Co-operatives Act

Link to law: http://www.gov.za/documents/co-operatives-act
Published: 2005-08-18

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Co-operatives Act [No. 14 of 2005]


Government Gazette
REPUBLIC OF SOUTH AFRICA

Vol. 482 Cape Town 18 August 2005 No. 27912
THE PRESIDENCY No. 832 18 August 2005
It is hereby notified that the President has assented to the following Act, which is hereby published for general information:–
No. 14 of 2005: Co-operatives Act, 2005


2 No.27912 GOVERNMENT GAZETTE, 18 AUGUST 2005
Act No. 14,2005 CO-OPERATIVES ACT, 2005
(English text signed by the President.) (Assented to 14 August 2005.)
ACT To provide for-
the formation and registration of co-operatives; the establishment of a Co-operatives Advisory Board; the winding up of co-operatives; the repeal of Act No. 91 of 1981; and matters connected therewith.
PREAMBLE
RECOGNISING- 0 the co-operative values of self-help, self-reliance, self-responsibility, democ-
racy, equality and social responsibility; 0 that a viable, autonomous, self-reliant and self-sustaining co-operative
movement can play a major role in the economic and social development of the Republic of South Africa, in particular by creating employment, generating income, facilitating broad-based black economic empowerment and eradicating poverty;
0 that the South African economy will benefit from increasing the number and variety of viable and sustainable economic enterprises;
0 that government is committed to providing a supportive legal environment to enable co-operatives to develop and flourish; and
IN ORDER TO- O ensure that international co-operative principles are recognised and imple-
mented in the Republic of South Africa; 0 enable co-operatives to register and acquire a legal status separate from their
members; and 0 facilitate the provision of targeted support for emerging co-operatives,
particularly those owned by women and black people,
E IT THEREFORE ENACTED by the Parliament of the Republic of South Africa, B as follows:- CONTENTS
Section
CHAPTER 1
DEFINITIONS, PURPOSE AND APPLICATION OF ACT
1. Definitions and interpretation 2. Purpose of Act 3. Compliance with co-operative principles 4. Forms and kinds of co-operatives 5. Application of Act
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Act No. 14.2005 CO-OPERATIVES ACT, 2005
CHAPTER 2
REGISTRATION, CONSTITUTION, POWERS OF CO-OPERATIVE AND REGISTERED OFFICE AND RECORD KEEPING BY CO-OPERATIVE
Part 1
6. 7. 8. 9. 10. 11. 12.
13. 14. 15. 16. 17. 18. 19.
20 * 21. 22.
23. 24. 25. 26.
27. 28. 29. 30. 31.
32. 33. 34.
Application to register and name
Application to register co-operative Registration of co-operative Effect of registration Pre-incorporation contract Name of co-operative Directive from registrar to change name Unlawful use of word “co-operative”
Part 2
Constitution and functions of co-operative
Constitution of co-operative Provisions for all co-operatives Provisions where members are required to hold shares Provisions for secondary and tertiary co-operatives Consequences of invalidity Amendment to constitution Functions of co-operative
Part 3
Registered ofice and record keeping by co-operative
Registered office of co-operative Record keeping by co-operative Access to information
CHAPTER 3
MEMBERSHIP OF CO-OPERATIVES
Liability of members Withdrawal of membership Transfer of membership, member loan or membership share Powers of registrar in case of reduced number of members
CHAPTER 4
GENERAL MEETINGS
Structure for decision making General meetings Annual general meetings Representation at meetings Minutes of general meetings
CHAPTER 5
MANAGEMENT OF CO-OPERATIVES
Board of directors Appointment of directors Meetings and resolutions of board of directors
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Act No. 14,2005 CO-OPERATIVES ACT, 2005
35. 36. 37. 38.
39.
40. 41. 42. 43. 44. 45. 46.
47. 48. 49. 50. 51. 52. 53. 54. 55.
56. 57. 58. 59. 60. 61. 62. 63, 64. 65. 66. 67. 68. 69.
70.
71. 72. 73. 74. 75.
Minutes of meetings of board of directors Board of directors may delegate functions to director or committee or manager Disclosure of interest Acceptance of commission, remuneration or reward prohibited in certain
Returns relating to directors circumstances 5
CHAPTER 6
CAPITAL STRUCTURE
Capital of co-operative Membership shares Issue of certificates in respect of membership shares or member loans Funds of members Patronage proportion Prohibited and permitted loans and security Reserve fund of members
CHAPTER 7
AUDIT OF CO-OPERATIVES
Audit Approval of auditor’s report and financial statements Auditor disqualified from acting Appointment of auditor Removal of auditor Attendance of meeting by auditor Right to information Notice of error Exemptions
CHAPTER 8
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AMALGAMATION, DIVISION, CONVERSION AND TRANSFER
Amalgamation Approval of amalgamation 30 Effect of registration of amalgamated co-operative Division of co-operatives Approval of division Effect of registration of co-operatives constituted in terms of division
Transfers Protection of creditors Registration of property upon amalgamation, division, conversion or transfer Application to convert company into co-operative Consideration of application 40 Effects of incorporation of company as co-operative Special provision relating to company which has given an undertaking under section 66(3) Registrar to give notice of conversion to Registration of Companies
Conversion of co-operative to any other form of juristic person 35
CHAPTER 9 45
WINDING-UP AND DE-REGISTRATION OF CO-OPERATIVES
Modes of winding-up Winding-up by order of court Winding-up or de-registration by order of Minister Admission and proving of claims against co-operative being wound up Distribution account
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76. Contribution account
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Act No. 14,2005 CO-OPERATIVES ACT, 2005
CHAPTER 10
77.
78. 79. 80. 81. 82. 83. 84.
85. 86. 87. 88. 89. 90. 91.
92. 93. 94. 95. 96. 97. 98. 99.
JUDICIAL MANAGEMENT
Circumstances in which co-operatives may be placed under judicial manage- ment
CHAPTER 11 5
ADMINISTRATION OF ACT
Registrar of Co-operatives Seal and official stamp of registrar Register of co-operatives to be kept by registrar Submission to registrar Inspection of documents Form of records kept may be prescribed Investigation by registrar
CHAPTER 12
CO-OPERATIVES ADVISORY BOARD
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Establishment of Co-operatives Advisory Board Functions of Advisory Board Members of Advisory Board Term of office and conditions of service of members of Advisory Board
Public hearings Accountability
Meetings of Advisory Board 20
CHAPTER 13
MISCELLANEOUS PROVISIONS
Offences Appeal to Minister Exclusion Regulations Delegation by Minister Transitional provisions Repeal of laws and savings Short title and commencement
SCHEDULE 1
SPECIAL PROVISIONS RELATING TO CERTAIN KINDS OF CO-OPERATIVES
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Part 1 - Housing co-operatives Part 2 - Worker co-operatives Part 3 - Financial services co-operatives Part 4 -AgFicu&wako-eperatives ~~ - - ~ ~ ~ ~
SCHEDULE 2 40
Laws repealed by section 98.
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CHAPTER 1
DEFINITIONS, PURPOSE AND APPLICATION OF ACT
Definitions and interpretation
1. (1) In this Act, unless the context indicates otherwise- “Advisory Board” means the Co-operatives Advisory Board established by section 85 of this Act; “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 co-operative; “agricultural co-operative” means a co-operative that produces, processes or markets agricultural products and supplies agricultural inputs and services to its members; “consumer co-operative” means a co-operative that procures and distributes goods or commodities to its members and non-members and provides services to its members; “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 burial society”, means a co-operative that provides funeral benefits, including funeral insurance and other services to its members and their dependants; “co-operative principles” means the internationally accepted principles of co-operation, exemplified by the principles adopted by the International Co- operative Alliance; “Department” means the Department of Trade and Industry; “deputy registrar” means a person appointed as such by the Minister to assist the registrar in the performance of his or her functions; “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 financial 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, 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 technical sectoral services to primary housing co-operatives; “marketing and supply co-operative” means a co-operative that engages in the supply of production inputs to members and markets or processes their products, and also includes an agricultural marketing and supply co-operative; “member loan” means a loan made by a member to a co-operative; “membership share” means a share issued to a member of a co-operative as a requirement for membership of a co-operative; “Minister” means the Minister of Trade and Industry; “nominal value” means the value on the face of the share; “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 a co-operative during the same period; “prescribed” means prescribed by regulation; “primary co-operative” means a co-operative formed by a minimum of five natural persons whose object is to provide employment or services to its members and to facilitate community development;
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“registrar” means the Registrar of Co-operatives; “reserve” means a portion of the surplus that is set aside in a reserve fund and that is indivisible amongst the members of a co-operative; “reserve fund” means a fund established in terms of section 46; “secondary co-operative” means a co-operative formed by two or more primary co-operatives to provide sectoral services to its members, and may include juristic persons; “services co-operative” means a co-operative that engages in housing, health care, child care, transportation, communication and other services; “share” includes membership shares and any additional shares that may be issued 10 by a co-operative; “social co-operative” is a non-profit co-operative which engages in the provision of social services to its members, such as care for the elderly, children and the sick; “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 15 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 20 the board of directors; “tertiary co-operative” means a co-operative whose members are secondary co-operatives and whose object is to advocate and engage organs of state, the private sector and stakeholders on behalf of its members, and may also be referred to as a co-operative apex; “this Act” includes the Schedules and any regulations made in terms of this Act; “worker co-operative” means a primary co-operative whose main objectives are to provide employment to its members, or a secondary co-operative providing services to primary worker co-operatives.
(2) This Act must be interpreted to give effect to its purpose and to develop the 30
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co-operative principles contemplated in section 3.
Purpose of Act
2. The Dumose of this Act is to- I &
promote the development of sustainable co-operatives that comply with co-operative principles, thereby increasing the number and variety of 35 economic enterprises operating in the formal economy; encourage persons and groups who subscribe to values of self-reliance and self-help, and who choose to work together in democratically controlled enterprises, to register co-operatives in terms of this Act; enable such co-operative enterprises to register and acquire a legal status 40 separate from their members; promote equity and greater participation by black persons, especially those in rural areas, women, persons with disability and youth in the formation of, and management of, co-operatives; establish a legislative framework that preserves a co-operative as a distinct 45 legal entity;
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Act No. 14,2005 CO-OPERATIVES ACT, 2005
v) facilitate the provision of support programmes that target emerging CO- operatives, specifically those co-operatives that consist of black persons, women, youth, disabled persons or persons in the rural areas and that promote equity and greater participation by its members;
(g) ensure the design and implementation of the co-operative development support programmes by all the agencies of national departments including but not limited to Khula, NEF, NPI, SEDA, IDC, SAQI, SABS, CSIR, PIC, DBSA, SALGA and SETA'S, and compliance with uniform norms and standards prescribed by this Act;
(h) ensure the design and implementation of the co-operative support measures across all spheres of government, including delivery agencies, and adherence to a uniform framework of established norms and standards that reflect fairness, equity, transparency, economy, efficiency, accountability and lawful- ness; and facilitate the effective co-ordination and reporting mechanism across all spheres of government through the department.
(i)
Compliance with co-operative principles
3. (1) For the purposes of this Act, a co-operative complies with co-operative principles if-
(a) membership of that co-operative is open to persons who can use the services of that co-operative and who are able to accept the responsibilities of membership;
(b) in the case of a primary co-operative, each member has only one vote; (c) to the extent feasible, members provide the capital required by that
co-operative; (d) the return paid on member capital is limited to the maximum percentage fixed
in accordance with the constitution of that co-operative; ( e ) at least five per cent of the surplus is set aside as a reserve in a reserve fund and
is not divisible amongst its members. Ifl it provides education and training to its members and employees.
(2) Despite subsection Ita), the constitution of a co-operative may restrict the persons
(a) reasonably relates to the business of a co-operative set out in its constitution and to the commercial ability of a co-operative to provide services to prospective members; and
(b) does not constitute unfair discrimination.
eligible for membership if the restriction-
(3) The constitution of a secondary or tertiary co-operative may provide that the members have more than one vote: Provided that in the case of a secondary co-operative no member shall have more than fifteen per cent of the vote of all the members of the co-operative.
Forms and kinds of co-operatives
4. (1) This Act provides for the registration of the following forms of co-operatives: (a) a primary co-operative; (b) a secondary co-operative; and (c) a tertiary co-operative.
(2) Without limiting the number and variety of different kinds of co-operatives, a co-operative registered in terms of this Act may be, but is not limited to, a-
(a) housing co-operative; (b) worker co-operative; (c) social co-operative; (d) agricultural co-operative; (e) co-operative burial society; v) financial services co-operative; (g) consumer co-operative;
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(h) marketing and supply co-operative; and (i) service co-operative.
Application of Act
5. (1) This Act applies to all co-operatives registered in terms of this Act. (2) This Act does not apply to a co-operative apex organisation that is not registered
as a co-operative, but applies to a tertiary co-operative having the objects of a co-operative apex organisation.
CHAPTER 2
REGISTRATION, CONSTITUTION, POWERS OF CO-OPERATIVE AND REGISTERED OFFICE AND RECORD KEEPING BY CO-OPERATIVE
Part 1
Application to register and name
Application to register co-operative
6. (1) An application to register a co-operative must be made by- (a) a minimum of five persons in the case of a primary co-operative; (b) a minimum of two or more primary co-operatives in the case of a secondary
co-operative; or (c) a minimum of two or more secondary co-operatives in the case of a tertiary
co-operative. (2) An application referred to in subsection (1) must be submitted to the registrar in
(a) the constitution of the co-operative, signed by the founder members; (b) a list of the founder members; (c) a list of the directors; (d) the prescribed fee or proof of payment thereof.
the prescribed form, and must be accompanied by-
(3) Before submitting an application referred to in subsection (l), there must be at least one meeting of interested persons at which-
(a) a constitution of the proposed co-operative is adopted; and (b) . the first directors are elected.
Registration of co-operative
7. The registrar must register a co-operative and issue a certificate of registration with a registration number, if the registrar is satisfied that-
(a) the application has been made in accordance with this Act; (b) the constitution of a co-operative complies with this Act and with the
co-operative principles referred to in section 3; and (c) the proposed name of that co-operative complies with section 10.
Effect of registration
8. (1) A co-operative must be incorporated as a legal person with effect from the date
(2) The department may provide a co-operative with the necessary support, if that on which it is registered, as reflected on its registration certificate.
co-operative- (a) is registered as a co-operative in terms of this Act; (b) complies with the co-operative principles referred to in section 3; and (c) consists of black persons, women, youth, disabled persons or persons in the
rural areas and promotes equity and greater participation by its members.
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Act No. 14,2005 CO-OPERATIVES ACT, 2005
Pre-incorporation contract
9. (1) A person who enters into a written contract in the name of, or on behalf of, a co-operative before it is registered is personally bound by the contract, unless that contract expressly provides otherwise.
(2) A co-operative may, within a month after its registration, ratify the contract referred to in subsection (1) by ordinary resolution at a general meeting.
(3) If a co-operative ratifies a contract under this section-
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(a) that co-operative is bound by the contract; and (b) a person who originally entered into the contract ceases to be bound by it.
(4) If a co-operative does not ratify the contract, the person who originally entered 10 into the contract continues to be bound by the contract, unless the contract expressly provides otherwise.
Name of co-operative
10. (1) The proposed name of a co-operative must not be- (a) the same or so similar to that of an existing co-operative that it may be 15
misleading; or (b) a name that is undesirable, prohibited or calculated to deceive, or otherwise,
mislead. (2) A co-operative must have the words-
(a) “co-operative” or “co-op” as part of its name; and (b) the word “limited” or the abbreviation “Ltd” as the last word of its name,
unless the constitution of a co-operative does not limit the liability of its members.
(3) A secondary co-operative must have the words “secondary co-operative” as part of its name and a tertiary co-operative must have the words “tertiary co-operative” as 25 part of its name.
(4) Aco-operative must set out its name in legible characters in all contracts, invoices, negotiable instruments, letters, orders and places of business.
( 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 30 (4).
(6) If the name of a secondary or tertiary co-operative indicates a restriction on the business that may be carried on by a co-operative, the constitution of that co-operative may not be amended to remove that restriction unless its name is also amended.
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Directive from registrar to change name 35
11. (1) The registrar may direct a co-operative to change its name if such name
(2) If a co-operative does not comply with a directive issued in terms of subsection (1)
(a) the registrar may issue a certificate of amendment revoking the name of the 40 co-operative and assigning a new name; and
(b) from the date of the certificate of amendment, the constitution of a co-operative is deemed to be amended to reflect the name assigned to it in the certificate.
(3) On issuing a certificate of amendment in terms of subsection (2), the registrar must 45 publish the change of name in a publication generally available to the public in the area where the majority of the members of the co-operative reside.
contravenes section 10.
within sixty days of receipt thereof-
Unlawful use of word “co-operative”
12. (1) It is an offence for any entity other than a co-operative registered in terms of this Act to- 50
(a) hold itself out as carrying on the business of a registered co-operative; (b) use or authorise the use of the words “co-operative”, “co-op”, “co-operative
limited”, “co-operative ltd”, or “co-op Itd” as part of its name.
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Act No. 14.2005 CO-OPERATIVES ACT, 2005
Part 2
Constitution and powers of co-operative
Constitution of co-operative
13. (1) A co-operative registered in terms of this Act must adopt a constitution that
(2) A co-operative where the members are required to hold shares must adopt a
(3) Secondary and tertiary co-operatives must adopt a constitution that complies with
(4) A co-operative may, in addition to the matters listed under section 14(2), adopt any
(5) The Minister may publish, by notice in the Gazette, model constitutions that may
complies with section 14.
constitution that complies with sections 14 and 15.
sections 14 and 16.
other provision that is not inconsistent with this Act.
be used by co-operatives.
Provisions for all co-operatives
1 The constitution of a co-operative must include- the name of the co-operative; whether it is a primary co-operative, a secondary co-operative, or a tertiary co-operative; the main objectives of the co-operative; a description of the business of the co-operative, including any restrictions on the business of the co-operative; a provision stipulating that each member has one vote in all meetings of the co-operative except in the case of secondary or tertiary co-operatives; the minimum period of notice of general meetings; the place where the registered office of the co-operative is located; the minimum and maximum number of directors; the term of office of directors, which may not be more than four years, and whether a director may be re-appointed for a second or further term of office; the powers and restrictions on the directors of the co-operative to manage the business of the co-operative; the requirements for membership of the co-operative, subject to section 3(2); the requirements for withdrawal of membership of a co-operative, including the necessary period for the notice of withdrawal and repayment of shares, and any provisions relating to the liability of a member for a specified period after the date of withdrawal, subject to section 23; a provision relating to the manner in which a portion of the surplus that is transferred as a reserve to a reserve fund in accordance with section 3(e), may be utilised; provision for the distribution of the assets of the co-operative on its dissolution; the financial year of the co-operative; procedures for the application of membership to the co-operative that should be in accordance with co-operative principles; a provision for the rights and obligations of members; a provision for the transfer of membership, member loan and membership share; the conditions and processes for the termination of membership; the conditions and processes for the suspension of membership; - the structure for decision making whereby members can participate in decision-making processes in a democratic and participatory manner; provisions for annual general meetings and special general meetings, including the manner in which such meetings are convened, the necessary periods of notice, the election of a chairperson and provisions for the proposal of resolutions that should ensure democratic decision making; a provision for the period of notice for general meetings and must state the conditions and processes to be followed when requesting a general meeting;
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(x) a provision for the tabling and adoption of resolutions; ( y ) the determination of quorums for general meetings and must ensure that the
quorum provides for adequate member control and decision making; (aa) a provision relating to the manner in which voting may be conducted; (bb) the conditions under which a resolution in lieu of a meeting may be held and
(cc) the conditions and processes for requesting a general meeting; (dd) a provision for the appointment of directors, on condition that only members
may be appointed as directors; (ee) the conditions for vacation of office by directors and the filling of any 10
vacancies in a manner that ensures democratic accountability to the members; @,) the conditions and processes for the appointment of the chairperson,
vice-chairperson and acting chairperson; and (gg) the conditions under which a board of directors may delegate functions to a
director or committee or manager; (hh) a provision relating to the manner in which a portion of the surplus that is not
transferred to the reserve fund, may be utilised.
the further obiectives of the co-operative;
5 passed;
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(2) The constitution of a co-operative may include-
the amount of business allowed with non-members, subject to the provisions 20 of this Act; in the case of a co-operative having members in more than one region, the holding of regional general meetings and a conference of delegates; a provision for a member to appoint a proxy to attend and vote at a general meeting on that member’s behalf, or for postal votes: Provided that no person 25 may act as a proxy for more than 20 per cent of the members entitled to vote at a meeting, or for such lesser percentage of members stipulated in the constitution of the co-operative; provision for people who want to provide support to the co-operative without themselves becoming members to be appointed as associate members; a provision relating to the manner in which the supervisory committee may be constituted; the conditions under which the board of directors may delegate functions to a director, committee or manager; provisions regulating the appointment of a general manager or executive 35 manager by the board of directors; provision to make rules consistent with the constitution and this Act concerning the holding of meetings or any other matter of procedure; and provision for the settlement of disputes between members of the co-operative, or between a member of the co-operative and the co-operative itself.
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Provisions where members are required to hold shares
15. Where a member is required to hold shares in a co-operative upon application or
(a) for the minimum number of membership shares to be issued to each member; (b) for the nominal value of the shares; 45 (c) whether the membership shares are to be issued fully paid up or not fully paid
up, and the conditions under which shares are to be paid; (d) for the circumstances under which additional shares may be issued to
members; (e) for the maximum percentage of the share capital of a co-operative a member 50
may hold, except in the case of a secondary or tertiary co-operative; (fl for the circumstances under which shares issued to a member may be
redeemed.
acceptance as a member, the constitution of a co-operative must provide-
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Provisions for secondary and tertiary co-operatives
16. (1) The constitution of a secondary or tertiary co-operative must provide for- (a) the main objectives of a secondary co-operative which must include the
provision of sectoral services to the primary co-operatives that are its members;
(b) the main objectives of a tertiary co-operative which must include advocating and engaging organs of state, the private sector and stakeholders on behalf of its members; and
(c) the number of votes a member has in proportion to the number of primary or secondary co-operatives that are its members.
(a) the further objectives of a secondary or tertiary co-operative which may include any activity that is not inconsistent with the objectives of any of its members, and which is undertaken for their exclusive benefit; and
(b) the further objectives of a tertiary co-operative which may include represent- ing the interests of co-operatives within a sector or region, providing assistance for education and training, establishing a guarantee fund to facilitate external financing of its members, and the establishment of an audit fund to assist members to have their operations audited.
(2) The constitution of a secondary or tertiary co-operative may provide for-
Consequences of invalidity
17. The constitution of a co-operative- (a ) containing a provision which is inconsistent with the provisions of this Act is,
despite such provision, valid in so far as the other provisions of the constitution are consistent with this Act;
(b) is not invalid by reason only of the fact that it does not provide for a matter which it was supposed to provide for in terms of this Act.
Amendment to constitution
18. (1) A co-operative may amend its constitution by a special resolution. (2) A notice of general meeting where a proposal to amend the constitution is to be
(3) An amendment of a constitution comes into operation- (a) on the date it is registered by the registrar; or (b) on a date specified in the special resolution.
considered must set out the proposed amendment.
(4) The registrar must register an amendment to the constitution, submitted in the
(a) the amendment complies with this Act and with the co-operative principles set out in section 3; and
(b) there has been compliance with the provisions of this section.
prescribed form, if the registrar is satisfied that-
(5) The registrar may refuse to register an amendment if the requirements set out in
(6 ) The registrar must advise a co-operative, in writing, of the reasons for refusing to
(7) An amendment to the constitution may not affect-
subsection (4) are not complied with.
register an amendment.
(a) an existing cause of action or claim or liability to prosecution in favour of, or against, the co-operative or its directors; or
(6) any civil, criminal, administrative, investigative or other action or proceed- ings to which a co-operative or its directors are a party.
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Functions of co-operative
19. (1) A co-operative may do all things necessary to carry out its objectives, subject to limitations imposed by its constitution, this Act and any other law.
(2) If a co-operative performs any act outside its functions, the co-operative and a director of the co-operative who authorised the performance of that act or who performed that act knowing that the co-operative is not empowered to perform that act is guilty of an offence.
Part 3
Registered ofice and record keeping by co-operative
Registered office of co-operative
20. (1) A co-operative must maintain a registered office in the Republic in the place set out in its constitution.
(2) A co-operative must, in the prescribed form, notify the registrar of the physical address of its registered office, as well as any electronic address, telephone or telefax numbers.
(3) If there are changes in any of the details contemplated in subsection (2) , a co-operative must notify the registrar in the prescribed form within fifteen days of such changes.
Record keeping by co-operative
21. (1) A co-operative must keep at its offices the following: The constitution of a co-operative and its rules, if any, including any amendments; the minutes of general meetings envisaged in section 31, in a minute book; the minutes of meetings of the board of directors envisaged in section 35, in a minute book; a list of its members, setting out- (i) the name and address of each member;
(ii) the date on which each member became a member; (iii) if applicable, the date on which a person’s membership was terminated;
and (iv) the amount of any membership fees paid, the number of membership
shares owned and the number and amount of member loans; a register of its directors setting out- (i) the name, address and identity number of each director, including former
directors; (ii) the date on which such directors became or ceased to be directors; and
(iii) the name and address of any other co-operative, company or close corporation where both present and former directors are, or were, directors or members;
a register of directors’ interests in contracts or undertakings, envisaged in section 38; adequate accounting records, including records reflecting the transactions between each member and the co-operative for the purpose of calculating the patronage proportion.
(2) A co-operative must retain its accounting records- (a ) for a period of five years after the end of the financial year to which they relate,
in the case of a co-operative whose main object involves its members conducting transactions with it; and
(b) for a period of three years after the end of the financial year to which they relate, for all other co-operatives.
(3) The registrar may issue guidelines to co-operatives regarding the manner in which
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the records referred to in subsection (1) must be kept, including guidelines allowing a co-operative to keep records in an electronic format.
(4) A co-operative or director who fails to comply with subsection (1) is guilty of an offence.
Access to information 5
22. (1) Subject to subsection (2), members of a co-operative may examine the records referred to in section 21(1) during the normal business hours of the co-operative and may make copies of records, or take extracts from records made, after payment of a fee.
(2) Subject to the Promotion of Access to Information Act, 2000 (Act No. 2 of 2000), the board of directors may, for a reasonable period of time, refuse information relating 10 to any commercial transaction of the co-operative if there are reasonable grounds to believe that the disclosure may be to the disadvantage of that co-operative.
(3) Where the constitution of a co-operative provides for the establishment of a supervisory committee, the supervisory committee must determine whether the board of directors is entitled to withhold information in terms of subsection (2). 15
CHAPTER 3
MEMBERSHIP OF CO-OPERATIVES
Liability of members
23. The liability of a member of a co-operative is limited to an amount equal to the nominal value of the shares, for which the member has not paid, that the member holds 20 in the co-operative.
Withdrawal of membership
24. (1) Despite any provisions contained in its constitution, if a co-operative determines that the repayment of shares would adversely affect its financial well-being, the co-operative may direct that the repayment be deferred for a period not exceeding 25 two years after the effective date of the notice of withdrawal.
(2) Unless a co-operative determines otherwise, the withdrawal of a member from the co-operative does not release the member from any debt or obligation to the co-operative or any contract between the member and the co-operative.
Transfer of membership, member loan or membership share 30
25. Despite any provisions contained in its constitution, if a co-operative determines that the repayment of the nominal value of a member’s shares, all other amounts held to the member’s credit including any member loan and any interest accrued on those amounts up to the date of the payment would adversely affect its financial well-being, the co-operative may direct that repayment be deferred for a period not exceeding two 35 years after the date of death of a member of the co-operative.
Powers of registrar in case of reduced number of members
26. (1) 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 less than that number-
(a) the co-operative is deemed to be de-registered in terms of this Act; (b) the co-operative must convert into another legal entity, in accordance with the
provisions of Chapter 8, or be wound up in accordance with the provisions of Chapter 9; and
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(c) the members of the co-operative may be held personally liable for any loss or damage which may occur as a result of any subsequent activities of the co-operative.
( 2 ) In the event of a co-operative converting into another legal entity as contemplated in subsection (l)(b), the registrar must publish the change of status in a publication generally available to the public in the area where the majority of the members of the co-operative live.
CHAPTER 4
GENERAL MEETINGS
5
Structure for decision making 10
27. (1) A co-operative’s decision-making structure provided for in its constitution
(2 ) The highest decision-making structure of a co-operative is a general meeting of
(3) The board of directors is accountable- (a) to the general meeting; and (b) between general meetings, to the supervisory committee if a supervisory
committee is provided for in the constitution of a co-operative.
must conform with the requirements of this section.
members. 15
General meetings
28. (1) Subject to the constitution of a co-operative and this Act, a member of a 20 co-operative may attend a meeting of the co-operative by means of a telephonic, electronic or other communication facility, if this facility permits participants to communicate adequately with each other during the meeting.
(2) A person participating in a meeting as contemplated in subsection (1) is deemed to be present at the meeting. 25
Annual general meetings
29. (1) A co-operative must hold- (a) its first annual general meeting within 18 months of its registration; (b) subsequent annual general meetings within six months after the end of the
preceding financial year. 30
(a) appoint an auditor, subject to section 50; (b) approve a report of the board on the affairs of the co-operative for the previous
financial year; (c) approve the financial statements and auditor’s report where applicable for the 35
previous financial year; (d) elect directors; ( e ) elect a supervisory committee, if required by the constitution of the
co-operative; If) decide on the future business of the co-operative; 40
(2 ) The annual general meeting must-
Representation at meetings
by any natural person authorised to do so. 30. Ajuristic person entitled to vote at a meeting of a co-operative may be represented
Minutes of general meetings
31. (1) The chairperson of the meeting must- 45 (a) cause minutes of general meetings to be kept in one of the official languages
of the Republic; and (b) keep the minutes at the registered office of the co-operative in accordance with
section 2 1.
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(b) presented for approval at the next general meeting. (3) The minutes of any general meeting, signed by the chairperson, or a resolution
adopted in terms of the constitution of the co-operative is, in the absence of evidence to the contrary, proof of the outcome of the vote or the resolution.
CHAPTER 5 MANAGEMENT OF CO-OPERATIVES
Board of directors
32. (1) The affairs of a co-operative must be managed by a board of directors
(2) The board of directors must exercise the powers and perform the duties of the
(3) The board of directors must be elected for such period as may be set out in the
consisting of such number of persons as the constitution of the co-operative permits.
co-operative subject to this Act and the constitution of the co-operative.
constitution of the co-operative, which period may not be more than four years.
Appointment of directors
conditions as provided for in its constitution.
(a) a person of unsound mind; (b) an unrehabilitated insolvent; (c) a person who has at any time been convicted (whether in the Republic or
elsewhere) of theft, fraud, forgery, perjury or any offence involving dishonesty in connection with the formation or management of a co-operative or other corporate entity.
33. (1) The directors of a co-operative must be appointed in accordance with such
(2) The following persons are not competent to be directors:
Meetings and resolutions of board of directors
time and place determined by- 34. (1) A meeting of the board of directors of a co-operative must be held at a date,
(a) the board of directors or the chairperson of the board; or (b) by any two of its directors.
(a) a majority of all directors constitutes a quorum for any meeting of a board of directors;
(b) the decision of the majority of the directors present at a meeting of a board constitutes a resolution of the board; and
(c) in the event of an equality of votes, the chairperson or the person acting as chairperson, as the case may be, has a casting vote in addition to a deliberative vote.
(3) For the purposes of determining whether there is a quorum in terms of subsection 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.
(2) Unless the constitution of the co-operative provides otherwise-
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Minutes of meetings of board of directors
35. (1) The board of directors must cause minutes of board meetings to be- (a) taken in one of the official languages of the Republic; and (b) kept at the registered office of the co-operative in accordance with section 21.
(2) The minutes of a board meeting must indicate which directors were present at the meeting.
(3) Minutes in respect of any meeting of a board of directors must be- (a) circulated to the directors as soon as possible after the meeting; and (b) presented for approval at the next board meeting.
(4) A resolution of a board of directors in the form of a written resolution signed by all directors-
(a) constitutes a decision of the board; and (b) must be entered in the minute book referred to in section 21(1).
( 5 ) The minutes of any meeting of a board of directors purporting to be signed by the chairperson of the board or a person who acted as such are taken as proof, in any court, of what took place in that meeting.
Board of directors may delegate functions to director or committee or manager
36. (1) The constitution of a co-operative must state the conditions under which a
(2) A delegation contemplated in subsection (1) does not prevent the performance of
(3) The provisions of section 34 apply, with such changes as the context may require,
board of directors may delegate functions to a director or committee or manager.
the delegated functions by the board of directors.
to a director, committee or manager referred to in subsection (1).
Disclosure of interest
37. (1) A director or manager of a co-operative must, in writing, disclose to the
(a) the nature and extent of any interest that he or she has in a material contract or transaction, or a proposed material contract or transaction, with the co-operative; and
(b) any material change to such interest.
co-operative in accordance with this section-
(2) This section does not require the disclosure of an interest in a contract or transaction that is available to and customarily entered into between the co-operative and its members, if the contract or transaction is on terms generally available to members.
(3) Any disclosure must be recorded in the minutes of the meetings of directors. (4) A disclosure in terms of this section, must- (a) be made at the first meeting of directors at which the proposed contract or
transaction is first considered; (b) if the director or manager did not have an interest in the proposed contract or
transaction at the time of the meeting referred to in paragraph (a), be made at the first meeting after the director or manager acquired an interest in it;
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(c) if there is a material change in the interest of the director or manager, be made at the first meeting after the change;
(d) if the director or manager acquires an interest in the contract or transaction after it has been concluded, be made at the first meeting after the director or manager acquires that interest;
(e) if the director or manager had an interest in the contract or transaction before becoming a director or manager, be made at the first meeting after becoming a director or manager; or if the contract or the transaction is one that would in the ordinary course of business not require the approval of directors, be made as soon as the director or manager becomes aware of the contract or transaction.
(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, in accordance with section 21, keep 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.
(7) A director or manager of a co-operative who fails to comply with subsection (1) is, in the manner prescribed, subject to disqualification.
01
Acceptance of commission, remuneration or reward prohibited in certain circumstances
38. (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 usual business or profession of the director or employee 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 subsection (1) is guilty of an offence.
Returns relating to directors
39. (1) A co-operative must, in writing, notify the registrar- (a) of the full names, address and identity number of each person appointed as a
director, within 30 days of such appointment; (b) of my change of address of a director, within 30 days of knowledge of such
change; (c) after any director has vacated office, within 30 days of such vacation.
(2) A director must, in writing, inform the co-operative of any change of address,
(3) A co-operative that fails to comply with subsection (1) or a director who fails to within 30 days of such change.
comply with subsection (2) is guilty of an offence.
CHAPTER 6
CAPITAL STRUCTURE
Capital of co-operative
(a) Entrance fees; (b) membership fees or subscriptions; (c) the consideration for membership shares or additional shares in a co-
operative; (d) member loans; and ( e ) funds of member.
40. The capital contributed by members may comprise any of the following:
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Membership shares
41. (1) The constitution of a co-operative may provide for membership shares to be
(2) Each member must at all times hold the minimum number of membership shares
(3) The constitution may permit additional 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,
(6 ) A transfer of membership shares is valid only if it complies with section 25 and
issued to members.
prescribed by the constitution.
that are paid up.
any restrictions set out in the constitution.
Issue of certificates in respect of membership shares or member loans
42. (1) Unless the constitution of a co-operative provides otherwise, a member is entitled to a certificate in respect of-
(a) membership shares issued to that member; and (b) member loans made by that member.
(a) the name of the co-operative; (b) that the co-operative is subject to this Act; (c) the name of the person to whom it is issued; and (d) that the certificate represents membership shares in, or member loans to, the
co-operative and the number of the membership shares or the amount of the member loans.
(3) If the constitution of a co-operative does not require the issue of certificates, the
(2) The face of each certificate issued in terms of subsection (1 ) must state-
co-operative must, on the request of a member, issue a statement of- (a) the number of membership shares held by the member; and (b) the amount of any member loan made by the member.
Funds of members
43. (1) The constitution of a co-operative may provide for the establishment of one or more funds of members in which the member of a co-operative may be credited with-
(a) contributions made by the member to that fund; (b) any amount set aside for future payment to members including-
(i) interest on an amount paid upon the member’s shares; (ii) any patronage return allocated to the member;
(iii) any amount paid to the member after reducing share capital; and (c) any other money due to the member, the payment of which is deferred.
(a) may be applied for any purpose permitted in terms of the constitution of a co-operative except for writing off of losses;
(b) must be paid to the member in the manner and at the time provided for in the constitution of a co-operative;
(c) may bear interest at a rate fixed in the constitution of a co-operative; and (d) may, on the due date, be set off against a debt owed by the member to the
co-operative. (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 fund of members.
(2) The money standing to the credit of a member in a fund of members-
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Patronage proportion
44. (1) A co-operative may allocate and credit or pay to its members a portion of the surplus that is not transferred as a reserve to a reserve fund in terms of section 3( l)(e) and such a portion must be allocated in proportion to the value of transactions conducted by a member with a co-operative during a specified period.
(2) For the purpose of subsection (l), the board of directors must, when determining the amount of business done by each member with a co-operative in a financial year, take into account-
(a) the quantity, quality, kind and value of things bought, sold, handled, marketed or dealt with by the co-operative; and
(b) the services rendered- (i) by the co-operative on behalf of or to the member; and
(ii) by the member on behalf of or to the co-operative. (3) A co-operative may provide in its constitution that the whole, or a part, of the
patronage proportion of a member, determined by the board in respect of a financial year, must be applied to purchase membership shares in a co-operative for the member.
(4) If the provisions of subsection (3) apply, the constitution must further provide for-
(a) giving notice to each member of the number of shares purchased or to be purchased for the member;
(b) the manner of issuing or transferring of shares; and (c) if applicable, issuing and forwarding of share certificates to members.
Prohibited and permitted loans and security
45. (1) A co-operative may give financial assistance by means of a loan or the
(a) any person in the ordinary course of business if the lending of money is part of the ordinary business of the co-operative;
(b) any person on account of expenditures incurred or to be incurred on behalf of the co-operative;
(c) employees of the co-operative or of any of its members- (i) to enable or assist them to purchase or erect living accommodation for
their own occupation; or (ii) in accordance with a plan for shares of the co-operative or any of its
members to be held by a trustee; and (d ) members, if the financial assistance is available to all members on
(2) A co-operative may not give financial assistance in terms of subsection (1)
(a) the co-operative, after giving the financial assistance, will be unable to pay its liabilities as they become due; or
(b) the realisable value of the co-operative's assets, after giving the financial assistance, will be less than the aggregate of its liabilities, share capital and reserves.
(3) In determining the realisable value of the co-operative's assets contemplated in subsection (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.
Reserve fund of members
provision of security to-
substantially the same terms.
whether directly or indirectly if there are reasonable grounds to believe that-
46. (1) A co-operative-must sebp-a..asewe.futul wherein such_ca:operative must deposit at least five per cent of the surplus as a reserve, that is indivisible amongst its members, during a financial year.
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(2) A co-operative may use the fund referred to in subsection (1) only in accordance
(3) The reserve of a co-operative is monitored for compliance by the registrar through with the manner contemplated in its constitution.
the audited annual financial statements.
CHAPTER 7 5
AUDIT OF CO-OPERATIVES
Audit
47. (1) An audit of the affairs of a co-operative must be conducted annually in respect
(a) ensure that financial statements are drawn up in conformity with generally 10 accepted accounting practices;
(b) verify that the co-operative has maintained adequate records in accordance with the requirements of its constitution and this Act;
(c) report generally as to whether the assets and facilities of a co-operative are being properly managed and the operations of a co-operative are being 15 conducted in accordance with co-operative principles; and
(d) report on any other matter the auditors are required to report on in terms of a co-operative’s constitution.
(2) A co-operative that is not able to afford the costs of an annual audit may apply in
of each financial year, in order to-
writing to the registrar for an exemption in terms of section 55. 20
Approval of auditor’s report and financial statements
48. (1) A co-operative may circulate draft financial statements to its members prior to an annual general meeting.
(2) The annual general meeting must consider approval of the auditor’s report and financial statements. 25
(3) The chairperson of the board, or the person who acted as such in a meeting where 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-
(a) approved by the annual general meeting and signed in accordance with subsection (2); and
(b) accompanied by a report of the auditor.
30
(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 21 days after approval 35 of such report and financial statements.
(6) The board of directors must- (a) submit a copy of the financial statements and auditors’ report to the registrar
within 15 days of its approval; or (b) if for any reason the annual general meeting fails to approve the financial 40
statements and auditor’s report, notify the registrar within 15 days of the reasons for such failure and of the action the co-operative proposes to take in order to address the situation.
Auditor disqualified from acting
49. A person is disqualified from being an auditor of a co-operative- 45 (a) if that person has a personal or material interest in a co-operative or in any of
its affiliates or in any of its subsidiaries or in the business of any of its directors or senior employees ; or
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Appointment of auditor
50. (1) The members must appoint an auditor- (a) at a meeting of interested persons referred to in section 6(3) , to hold office
until the first annual general meeting; and (b) at each annual general meeting, to hold office until the close of the next annual
general meeting. (2) Despite subsection (l), 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 subsections (1) and
(2), the registrar may approve the person nominated by the board of the co-operative to audit its books for one financial year. (4) The fees payable to the auditor appointed in terms of subsection (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 in terms of section 51 or is struck off 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 a co-operative, or on the date specified in the resignation, whichever is later.
Removal of auditor
51. (1) The members may by ordinary resolution remove an auditor from office. (2) A vacancy created by the removal of an auditor must- (a) be filled at the meeting at which the auditor is removed; or (b) if not filled at the meeting, be filled within 30 days of the creation of a vacancy,
by the board of directors, subject to the registrar’s approval. (3) An auditor appointed in terms of subsection (2 ) holds office for the unexpired term
of his or her predecessor.
Attendance of meeting by auditor
52. (1) The auditor of a co-operative is entitled- (a) to be given notice of any general meeting at which a report of the auditor is to
be discussed; (b) to attend such a meeting, at the expense of the co-operative; and (c) to address the meeting on matters relating to the auditor’s duties.
( 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 that the auditor or former auditor of the co-operative is given written notice of 10 days of such meeting.
(3) A director or member who sends a notice referred to in subsection (2) must send a copy of the notice to the co-operative at the same time.
Right to information
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53. (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.
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(2) At the request of the auditor the directors must obtain from any present or former directors, employees, agents or mandataries of the co-operative the information and explanations that such persons are reasonably able to provide and that are, in the auditor’s opinion, necessary for the purposes of the audit.
Notice of error
54. (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 manner 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 subsection (2), the directors must-
(a) prepare and issue revised financial statements; or (b) inform the members and the registrar of the error or misstatement.
Exemptions
55. (1) Upon application in terms of section 47(2) 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 that-
(a) the costs of an annual audit would materially affect the financial sustainability of the co-operative;
(b) the co-operative has maintained adequate financial records, and is able to prepare annual financial statements; and
(c) having regard to the size and kind of co-operative, the interests of members are adequately protected.
(2) When exempting a co-operative in terms of subsection (l), the registrar must
(a) at a period of longer than one year but not exceeding three years; or (b) by a suitably qualified person other than an auditor.
(3) The board of directors of a co-operative that is exempted in terms of subsection (1) is nevertheless required to prepare annual financial statements for submission to an annual general meeting, and to submit a copy to the registrar within 15 days of the annual general meeting approving such financial statements.
(4) In the event that an annual general meeting fails to approve the financial statements referred to in subsection (3), the board of directors is required to comply with the provisions of section 48(6)(b) in the same manner as would apply to audited financial statements.
( 5 ) The registrar may stipulate conditions to an exemption granted in terms of this section, if the registrar considers that it will serve the purpose of this Act to do so.
either require such co-operative to be audited-
CHAPTER 8
AMALGAMATION, DIVISION, CONVERSION AND TRANSFER
Amalgamation
56. (1) Two or more co-operatives may agree in writing to amalgamate, on condition that the co-operative to be constituted by the amalgamation will comply with the requirements for a co-operative to be registered in terms of this Act.
(2) An agreement to amalgamate referred to in subsection ( I ) must set out the terms of the amalgamation, and the means by which such amalgamation will be effected, including the following-
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(a) the constitution of the amalgamated co-operative; (b) the manner in which the shares of each amalgamating co-operative are to be
converted into membership shares of the amalgamated co-operative or, if applicable, other securities of the amalgamated co-operative;
(c) if any membership share of an amalgamating co-operative is not to be converted into shares or other securities of the amalgamated co-operative, the amount of money that the holders of those shares are to receive in addition to or instead of shares of the amalgamated co-operative;
(d) the continuation of the members’ respective interests in a fund of members of
( e ) the application of any surplus or loss which may have resulted from the operations of the amalgamating co-operatives; and
(f) the name and address of each proposed director of the amalgamated co-operative.
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the amalgamated co-operative; 10
Approval of amalgamation 15
57. (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 amalgamation agreement must accompany
(3) An amalgamation agreement must be approved by special resolutions of each amalgamating co-operative. (4) After approval of an amalgamation agreement, the constitution of the amalgam-
ated co-operative must be submitted to the registrar for approval, together with a notice of its registered office, a notice of the directors of the amalgamated co-operative and the 25 prescribed fee.
(5) A declaration by the directors of each amalgamating co-operative must be attached to the constitution submitted in terms of subsection (4), establishing that the relevant provisions of their constitutions have been complied with in approving the amalgam- ation, and that there are reasonable grounds to believe that-
(a) the amalgamated co-operative will be able to pay its liabilities as they become due;
(b) the realisable value of the amalgamated co-operative’s assets will not be less than the total of its liabilities, share capital and reserves; and
(c) the interests of creditors will be protected in compliance with section 64.
the notice of such meeting. 20
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(a) the amalgamating co-operatives have complied with all the relevant provi- sions of their constitutions and this Act; and
(b) the name and constitution of the amalgamated co-operative comply with this 40 Act.
(7) For the purposes of subsection (6), the registrar may rely on the constitution and
amalgamated co-operative if satisfied that-
the declarations contemplated in subsection (5).
Effect of registration of amalgamated co-operative
58. As from the date stated on the certificate of registration- 45 (a) the amalgamation of the amalgamating co-operatives and their continuance as
one co-operative become effective, (b) the registration of the amalgamating co-operatives is cancelled; (c) members of the amalgamating co-operatives become members of the
amalgamated co-operative; and 50 (d) the assets, rights, liabilities and obligations of the amalgamating co-operatives
become the assets, rights, liabilities and obligations of the amalgamated co-operative.
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Division of co-operatives
59. ( I ) A co-operative may decide to divide into two or more co-operatives, on condition that each co-operative will comply with the requirements for a co-operative to be registered in terms of this Act.
(2) An agreement to divide a co-operative referred to in subsection (1) must set out the terms of the division and the means by which it will be effected including the following:
The provisions of the constitutions of each of the co-operatives to be constituted by the proposed division; the members of the co-operative who will become members of the
5
co-operatives to be constituted by the division; 10 the manner in which the assets, rights, liabilities and obligations of the co-operative are to be divided between the co-operatives to be constituted by the division; the business of each of the co-operatives constituted by the division and the area or sector in which they are to operate; and the name and address of the proposed directors of the co-operatives to be constituted.
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Approval of division
60. (1) The board of directors must submit a proposed agreement to divide a
(2) A copy or summary of the proposed agreement referred to in subsection (1) must
(3) An agreement to divide a co-operative must be adopted by a special resolution. (4) After the members of the co-operative have approved the division, the
constitutions of the co-operatives to be constituted by the division must be submitted to 25 the registrar for approval together with a notice of their registered offices and a notice of the directors of the co-operatives in question.
co-operative to a general meeting. 20
accompany the notice of such meeting.
(5) The following must also be submitted to the registrar: (a ) A declaration by the directors of the co-operative being divided, establishing
that the relevant provisions of its constitution have been complied with in 30 approving the division;
(b) a declaration by the directors of each co-operative constituted by the division, establishing that there are reasonable grounds to believe that- (i) the co-operatives to be constituted will be able to pay their liabilities as
(ii) the realisable value of the assets of the co-operatives to be constituted will not be less than the total liabilities, share capital and reserves; and
(iii) the interests of creditors will be protected in compliance with section 64. (6) The registrar must issue a certificate of registration in the name of the
(a) the co-operative has complied with all the relevant provisions of its constitution and this Act in approving the division; and
(b) the constitutions of the co-operatives to be constituted comply with this Act.
they become due; 35
co-operatives to be constituted if satisfied that- 40
Effect of registration of co-operatives constituted in terms of division
61. As from the date of the last registration of a co-operative constituted in terms of 45 a division-
(a) the registration of the co-operative being divided is cancelled; (b) _the members of .the _co-opetative- being dividedbeco-mde members of the
co-operatives constituted in terms of the division, in accordance with the agreement to divide; and 50
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(c) the assets, rights, liabilities and obligations of the co-operative being divided become the assets, rights, liabilities and obligations of the co-operatives constituted by the division in accordance with the agreement to divide.
Conversion of co-operative to any other form of juristic person
62. (1) A co-operative may apply to- (a) convert into any other form of corporate or unincorporated body in
accordance with the applicable legislation; and (b) cancel its registration as a co-operative.
(2) An application in terms of subsection (1) may only be made if the board of directors has submitted a proposal to a general meeting, detailing the reasons for and the terms of the proposed conversion.
(3) A copy of the proposal referred to in subsection (2) must be attached to the notice of the general meeting, and must be adopted by special resolution.
(4) A declaration by the board of directors of the co-operative must be attached to an application in terms of subsection (I), establishing-
(a) compliance with the relevant provisions of this Act and the constitution of the co-operative; and
(b) that the interests of creditors will be protected in accordance with section 64. (5) The registrar may require the board of directors to submit such proof as the
registrar may require in respect of any matter contained in a declaration referred to in subsection (4).
(6) If the registrar is satisfied that there has been compliance with the provisions of this Act, the registrar must-
(a) cancel the registration of the co-operative; and (b) remove its name from the register of co-operatives.
(a) the co-operative ceases to exist; (b) all assets, rights, liabilities and obligations of the co-operative vest in the
corporate body or unincorporated association of persons into which the co-operative has been converted, if it is by virtue of its constitution capable of owning property separate from its members; and
(c) if the co-operative is converted into a company, all members of the co-operative become shareholders of that company.
(7) As from the date on which the registration of a co-operative is cancelled-
Transfers
63. (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 subsection (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 in question together with the notice of the general meeting at which the transfer is to be considered.
(3) A transfer in terms of subsection (1) must be approved by a special resolution of each of the co-operatives in question.
(4) A declaration by the board of directors of each co-operative must be attached to an application in terms of subsection ( l), establishing that-
(a) there has been compliance with the relevant provisions of this Act and the constitution of each of the co-operatives; and
(6) the interests of creditors will be protected in accordance with section 64. (5) The registrar may require the board of directors to submit such proof as the
registrar may require in respect of any matter contained in a declaration referred to in subsection (4).
(6) The registrar must approve the application referred to in subsection (1) if satisfied
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that there has been compliance with the relevant provisions of this Act and the constitutions of the co-operatives in question.
Protection of creditors
64. The registrar may not register any amalgamation, division, conversion or transfer
(a) written notice of at least three months of the proposal has been given to each known creditor who has a claim exceeding one thousand rand or such other amount as the Minister may from time to time prescribe;
(b) any creditors who have demanded payment of any amount due to them have been paid in full or will be paid before the amalgamation, division, conversion 10 or transfer is effected; and
(c) no creditor will be prejudiced by the amalgamation, division, conversion or transfer.
in terms of this Chapter unless the registrar is satisfied that- 5
Registration of property upon amalgamation, division, conversion or transfer
65. (1) Any property or right which vests in a co-operative or a corporate body by 15 virtue of any provision of this Chapter must be transferred to the 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 the relevant 20 register, title deed or other document in his or her office or laid before him or her, to register the property or right in the name of the co-operative or corporate body concerned.
Application to convert company into co-operative
66. (1) A company that intends to conduct its affairs according to co-operative 25 principles and that passed a resolution at a general meeting that authorises the conversion of that company into a co-operative of a particular kind and form, may apply to the registrar on the prescribed form to be converted.
(2) An application referred to in subsection (1) must be accompanied by- a sworn statement by a person who acted as the chairperson of the general 30 meeting referred to in subsection (1)- (i) that the meeting has passed a resolution authorising the conversion of the
company into a co-operative of the required kind and form; (ii) that the meeting was specially convened to consider the resolution; and
(iii) that the chairperson has satisfied himself or herself that proper notice of 35 the meeting was given to the members of the company;
a copy of the resolution and an explanation of the reasons for the proposed conversion; proof of the company’s registration under any law as a company; two certified copies of the company’s memorandum and articles of associa- 40 tion; two copies of either a proposed new constitution in terms of this Act or a proposed amendment of the memorandum and articles of association of the company bringing the memorandum and articles into line with the provisions of this Act; 45 a certified copy of the company’s latest audited annual financial statements; a schedule containing thefull-namesand addresses of the members of the company, the number of shares and class of shares held by each one of them in the company, and, if application is made to convert the company into a co-operative, also the occupations of the members; a schedule containing the full names and addresses of the directors of the company;
50
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(i)
(j) the prescribed application fees.
a schedule stating the particulars and extent of the company’s interest in any other company; and
(3) A company may instead of a document referred to in subsection (2)(e) give the registrar an undertaking in writing that if it is converted into a co-operative it will, within one year of its conversion, replace its memorandum and articles of association with a constitution in terms of this Act or will otherwise amend its memorandum and articles of association so as to bring them into line with the provisions of this Act.
Consideration of application
67. (1) An application referred to in section 66 must be submitted to the registrar together with any such other documents as he or she may require.
(2) The registrar must consider the application submitted to him or her in terms of subsection (l), and if he or she is satisfied that the provisions of this Act have been complied with in respect of the application and that-
(a) the conversion of the company into a co-operative; (b) the incorporation of the proposed co-operative; and (c) the company’s memorandum and articles of association,
with due regard to the proposed amendment, or the proposed new constitution, if such proposed amendment or new constitution accompanied the application are not inconsistent with this Act, he or she must approve the application, or if he or she is not so satisfied, he or she may conditionally approve or reject the application.
(3) If the registrar approves or conditionally approves an application, the registrar must ensure that-
(a) the name and other particulars of the company are entered in the register of co-operatives; and
(b) the memorandum and articles of association or new constitution, as the case may be, are registered conditionally or unconditionally, and a certificate is issued in duplicate that the company has been incorporated as a co-operative in terms of this Act and that the memorandum and articles of association or new constitution, as the case may be, have been submitted in the manner contemplated in this Act.
(4) One copy of the certificate and of the memorandum and articles of association or new constitution, as the case may be, must be sent to the applicant and the other copy must be retained within the office of the registrar.
Effects of incorporation of company as co-operative
68. As from the date on which the entry is made in terms of section 67(3)(a) in the register of co-operatives-
(a) the company is converted into a co-operative; (b) the company ceases to exist; (c) if a new constitution was not substituted, the memorandum and articles of
association of the company are considered to be the constitution of a co-operative;
(d) the persons who at the date of conversion of the company were members of the company accordingly become members of the co-operative;
( e ) all assets, rights, liabilities and obligations of the company vest in the co-operative; and
cfl the constitution or the memorandum and articles of association, as the case may be, bind the co-operative and each member to the same extent as if it had been signed by each member, subject to this Act.
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Special provision relating to company which has given an undertaking under section 66(3)
69. (1) A co-operative which as a company has given an undertaking under section 66(3) to the registrar must within one year of the date of its incorporation amend its memorandum and articles of association or replace its memorandum and articles of association with a new constitution so as to bring it into conformity with the provisions of this Act.
(2) A co-operative referred to in subsection (1) which has failed to comply with section 66(3) is considered to have remained a company.
(3) The name and particulars of a co-operative which has failed to comply with the 10 provisions of subsection (1) must be struck off the register of co-operatives by the registrar.
Registrar to give notice of conversion to Registrar of Companies
5
70. The registrar must give notice of any conversion of a company into a co-operative in terms of this Act and of any default referred to in section 69(2) to the Registrar of 15 Companies mentioned in section 7 of the Companies Act, 1973 (Act No. 61 of 1973).
CHAPTER 9
WINDING-UP OR DE-REGISTRATION OF CO-OPERATIVES
Modes of winding-up
71. (1) A co-operative may be wound up voluntarily by a special resolution of at least 20
(2) A co-operative must be wound up, if ordered to do so by- 75 per cent of its members.
(a) a court, in terms of section 72; or (b) the Minister, in terms of section 73.
Winding-up by order of court 25
72. (1) A court may, on application by any interested person, order that a co-operative be wound up, if-
(a ) the co-operative is unable to pay its debts; (b) there is no reasonable probability that it will be able to pay its debts or become
a viable co-operative; and 30 (c) it appears just and equitable to do so.
(a) adjourn the hearing thereof conditionally or unconditionally; or (b) prior to granting or refusing the application, make any provisional or other
(2) The court considering an application in terms of subsection (1) may-
order it may deem fit. 35
Winding-up or de-registration by order of Minister
73. (1) The Minister may, on the recommendation of the registrar, order that a co-operative be wound up or de-registered if the Minister has reason to believe that the co-operative-
(a) obtained registration through fraud; 40 (b) was formed for a particular period or until the occurrence of a particular event
and that period has expired or that event has-occurred;- - (c) has not transacted business during a continuous period of two years; and (d) is not operating in accordance with its constitution or in accordance with this
Act. 45 (2) Before making an order in terms of subsection (l), the Minister must give the
relevant co-operative a right to be heard.
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Admission and proving of claims against co-operative being wound up
74. (1) Any person who has a claim, other than a claim against a fund of members, against a co-operative that is being wound up must lodge an affidavit with the liquidator-
(a) specifying the amount of the claim together with any supporting documents; and
(b) containing any prescribed particulars relating to the claim.
(a) within 90 days of the publication of the notice of appointment of the liquidator; and
(b) with the consent of the registrar, within a further period of 30 days.
(a) admit or refuse the liability of a co-operative for the amount of a claim referred to in subsection (1); or
(b) admit the liability of a co-operative for any portion of such amount. (4) Any person aggrieved by a decision of a liquidator under subsection (3) may,
within 30 days after being notified of that decision, appeal to the registrar against such decision.
(5) 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 aside the decision and order the liquidator to admit the claim or to admit the claim to the extent determined by the registrar.
(6) A member who does not want his or her claim against a fund of members to proceed must inform the liquidator in writing.
(7) The provisions of this section do not prevent a creditor from proving a claim in any court.
(2) A claim referred to in subsection (1) must be lodged-
(3 ) The liquidator may-
Distribution account
75. (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 according to the provisions of this section.
(2) The residue referred to in subsection (1) must first be applied in paying back the paid-up share capital of the co-operative to its members.
(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 shares of members 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 must, subject to subsection (7), be allocated to the members of the co-operative-
(a) in accordance with the patronage proportion, in the case of a co-operative whose main object involves its members conducting transactions with it; and
(b) in accordance with the constitution of the co-operative, in the case of any other co-operative.
(5) The patronage proportion referred to in subsection (4)(a) must be determined with reference to the shorter of-
(a) the period specified in the constitution of the co-operative, which must be at least five years; or
(b) the period that the co-operative has existed.
(a) the value of the transactions conducted by a former member of a co-operative during the period referred to in subsection (5) may be added to the value of the transactions of a member who is entitled to an allocation under subsection (4) if- (i) the former member or the executor or representative of a deceased
member has consented in writing to that effect to the co-operative within 90 days after the former member ceased to be a member of the co-operative; and
(ii) the constitution of the co-operative so provides; (b) a co-operative registered in consequence of a division of a co-operative in
terms of this Act is deemed to have existed from the date of registration of the co-operative that was divided;
( 6 ) For the purposes of subsections (4) and (5)-
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(c) a co-operative by virtue of an amalgamation of two or more co-operatives in terms of this Act is deemed to have existed from the date of registration of the last amalgamating co-operative; and
(d) the value of the transactions conducted by a member through any co-operative contemplated in subparagraphs (b) and (c) during the appropriate period must be taken into account in determining a member’s allocation.
(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 first be applied for the payment
5
of such amount. 10
Contribution account
76. (1) A contribution account must provide for the recovery of contributions from
(2) A contribution account must, in respect of each contributory, indicate- persons liable for the payment thereof.
(a) the ground on which he or she is liable for the payment of contributions; (b) the amount for which he or she is liable; and (c) the contribution to be paid by him or her in terms of the 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.
15
CHAPTER 10 20
JUDICIAL MANAGEMENT
Circumstances in which co-operatives may be placed under judicial management
77. (1 ) A court may grant a judicial management order in respect of a co-operative- (a) when that co-operative by reason of mismanagement or for any other cause is
unable to pay its debts or is probably unable to meet its obligations; (b) when that co-operative by reason of mismanagement or for any other cause
has not become or is prevented from becoming a viable co-operative; (c) if there is a reasonable probability that, if it is placed under judicial
management, it will be able to pay its debts or to meet its obligations and become a viable co-operative; and
(d) if it appears just and equitable to do so.
25
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(2) An application to court for a judicial management order in respect of a
(a) by the co-operative voluntarily after a special resolution to that effect;
(c) by the Minister on the recommendation of the registrar.
co-operative may be made-
(b) by any interested person; or 35
(3) When an application for the winding-up of a co-operative is made to a court and it appears to the court that if the co-operative is placed under judicial management the grounds for its winding-up may be removed and it will become a viable co-operative, and that the granting of a judicial management order would be just and equitable, the 40 court may grant such an order in respect of that co-operative.
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CHAPTER 11
ADMINISTRATION OF ACT
Registrar of Co-operatives
78. (1) The Minister- (a) must appoint an officer in the public service as the Registrar of Co-operatives,
with the authority to exercise the powers and perform the functions conferred on the registrar by or in terms of this Act;
(b) may appoint as many persons as the Minister deems necessary as deputy registrars of co-operatives, to assist the registrar in the performance of his or her functions and to exercise such powers as may be delegated to the deputy 10 registrar concerned; and
(c) may from time to time designate such other officers in the Department as may be necessary to assist the registrar.
(2) The registrar may, from time to time, delegate any power conferred on him or her by or under this Act to any officer in the public service.
(3) A delegation under subsection (2) does not prevent the exercise of the delegated power by the registrar.
Seal and official stamp of registrar
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79. (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 20 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 office of the registrar will be judicially noticed in evidence.
Register of co-operatives to be kept by registrar 25
80. (1) The registrar must keep a 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 copy thereof signed by the registrar is, on the face of it, proof of the particulars contained in the register.
(3) If the registrar has reason to believe that either of the circumstances set out in 30 section 73(l)(b) and (c) prevail, the registrar may send such co-operative a written notice requiring it to provide a written statement, signed by at least two of its directors, indicating that the co-operative is still operational.
(4) If the statement contemplated in subsection (3) is not received within 30 days of receipt of such notice, the registrar may remove such co-operative from the register.
( 5 ) The registrar must publish the name of any co-operative that is deemed to be de-registered by virtue of section 26( l)(a), or that is removed from the register in terms of subsection (4), in a publication generally available to the public in the area where the majority of the members of the co-operative live.
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Submission to registrar 40
81. 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
82. (1) A person may, in writing, upon payment of a prescribed fee, apply to the 45 registrar to examine any document that a co-operative has sent to the registrar in terms of this Act, except a report relating to transactions between a co-operative and its members, and to make copies of, or take extracts from such document.
(2) The registrar must, on receipt of the application referred to in subsection (l), provide such person with copies of the requested documents, except a report relating to 50 transactions between a co-operative and its members.
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Form of records kept may be prescribed
to time be prescribed. 83. The registrar must keep records in such form, system or device as may from time
Investigation by registrar
84. (1) The registrar may order an investigation into or inspection of 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 is contravening a provision of this Act.
(2) The registrar may make any recommendation he or she considers appropriate following an investigation or inspection in terms of subsection (l), including a 10 recommendation to-
5
(a) the co-operative; (b ) the Minister in terms of section 73; and (c) the relevant prosecuting authority.
CHAPTER 12 15
CO-OPERATIVES ADVISORY BOARD
Establishment of Co-operatives Advisory Board
85. The Co-operatives Advisory Board is hereby established.
Functions of Advisory Board
86. The functions of the Advisory Board are to advise the Minister generally, and to 20 make recommendations, with regard to-
(a) policy for the development of co-operatives in the Republic; (b) the application of any of the provisions of this Act or any other law on matters
affecting co-operatives; (c) the publication of any regulations in terms of this Act that may be necessary; 25 (d) the provision of support programmes that target co-operatives, especially
those co-operatives that consist of black persons, women, youth, disabled persons or persons in the rural areas and promote equity and greater participation by its members;
(e) the establishment of guidelines for audits of co-operatives; 30 cf) any matter referred to the Advisory Board by a co-operative, proposed
co-operative or member of a co-operative that relates to promoting the development of co-operatives; and
(g) any decision the Minister is required to take in terms of this Act.
Members of Advisory Board 35
87. (1) The Minister must appoint as members of the Advisory Board not less than five but not more than 10 persons capable of representing the interests of co-operatives in the Republic.
(2) When appointing members in terms of subsection (l), the Minister must have regard to the need for the Advisory Board- 40
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(a) to have appropriate expertise; and (b) to represent different relevant constituencies including trade unions, business,
co-operative support organisations and academics. (3) The Minister must designate one of the members of the Advisory Board as
chairperson. 5
Term of office and conditions of service of members of Advisory Board
88. (1) The Minister must determine- (a) the term of office of members of the Advisory Board, which may not be more
than three years; and (b) any other conditions of appointment not provided for in this section. 10
(2) A member of the Advisory Board whose period of office has expired is eligible for
(3) Members of the Advisory Board may resign in writing. (4) Members of the Advisory Board are not remunerated for their services, but may be
reimbursed for expenses incurred by them in carrying out their duties, as determined by 15 the Minister, with the concurrence of the Minister of Finance.
(5) The Minister may remove a member of the Advisory Board from office for-
reappointment.
(a) serious misconduct; (b) permanent incapacity; or (c) engaging in any activity that may undermine the integrity of the Advisory 20
Board.
Meetings of Advisory Board
89. (1) The Advisory Board may make rules in relation to the holding of and the procedure at meetings of the Advisory Board and those rules are subject to the approval of the Minister. 25
(2) Meetings of the Advisory Board must be held at such time and place as may be determined by the chairperson of the Advisory Board in accordance with its rules.
(3) Members of the Advisory Board are accountable to Parliament.
Public hearings
90. The Advisory Board may hold public hearings at which co-operatives or 30 interested parties may make oral representations on any matter the Advisory Board considers in terms of this Chapter.
Accountability to Parliament
91. All the national departments and their agencies that provide co-operative development support programmes may be required by Parliament, in line with the 35 principles contained in Chapter 3 of the Constitution, to report on the progress made regarding the design and implementation of such programmes.
CHAPTER 13
MISCELLANEOUS PROVISIONS
Offences 40
92. (1) Subject to the provisions of the Promotion of Access to Information Act, 2000 (Act No. 2 of 2000), a person commits an offence by disclosing the information that he or she obtained in the performance of any function contemplated in this Act unless-
(a) the disclosure is necessary for the administration of this Act; (b) the disclosure is necessary for the purposes of the administration ofjustice; or 45 (c) the registrar or any other person is entitled to the information.
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(2) Any person who knowingly- (a) makes or assist in making a report, return, notice or any 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
(b) omits to state a material fact on any of the documents referred to in paragraph (a), that will be sent to the registrar or any other person, as required by this Act, is guilty of an offence and is liable on conviction to a fine or to imprisonment for a period not exceeding 24 months or to both a fine and such imprisonment.
(3) Any person who contravenes or who fails to comply with the provisions of section 12, 19, 21, 38 and 39, is guilty of an offence and is liable on conviction to a fine or to imprisonment for a period not exceeding 24 months or to both a fine and such imprisonment.
Appeal to Minister
93. (1) A 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
94. 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.
Regulations
95. (1) The Minister may make regulations relating to- (a) the prescription of fees or the determination of fees that may be charged in
respect of the filing, verification or copying of a document in terms of this Act, or in respect of any services rendered by the registrar;
(6) the payment of any prescribed fees, including the time when and the manner in which the fees are to be paid, the additional fees that may be charged or payable for the late payment thereof and the circumstances in which any fees previously paid may be refunded;
(c) the prescription of criteria in respect of exemptions permitted by this Act; (d) the prescription of standards of accounting to be followed for the purposes of
Chapter 7 by a co-operative; ( e ) the categorisation of specific forms and kinds of co-operatives; (’ the operation or administration of specific forms and kinds of co-operatives; (g) a threshold based on a number of members or annual turnover of a
co-operative, where required by this Act, and different thresholds may be prescribed for different purposes;
(h) matters arising from, or consequential to, the transitional provisions set out in section 97;
(i) the procedure in which an amendment to the constitution of a co-operative may be made;
(j) the prescription of norms and standards to which co-operative development support programmes must conform;
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(k) the manner in which a co-operative may notify the registrar of the change of a co-operative’s details;
(I) the procedure for disqualification of a director or manager of a co-operative as contemplated in section 37(7); and
(m) generally, any matter that is necessary or expedient to prescribe for the proper implementation of this Act.
(2) The Minister may, after consulting any other relevant Minister and the Advisory Board, make regulations regarding any matter relating to the operation or administration of particular forms and kinds of co-operatives.
Delegation by Minister
96. (1) The Minister may delegate any power conferred upon him or her 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) does not prevent the exercise of the delegated power by the Minister.
Transitional provisions
97. (1) Subject to this section and despite the repeal of the Co-operatives Act, 1981 (Act No. 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 78 of this Act; and
(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
(a) amend its constitution to the extent necessary in order to comply with the requirements of this Act; and
(b) submit its constitution, to the registrar for registration in terms of section 6(2), read with the changes required by the context.
(a) issue the co-operative with a certificate stating that its constitution complies with this Act; or
(b) issue a directive to the co-operative specifying in what respect the constitution of the co-operative fails to comply with the provisions of this Act.
(4) A directive issued in terms of subsection (3)(b) may stipdate a time within which
(5) The registrar may require a co-operative that fails to comply with a directive
(a) to convert into another legal entity, in accordance with the provisions of Chapter 8; or
(b) if the co-operative does not convert, to be wound up in terms of the provisions of Chapter 9.
(6 ) This Act applies, in respect of a co-operative registered prior to the commence-
coming into effect-
(3) On receipt of an application in terms of subsection (2)(b) the registrar must-
the co-operative must comply with the directive.
issued in terms of subsection (3)(b), or that fails to comply with subsection (2)-
ment of this Act- (a) from the date of issue of the certificate referred to in subsection 3(a); or (b) after the expiry of a period of three years from the date of commencement of
this Act.
Repeal of laws and savings
98. (1) Subject to subsection (2) the laws specified in Schedule 2 are repealed by this Act.
(2 ) Anything which could have been done under the laws repealed by subsection (1) and which may be done under the provisions of this Act, is deemed to have been done under this Act.
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Short title and commencement
99. This Act is called the Co-operatives Act, 2005, and comes into operation on a date determined by the President by proclamation in the Gazette.
SCHEDULE 1
SPECIAL PROVISIONS RELATING TO CERTAIN KINDS OF CO-OPERATIVES
Part 1
Housing co-operatives
Application of Schedule
1. This Part applies to housing co-operatives which must comply with- (a) the requirements of this Part; and (b) all other relevant provisions of this Act.
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Name
2. The name of a housing co-operative must include the following words: (a) “housing co-operative” or “housing co-op;” and 15 (b) “limited” or “Ltd.”.
Constitution of 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:
(a) In respect of a primary housing co-operative- 20 (i) that its main objective is to provide housing for its members;
(ii) that, in accordance with a use agreement and subject to the provisions of its constitution, its members have the right to occupy housing units allocated to them by the co-operative for as long as they remain members of the co-operative; 25
(iii) that the right of a member to occupy a housing unit owned by the co-operative terminates once membership is terminated, in accordance with its constitution and this Part;
(b) in respect of a secondary housing co-operative, that its main objective is to provide services to primary housing co-operatives and to undertake housing 30 developments on behalf of existing or proposed housing co-operatives;
(c) in respect of all housing co-operatives, that provision must be made for the establishment of adequate reserves and the maintenance of adequate insurance to protect the co-operative from loss.
Use agreements 35
4. (1) A use agreement must be concluded between a primary housing co-operative
(2) A use agreement must set out the terms and conditions on which the member and each of its members.
occupies a housing unit.
Termination of membership 40 - ~ _ _ - _ _ _ _ ~ ~
5. (1) Despite 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
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members, 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, the member’s membership will terminate automatically upon failure to effect payment by the date specified.
(2) A person whose membership is terminated in terms of subitem (1)- (i) does not have a right to appeal the termination;
(ii) may only be re-admitted to membership if such person pays the arrears that were due at the date when his or her membership was terminated, as well as any other payments due by virtue of that person’s continued occupancy after that date, if applicable.
(3) The board of directors may terminate the membership of a member in circumstances other than those set out in subitem (I ) if there is good and sufficient reason to do so: Provided that-
(i) the board of directors gives the member concerned reasonable notice that termination is contemplated for reasons stated in that notice; and
(ii) the member is afforded the right to be heard before a decision is taken. (4) A member whose membership is terminated in terms of subitem (3) may appeal to
a general meeting, within a time limit set out in the constitution of a co-operative. (5) A decision of the board of directors to terminate the membership of a member is
confirmed if the members, at a duly called general meeting, do not reverse the decision by the board of directors.
(6) If a general meeting is called to consider the appeal of a member whose membership is terminated and a quorum of members is not present, the decision of the board of directors is confirmed.
(7) A member has the right to occupy the unit allocated to him or her until the termination is confirmed by the members: Provided that the member-
(i) has lodged the appeal to the members within the time limit set out in the constitution; and
(ii) is not in arrears with any payments. (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 item 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 the following:
(i) The collection of payments from members; (ii) the service of any notice such as envisaged in subitem (1) above; and
(iii) the institution of any proceedings to evict a person.
Exclusion
6. The provisions of the Share Block Control Act, 1980 (Act No. 59 of 1980), do not apply to a housing co-operative registered in terms of this Act.
Part 2
Worker co-operatives
Application of this Part
1. This Part applies to worker co-operatives which must comply with- (a) the requirements of this Part; and (b) all other relevant provisions of this Act.
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Name
2. The name of a worker co-operative must include the following words: (a) “worker co-operative” or “worker co-op”; and
. (b) ‘‘limited’’ or “Ltd”.
Requirements of constitution 5
3. (1) In addition to the other requirements of this Act, the constitution of a worker co-operative must provide-
whether -membership is restricted to natural persons who work for the co-operative; whether the maximum amount a member is required to contribute during the 10 first year of membership, whether by way of entrance fees, payments in respect of shares or in respect of a member loan, may not exceed half the person’s expected annual remuneration; whether the co-operative is entitled to provide employment to persons who are not members and, if so, a limitation on the number of persons that are 15 non-members that may be employed, expressed as a percentage of the number of members, which percentage should not exceed twenty five per cent; whether the period of probation to an application for membership, which may not exceed a period of two years is applicable; for the procedure for allocating, crediting or distributing any surplus earned, 20 including a provision that not less than fifty per cent of such surplus must be paid on the basis of the remuneration earned by the members from the co-operative or the labour contributed by the members to the co-operative; and whether the manner in which the membership of a member may be terminated 25 is in accordance with item 4 of this Part.
(2) The constitution of a worker co-operative may provide- (a) how work is to be allocated between members; (b) for laying off or suspending of members when there is a lack of work, and for
the recall to work of members who have been laid off and (c) for a procedure for disciplining members.
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Termination of membership
4. (1) Despite any other provisions of this Act, the constitution of a worker co-operative may give the board of directors the power to terminate the membership of
(2) Before terminating the membership of a member, the board of directors must give a member if there is good reason to do so. 35
such member- (a) notice that termination is contemplated; (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 40 member to carry out his or her duties, or to the operational requirements of the co-operative; and
(c) a right to be heard. (3) A member whose membership is terminated by the board of directors has a right
(4) A termination of the membership of a member by the board of directors is confirmed on appeal if the members, at a duly called general meeting, do not reverse the decision of the board of directors.
(5 ) If a general meeting is called to consider the appeal of a member whose membership is terminated and a quorum of members is not present, the decision of the 50 board of directors is confirmed.
to appeal to a general meeting within the time limit set out in the constitution. 45
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Laid-off member
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 of a co-operative, terminate the membership of the member.
(3) The provisions of item 4(2) to (5) apply to the termination of a member’s membership in terms of this item.
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Application of labour legislation 10
6. (1) A member of a worker co-operative is not an employee as defined in terms of the Labour Relations Act, 1995 (Act No. 66 of 1995), and the Basic Conditions of Employment Act, 1997 (Act No. 75 of 1997).
(2) Despite subsection (l), a worker co-operative is deemed to be the employer of its members who work for the co-operative for the purposes of the following Acts: 15
(a) The Skills Development Act, 1998 (Act No. 97 of 1998); (b) the Skills Development Levies Act, 1999 (Act No. 9 of 1999); (c) the Occupational Health and Safety Act, 1993 (Act No. 85 of 1993); (d) the Compensation for Occupational Injuries and Diseases Act, 1993 (Act No.
( e ) the Unemployment Insurance Act, 2001 (Act No. 63 of 2001); and (f) the Unemployment Insurance Contributions Act, 2002 (Act No. 4 of 2002).
130 of 1993); 20
Part 3
Financial services co-operatives
Application of this Part 25
1. (1) This Part applies to financial services co-operatives which must comply with- (a) the requirements of this Part; and (b) all other relevant provisions of this Act.
(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 30 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 precise nature of the financial service the co-operative aims to provide to its members, which may include the following: 35
(a) To receive and deposit money from its members; (b) to loan money to its members; (c) to invest money on behalf of its members, subject to such limitations
regarding the nature of such investments as may be provided for in its constitution or prescribed from time to time;
(d) to stand surety on behalf of its members to any person including a body corporate to the extent of the member’s deposit in the co-operative;
( e ) to provide insurance cover to its members, whether of a long-term or short-term nature;
(g) to provide funeral services to its members, including funeral insurance;
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(h) to render any other banking or financial service.
Insurance legislation
3. A financial services co-operative providing long-term or short-term insurance to its members is required to register in terms of the Long-term Insurance Act, 1998 (Act NO. 52 of 1998), or Short-term Insurance Act, 1998 (Act No. 53 of 1998), despite its registration in terms of this Act.
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Medical Schemes Act
4. A financial services co-operative providing a medical benefit to its members is required to register in terms of the Medical Schemes Act, 1998 (Act No. 131 of 1998).
Friendly Societies Act 10
5. A financial services co-operative providing funeral benefits to its members is not required to register in terms of the Friendly Societies Act, 1956 (Act No. 25 of 1956).
Establishment of self-regulatory body for financial services co-operatives
6. (1) The registrar may, in consultation with the Registrar of Banks, or Registrars of Long-term or Short-term Insurance, or the Registrar of Medical Schemes, as the case 15 may be, direct that all co-operatives to whom this part applies, or any category of co-operative to whom this part applies, belong to a secondary co-operative that will act as a self-regulatory body, in compliance with any requirement for exemption from any provision of the Banks Act, 1990 (Act No. 94 of 1990), the Long-term Insurance Act, 1998 (Act No. 52 of 1998), or Short-term Insurance Act, 1998 (Act No. 53 of 1998), or 20 the Medical Schemes Act (Act No. 131 of 1998).
(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. 25
Regulations
7. The Minister may, in consultation with the Registrar of Banks, or the Registrars of Long-term or Short-term Insurance, or the Registrar of Medical Schemes, as the case may be, make regulations regarding any matter relating to the operation or administra- tion of financial services co-operatives or any category of financial services co- 30 operatives.
Definitions
8. For the purposes of this Part “financial service” means any financial or banking service a co-operative may provide to its members, and includes the provision of long-term and short-term insurance, as envisaged in terms of the Long-term Insurance 35 Act, 1998 (Act No. 52 of 1998), or the Short-term Insurance Act, 1998 (Act No. 53 of 1998), and the business of a medical scheme, as envisaged in terms of the Medical Schemes Act (Act No. 131 of 1998), and funeral services.
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Part 4
Agricultural co-operatives
Application of this Part
1. This Part applies to agricultural co-operatives which must comply with- (a) the requirements of this Part; and (b) all other relevant provisions of this Act.
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2. The name of an agricultural co-operative must include the following words: (a) “agricultural co-operative”, or “agricultural co-op;” and (b) “limited” or “Ltd.” 10
Objectives of agricultural co-operative
3. (1) The main objectives of a primary agricultural co-operative are one or more of the following:
To-undertake the marketing of any agricultural product or anything that is derived from an agricultural product; to acquire, or to acquire control over, any agricultural product or anything derived from an agricultural product, for the purposes referred to in paragraph (i), and to dispose of it; to process an agricultural product or anything derived from it, manufacture it and dispose of the end product or of the agricultural product and anything 20 derived from it; to hire, buy, produce, manufacture, let, sell or supply services or things required for purposes of farming; to hire, buy, acquire, produce, manufacture, let, sell or supply any article for consumption; 25 to hire, establish, erect, use or make facilities available for use in connection with farming; to render services which are necessary and useful in farming; to render any other services, including services which relate to buying, selling and hiring of fixed agricultural property; to farm and dispose of farming products, process products or manufacture articles and dispose of them; and to undertake insurance business which relates to farming risks for farmers.
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(2)-The main objectives of a secondary agricultural co-operative are to- (a) provide services to primary co-operatives; 35 (b) engage in insurance business in respect of all risks; and (c) establish and administer pension funds, provident funds and medical aid
schemes.
Security for production credit and loans
4. (1) A co-operative retains ownership in respect of any debt owed to it by a farmer 40 or member if the debt arises from any transactions related to farming or agricultural purposes, including the provision of the following:
fuel, spare parts, fertilisers, plants materials, agricultural remedies, packing materials, livestock, feeding stuff, fumigating, spraying or cleansing operations or repair services, electricity, or money advanced for purposes of production. 45
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(2 ) If a co-operative gives assistance to a farmer or member- (a) the products produced or acquired by the farmer or member are deemed to be
pledged to the co-operative as if they were delivered to the co-operative, under the principles applicable in the law of pledge in the Republic; and
(b) the farmer or member is prohibited from selling the products referred to in paragraph (a) or using them as security to a third party without the written consent of the co-operative.
(3) A farmer or member of the co-operative referred to in subitem (2) is required by
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a co-operative to indicate the following: (a) The agricultural products deemed to be pledged; 10 (b) the land on which the products deemed to be pledged are being produced; (c) the exact location of the livestock which is the subject of the deemed pledge; (d) whether the products and livestock referred to in paragraphs (b) and (c) are
pledged; (e) names of other co-operatives of which the member or farmer is a member; and 15 I'JJ the extent of the debt of the member or farmer to other co-operatives and other
third parties. (4) If products cannot be found on inspection by the co-operative or its representative,
(5) If products or livestock of the member or farmer are pledged to more than one 20
(a) the products or livestock is deemed to be pledged to the co-operatives jointly to the extent of the indebtedness of the farmer or member;
(b) the co-operatives must share the proceeds of the products or livestock proportionate to their claims irrespective of which co-operative has posses- 25 sion of them; and
(c) an affected co-operative must send notice to the other affected co-operatives disclosing its interest and proof of its claim.
(6) If a farmer or member requests finance for the purposes of fanning operations
(a) the third party and the farmer or member must ask a co-operative which has a deemed pledge over the products of the member or farmer to waive its rights; and
(b) a co-operative may not refuse the request unless the estimated value of the products on the farm is insufficient to cover its debts and those of the third 35 Party-
(7) If a co-operative agrees to waive its rights in terms of subitem (6), the third party may only sell in execution, pursuant to a court order, agricultural products or livestock with the written consent of the co-operative and thereafter pay to the co-operative what is due to it. 40
(8) A co-operative may refuse to give permission for a sale in execution referred to in subitem (7) if it is of the view that the sale in execution will prejudice its claim for the debt owing and secured by the deemed pledge.
(9) (a) If there is a dispute regarding the estimated value of products, the insurer of
(b) The value given by the insurer is final and binding to all parties. (c) The request and valuation referred to in paragraph (a) must be completed within
(10) A farmer or member may use the products referred to in this item for his or her
(11) Anyone who contravenes subitems (2)(b) or (3) is guilty of an offence.
the farmer or member will be required to explain the whereabouts of the products.
co-operative-
from a third party- 30
products must be requested to evaluate. 45
seven working days.
consumption with his or her workers and family in an appropriate manner. 50
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Definitions
5. 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.
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SCHEDULE 2
LAWS REPEALED BY SECTION 98
Co-operatives Act, 1981 (Act No. 91 of 1981).