Governance contradictions

Contradictions between the operating model's governance design and Australian co-operative law principles.

Source: docs/website_content/governance_contradictions.csv · Rendered 2026-07-07

Proposal Claim	Legal Reality	Risk Level	Required Action	Source Citations	Source
Shares are tradeable on financial markets and can yield significant capital gains.	Co-operative shares are not tradeable on financial markets. They have a fixed or 'par' value and their value does not fluctuate with the fortunes of the co-operative.	Critical	Correct all promotional literature to clarify that shares are non-tradeable and do not offer capital gains, to avoid misleading statements under the CNL.	[2, 5, 11]	[2, 5, 11]
Fixed financial returns (e.g., 5% dividend, 75% total return over 15 years) and capital return in Year 15.	Co-operatives National Law (CNL) prohibits promising fixed dividends or guaranteed capital returns. Co-operatives may not generally repurchase more than 5% of issued capital in any year, and returns are subject to board discretion and solvency.	Critical	Strip all fixed return and repayment timeline claims. Use placeholder language for capital stack options. Add 'indicative only and not an offer to invest' disclaimers and disclose board powers to refuse repurchases.	[2, 11]	[2, 11]
Issuing shares to external investors who are not active members.	Shares can only be issued to members. Co-operatives require an active ongoing commitment from members to support the primary activities of the entity.	Critical	Mandate that all share applicants also apply for membership and agree to the 'active member rule' defined in the co-operative's rules.	[2, 11, 12]	[2, 11, 12]
The community group has a right to compel the owner to negotiate or accept a bid if it meets the market price.	Under property protections and the CNL, there is no right to buy or pre-emption right; the owner is free to proceed with disposal after the moratorium. Law does not grant power to compel a private sale.	Critical	Clarify in all governance documents and public statements that the 'Right to Bid' is a moratorium period only and does not equate to a 'Right to Buy'.	[2]	[2]
Investors provided a first mortgage over $2.5M+ property as security.	Promising specific security values for an unregistered investment crosses into regulated financial product territory, risking ASIC enforcement and liability. Security structures and debentures must be legally drafted.	Critical	Remove specific dollar values regarding property value and investment security until verified. Commission professional valuation and legal review by a solicitor.	[4, 9, 11]	[4, 9, 11]
Co-operative will hold the liquor licence for the pub.	In Tasmania, liquor licences can only be held by a person (at least 18), not by companies or trusts. The co-operative cannot naturally assume licence control as an entity.	Critical	Reconcile the ownership model with an individual licensee/publican structure; research person/licensee requirements.	[1, 7]	[1, 7]
Community groups can raise funds by residents subscribing for shares in community interest companies (CICs) or community benefit societies.	Australian co-operatives must be registered under the CNL. CICs and CBSs are UK-specific structures. CNL governs share issuance, requiring specific disclosure statements and regulating returns on capital.	High	Specify registration as a co-operative under the CNL. Ensure any share offer complies with Part 3.3 regarding disclosure and entity rules align with Australian legal categories.	[2, 11]	[2, 11]
Any surplus generated by the community venture will be distributed among the local members.	For non-distributing co-operatives, the CNL requires surplus to be applied to primary objects or community purposes. Non-distributing co-operatives are prohibited from paying dividends or distributing assets to members.	High	Determine registration type. If non-distributing, amend rules to include an 'asset lock' or 'non-distribution' clause and remove all claims regarding member dividends.	[2, 5, 11]	[2, 5, 11]
Offering unlimited financial dividends or interest rates exceeding statutory limits.	Dividends are strictly limited by CNL formulas (e.g. 10% above the 10-year Commonwealth Bond rate) and can only be paid from surplus. Non-distributing co-ops are prohibited from paying dividends.	High	Specify the co-operative type and adjust projections to comply with statutory limit formulas and maximum rates permitted by the Registrar.	[2, 11]	[2, 11]
Organizational structure allows a single member to hold 51% of share capital for control.	A member cannot hold more than 20% of the total issued share capital under the CNL.	High	Amend the governance rules to enforce the 20% individual shareholding limit to prevent regulatory breach.	[2, 5]	[2, 5]
Allocating board seats specifically for 'Investor Members' or excluding employee members.	While different classes can elect directors, CNL emphasizes democratic control. Excessive restrictions or quotas may conflict with 'active membership' rights or the 'one member, one vote' principle.	High	Review governance against active membership provisions. Define stakeholder classes and ensure directors act in the interest of the co-operative as a whole.	[2, 12]	[2, 12]
Membership open to 'locals' via a joining fee or free shares.	CNL requires a legally defined 'active membership' obligation. Simply paying a fee or receiving free shares is insufficient; members must maintain an active relationship with the co-operative's activities.	High	Legally define measurable active membership criteria in the rules and validate share issues against CNL Part 2.4 and s144 requirements.	[2, 12]	[2, 12]
Member role separate from day-to-day management.	Standard governance models require a clear distinction between the Board's strategic oversight and operational management to ensure accountability and effective control.	High	Include clear role descriptions in public documents distinguishing member voting rights from management authority to avoid operational interference.	[2, 6]	[2, 6]
Governance handled by an informal unincorporated body of local residents.	An unincorporated body lacks separate legal personality to hold property or enter contracts. Long-term asset management or share issuance requires a legal entity such as a Co-operative.	Medium	Formally incorporate as a co-operative under the CNL to provide a legal structure for asset ownership and financial management.	[2]	[2]
Project neighbours have an equal vote in determining funding allocations.	If 'neighbours' are not formal members, their voting power lacks legal standing. Democratic control is linked to formal membership under CNL s156.	Medium	Define 'neighbours' as a specific membership class in the Rules and ensure the voting mechanism aligns with CNL s156 to prevent ultra vires decisions.	[2, 12]	[2, 12]
A Community Board Observer has full access to board information and meetings.	Observers cannot exercise director powers. Directors remain liable for confidentiality and fiduciary duties under CNL s191.	Medium	Establish a Board Observer agreement with non-disclosure clauses and define the role as non-participatory.	[2, 6]	[2, 6]
Consent-based decision making (Sociocracy) used for governance.	Legal acts of the board must comply with statutory requirements; e.g., special resolutions require a 75% majority under CNL regardless of internal 'consent' models.	Medium	Define how 'consent' interacts with statutory 'voting' in the Rules to ensure valid legal outcomes for Special Resolutions.	[2, 6]	[2, 6]
Profit allocation based on work contribution (Worker Sovereignty).	In worker co-operatives, profit is allocated based on work contributed. Capital is instrumental and subordinated to labor.	Medium	Clearly define 'work contribution' in the disclosure statement and ensure surplus distribution does not breach tax or regulatory limits.	[2, 11]	[2, 11]
Membership fee of approximately 500- 1000.	Financial contributions are subject to specific disclosure and legal structure requirements under the CNL.	Medium	Reword as a possible future contribution or share purchase subject to legal advice.	[2, 11, 13]	[2, 11, 13]
Communities can use 'Industrial Common Ownership Finance' for acquisitions.	Borrowing by co-operatives is governed by CNL Part 3.3. Lending must comply with co-operative rules and state financial regulations.	Medium	Verify the lender is authorized in Australia and ensure the co-operative's rules permit the proposed type of borrowing.	[2, 11]	[2, 11]
Democratic control based on 'one member, one vote'.	CNL mandates that each active member has only one vote regardless of the number of shares held. Control is linked to membership, not capital.	Low	Explicitly state the 'one member, one vote' principle in the registered rules to ensure compliance with CNL Section 10 and Section 160.	[2, 5]	[2, 5]
Co-operative will be a common ownership enterprise where assets are not distributed among members.	The CNL permits non-distributing co-operatives to enforce common ownership through specific 'asset lock' clauses in the rules.	Low	Register as a 'non-distributing' co-operative and ensure the dissolution clause directs residual assets to another non-profit.	[2, 5, 11]	[2, 5, 11]
Open Membership.	Co-operatives are generally open to all persons who can use their services without discrimination, provided they accept member responsibilities.	Low	Ensure membership criteria are non-discriminatory and the process for joining is transparently outlined in the rules.	[2, 5]	[2, 5]