What is a bonafide cooperative?
There is no legal definition of “a bonafide cooperative”, but there are criteria identified founded by the FSA or The Financial Services Authority. The criteria are as follows:
1. perform of the business should be of mutual advantage to its fellow members and the benefits that they receive arise primarily from their involvement in the business.
2. Public scrutiny must be allowed to all members. All are entitled a vote in business’s affairs.
3. curiosity on capital does not exceed the level required to achieve and maintain sufficient capital to run the community and achieve its objectives.
4. income distributed amongst fellow members will be in proportion to the extent of the involvement of the fellow members in the society’s business.
5. The membership rights should not be artificially limited to increase the value of property, rights and interests.
The goal is to ensure genuine interest among members of society based on something other than the amount of capital that they have invested in the society.
How is it judged that the community runs in public interest?
A community “in the public interest” must show that:
1. Operations are run primarily for the benefit of persons, who are not members of the community and are beneficial to the whole society,
2. Rules of the society do not allow earnings or assets to members. Earnings are reinvested in the business.
3. The group has a particular reason to enroll in the segment of the commercial and provident society rather than as a business corporation.
4. On dissolution of the assets, they will be transferred to another organisation with equivalent objects and not to its members.
Examples of industrial & Provident societies include cooperative retails, clubs, local associations etc.
Some famous commercial & Provident societies in UK are:
1. FC United of Manchester:
It is a semi-professional club of English football from Bury, Greater Manchester that participates in the Northern Premier League Division. It was formed in 2005 by the assistance of Manchester United against the controversial businessman Malcolm Glazer’s taking over of the club.
assistance of the club have a say in how the club is run. One can obtain a fellow membership by depositing a fee of £ 12 per annum to the club. Each member is a part of the club and is authorised to vote at the meetings, irrespective of the amount of donation.
2. Ford Hall Farm:
It is an organic farm on 128 acres of land in marketplace Drayton, North Shropshire, England. It is owned by an industrial & Provident Society referred to as Ford Hall community Land Initiative (FCLI), which aims to use the land for the benefit of society.
3. Shared interest Society Limited:
It is a fair Trade cooperative in the UK. Today it finances importers, exporters, fair trade producers and retailers in the world. In 2004 it was formed as a subsidiary charity and has been providing training and support to manufacturers by the complementary financial services provided by the business.