatives can include provisions in either their articles or by-laws to provide the co-operative may conduct less than 50% of its business with non-members.

I recommend that every co-operative business should review whether or not they believe the 50% Rule is something they should be bound by and, if not, their articles and/or by-laws would be amended accordingly.

The removal of the “business with members” rule should reduce costs for co-operatives in keeping track of compliance with the Rule and reduce audit costs because auditors would no longer be required to comment on compliance in their audits.  It should also open up the opportunity for new co-operatives, particularly in the retail sector.  I believe people would still be interested in becoming members of a co-operative regardless because they would be entitled to exercise their democratic rights with respect to governance of the co-operative as an owner and be eligible to receive patronage for the business they do with the co-operative.

A further analysis of Bill 138 will follow in another edition of “Building Success”.

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Ian D. Shewan

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