# Ontario Co-op Requirements [TOC] ## Recommendations - Strike a working group to conduct feasibility study + business plan (inc. Y1 startup costs) (~6 months) - Strike a working group to draft (modify) bylaws and articles of incorporation (~2 months) - KEY ISSUES: - Nature of Board (all? subset?) - Natute of Membership (tiers? flat?) - Nature of Capital - **Share vs. No Share**? - **Amount of member buy in** (via share or loan) - Nature of Profit/Non Status - Incl. how to manage Surplus (See P. 11 in FSCO Guide "Use of Surplus") - Get a lawyer to review our bylaws before they are adopted - Prepare a "members handbook" which: - translates (?) required documents into our processes for working, according to our values (e.g., shows where bylaws come from --> like enspiral committments?) - renders in plaintext requirements/checklists for required roles: - chairing annual meeting ("president") - secretary - finance person - talks about being a good member - links to all important historical documents - describes our process of working - Critically: What information we keep private ## Checklist of Critical Steps - [ ] Identify 3 incorporators (majority based in Canada) - [ ] Pick a co-op name that meets *Act* requirements - [ ] Do a Nuans Search - [ ] Have a head office address - [ ] Prepare articles of incorporation - Identify restrictions on business, classes of membership, stakeholder groups, share/loan capital, other provisions - [ ] Host annual meeting and adopt bylaws within 18 months ## Places to ask for help - [Ontario Cooperative Association (OCA) Advisory Services](https://ontario.coop/apply-advice) OCA can provide referrals and connections, as well as direct you to the information you need to make sound decisions and move forward with your business plan or challenge. You can contact Co-op Development Manager, Peter Cameron, at 1.888.745.5521 x 23, by email pcameron _at_ ontario.coop, or through the Co-op Development "[Advisory Services Application](https://ontario.coop/apply-advice)" --- # Reference Material ## Worker Co-ops - A worker co‐op exists primarily to create employment for its members. - All members of a worker co‐operative must be employees, but not all employees must be members... At least 75% of all employees must be members and at least 75% of permanent, full-time employees must be members. - > [name=patcon] was curious what this meant in practice, so [sketched out](Diagramming co-op membership rules https://imgur.com/gallery/AmdyFNr) - A possible pitfall of worker co‐ops may occur when there is no clear or accessible path from employment to membership. - ServiceOntario is responsible for the incorporation of co-operative corporations (co-ops) in Ontario - Financial Services Commission of Ontario (FSCO) oversees aspects of co-op regulation under the Co-operative Corporations Act. - Specific Resources: - [:page_facing_up: OCA FACT SHEET Sector Specific SS02 Worker Co-operatives](https://ontario.coop/sites/default/files/SS02_Worker%20Co-operatives.pdf) - [:globe_with_meridians: coopzone.coop](http://www.coopzone.coop/) - [:globe_with_meridians: canadianworker.coop](http://www.canadianworker.coop/) ## Developing a Co-op - [**Industry Canadas's The Seven Steps in Forming a Co-operative** (see Appendix D)](#Appendix-D---Industry-Canadas’s-The-Seven-Steps-in-Forming-a-Co-operative) PHASE I – DEVELOP THE CO-OPERATIVE BUSINESS IDEA 1. Assemble a group of interested people 2. Conduct a pre-feasibility study If this study is not conclusive, the group should re-evaluate its business idea. If this study shows that the planned co-operative is feasible, the group can proceed to the second phase. PHASE II – CO-ORDINATE THE PRE CO-OPERATIVE’S ACTIVITIES 3. Hold an organizing meeting 4. Conduct a viability study If this study concludes that, although the planned co-operative looks feasible it would not be financially viable, the group should consider terminating the project. If the study shows that the new co-operative will be financially viable, the group can proceed to the third phase. PHASE III – ORGANIZE AND START UP THE CO-OPERATIVE 5. Organize the association Set up ad hoc committees to distribute the workload among the members of the temporary board of directors. For example: - planning committee - training committee - committee to draft by-laws 6. Organize the enterprise a. Plan the operation of the enterprise b. Plan and organize the enterprise’s start-up financing c. Recruit and train the enterprise’s staff d. Ensure the legality of the enterprise’s operations 7. Hold the initial general meeting - [**OCA's 10 Steps to Develop a Co‐op** (see Appendix C)](#Appendix-C---OCA%E2%80%99s-10-Steps-to-Develop-a-Co‐op) 1. Identify a real opportunity to serve people’s needs better. 2. Begin to work with others who share your commitment to the idea. 3. Investigate the financial and market feasibility of your idea. 4. Write (or hire a consultant to write) a comprehensive business plan. 5. Determine the organizational structure that is most suitable for your business. 6. Incorporate the co‐operative. 7. Recruit and educate members. 8. Raise the necessary start-up capital, including member investment, outside investors and lenders. 9. Organize the first General Membership Meeting and elect the first Board of Directors. 10. Open for business. - [**A Technology Freelancer's Guide To Starting a Worker Cooperative** (see Appendix B)](#Appendix-B---A-Technology-Freelancer%E2%80%99s-Guide-To-Starting-a-Worker-Cooperative) 1. Find cooperators 2. Consolidate a clear vision 3. Design your process 4. Create a start-up plan that will get you up and running 5. Analyze who you really are and what you can really do 6. Feasibility check: look before you leap 7. Business Plan 8. Organizational Plan 9. Incorporation and Start-up 10. Operations - [**Huia's Starting a Cooperative One Step at a Time** (see Appendix A)](#Appendix-A---Huia’s-Starting-a-Cooperative-One-Step-at-a-Time): 1. Is there an economic need? *Initial meeting* 2. Can a cooperative offer a solution? *Exploratory meeting* 3. Is there interest from potential members? *Conduct a member survey and an initial market analysis* *Second exploratory meeting* reviewing results 4. Is the plan for a cooperative feasible? *Third exploratory meeting* reviewing feasibility analysis *Prepare a business plan* *Draft legal papers and incorporate* *Fourth exploratory meeting* review draft constitution, member agreement, and business plan *First annual meeting of the cooperative* members: - approve the constitution and member agreement - elect the board of directors *First board meeting* board members: select board officers, committee appointments, and carry out the business plan. 5. Will members commit capital & business volume? Are resources available? *Begin operations* - Specific Resources: - [:globe_with_meridians: OCA Starting a Co-operative Landing Page](https://www.ontario.coop/starting-co-operative) - [:page_facing_up: OCA Starting a Co-operative](https://www.ontario.coop/sites/default/files/Starting%20a%20Co-op%20Guide.pdf) - [:page_facing_up: OCA FACT SHEET Best Practices BP01 Developing a Co-op](https://www.ontario.coop/sites/default/files/BP01_Developing%20a%20Coop_0.pdf) ## Bylaw-ing a Co-op - One member one vote - Co-operative Corporations Act requirements [too much to know how to summarize right now] - Specific Resources: - [Model Nova Scotia Worker Co-op Bylaws](http://www.coopzone.coop/model-worker-co-op-bylaws/) - [Canadian Worker Co-operative Federation (CWCF) Bylaws](http://canadianworker.coop/about/cwcf-bylaws/) - [Model US Worker Co-op Bylaws](http://www.co-oplaw.org/legal-tools/cooperative-bylaws/) - [Sample US Worker Cooperative Bylaws](https://institute.coop/resources/sample-worker-cooperative-bylaws) - [Examples Worker-Owener Handbooks](http://www.co-oplaw.org/legal-tools/worker-owner-handbooks/) ## Incorporating a Co-op - From the Co-operative Corporations Act "*Three or more natural persons who are of the age of eighteen years or more and who intend to be members of a worker co-operative may incorporate*" - Ontario process: 1. Get a Nuans name search report from a Nuans member (~$50) 2. Complete, print and sign 2 copies of the Articles of Incorporation of a Co-operative form that applies to your situation - with Share Capital (Form 1), if the co-op plans to raise money by issuing and selling shares, borrow money and issue other forms of debt to members and non-members. - without Share Capital (Form 2), if the co-op does not plan to issue shares and will raise money through other means. 3. Gather your supporting documents - cover letter - an Ontario Nuans name search report - (if applicable) a Consent to Act as First Director form 4. Cost (~$335) It costs $335 to file Articles of Incorporation, if you’re a non-profit organization, it’s $155. 5. Submit - Specific Resources: - [:page_facing_up: OCA FACT SHEET Structure STR01 How to Incorporate in Ontario](https://www.ontario.coop/sites/default/files/STR02_How%20to%20Incorporate%20in%20Ontario.pdf) - [:globe_with_meridians: ServiceOntario How to incorporate your co-op](https://www.ontario.ca/page/start-dissolve-and-change-co-operative-corporation#section-4) - [:globe_with_meridians: Share Capital vs. Non-share Capital Co-ops](http://www.coopzone.coop/wp-content/uploads/2015/05/FACTSheet_-_Coops_with_and_without_share_capital.pdf) - [:page_facing_up: Articles of Incorporation of a Co-operative **with Share Capital**, Form 1 Co-operative Corporations Act](http://www.forms.ssb.gov.on.ca/mbs/ssb/forms/ssbforms.nsf/FormDetail?OpenForm&ACT=RDR&TAB=PROFILE&SRCH=&ENV=WWE&TIT=11377&NO=007-11377E) - [:page_facing_up: Articles of Incorporation of a Co-operative **without Share Capital**, Form 2 Co-operative Corporations Act](http://www.forms.ssb.gov.on.ca/mbs/ssb/forms/ssbforms.nsf/FormDetail?OpenForm&ACT=RDR&TAB=PROFILE&SRCH=&ENV=WWE&TIT=11378&NO=007-11378E) - [:globe_with_meridians: Co-operative Corporations Act, R.S.O. 1990, c. C.35](https://www.ontario.ca/laws/statute/90c35?search=cooperative+corporations) ## Checklists and Resources - [:page_facing_up: Ontario Co-operative Association (OCA) COMPLETE LIST OF FACT SHEETS](https://ontario.coop/sites/default/files/Complete%20list%20of%20FACTSheets%20-%20Updated.pdf) - [:globe_with_meridians: Industry Canada: Starting a Federal co-op](https://www.ic.gc.ca/eic/site/106.nsf/eng/h_00073.html#federal) - [:globe_with_meridians: Industry Canada: Starting an ON co-op](https://www.ic.gc.ca/eic/site/106.nsf/eng/h_00073.html#ontario) - [:page_facing_up: FSCO Guide to Setting up a Co-operative](http://www.fsco.gov.on.ca/en/coops/Documents/guide_coop.pdf) - [:page_facing_up: FSCO Co-op Filing Requirements and Record-Keeping](http://www.fsco.gov.on.ca/en/coops/Documents/filing_reqs_rec_keeping.pdf) - [:page_facing_up: FSCO Co-op Legal Requirements](http://www.fsco.gov.on.ca/en/coops/Documents/legal_reqs.pdf) # Appendicies ## Appendix A - Huia's Starting a Cooperative One Step at a Time _Available online: http://huia.coop/ebook.php_ 1. Is there an economic need? *Initial meeting* Focus on the economic need and the potential use of a cooperative as a solution. 2. Can a cooperative offer a solution? *Exploratory meeting* Among the items that should be discussed are: - an outline of the problem - possible solutions - cooperative terminology and principles - how a cooperative might work in this situation - advantages and disadvantages of a cooperative - the financial and other commitments that might be expected of user members - the process of conducting a feasibility study 3. Is there interest from potential members? *Conduct a member survey and an initial market analysis* - Member needs - Anticipated business volume - Location and business or service characteristics of prospective members - Opinions of potential members *Second exploratory meeting* This meeting reviews the results of the user member survey and the initial market analysis 4. Is the plan for a cooperative feasible? *Third exploratory meeting* At the third exploratory meeting, the steering committee presents the findings of the comprehensive feasibility analysis to potential user members and provides a recommendation on whether to proceed. *Prepare a business plan* Every business needs a business plan. The steering committee should arrange for an in-depth business plan to be produced by a professional who is familiar with how cooperatives provide benefits to user members. *Draft legal papers and incorporate* *Fourth exploratory meeting* At this meeting, potential members review the work and recommendations of the steering committee, including the draft constitution, member agreement, and any adjustments made to the business plan. *First annual meeting of the cooperative* At the first meeting of the cooperative, members have two very important responsibilities, which are to: - approve the constitution and member agreement - elect the board of directors While steering committee members are often board candidates, other members may also be elected to these leadership positions. *First board meeting* - The first meeting of the board of directors should focus on selection of board officers, committee appointments, and carrying out the business plan. 5. Will members commit capital & business volume? Are resources available? *Begin operations* ## Appendix B - A Technology Freelancer's Guide To Starting a Worker Cooperative _Available online: https://www.techworker.coop/resources/technology-freelancers-guide-starting-worker-cooperative_ 1. Find cooperators 2. Consolidate a clear vision Get the group together, make your case about why you want to start a co-op, and then start listening—this is now a group project! Before proceeding, you should develop a single written vision that inspires everyone in the group. You don't need to be incredibly specific at this point, but it is important that everyone understands generally what the co- op will do, and why it would be valuable to do it together rather than as freelancers. And it's important that everyone understands the basic concepts of democratic worker control (shared power, shared responsibility) and ownership (shared risk, shared reward). 3. Design your process Soon, you're going to need to start making decisions. So before going any further, it's time to develop a decision- making process that works for your group. This process will be used as you create your co-op, and will probably evolve into the governance model you use after your co-op starts up. Two main questions need to be answered: (1) who will make decisions, and (2) how will they decide? Specifically, what decisions require group discussion and decision? What decisions can be delegated to individuals or smaller groups? Will the group make decisions by majority vote? By a super majority (like 75%)? Or will the group use modified or formal consensus? The process should be very clear, especially regarding quorums, tie votes, limits on time spent in debate, and other seemingly small details. 4. Create a start-up plan that will get you up and running Spend some time studying Steps 5 through 10 below, and flesh them out into a true start-up plan. Break them down into smaller tasks, estimate completion dates and time lines, match them up with people according to relevant skills and experience, and piece them out. This is where you get to test out (and tweak) the decision-making process you created in Step 3. A facilitator, coordinator, or chairperson may be essential here to nudge people along and diplomatically ensure that things get done and that the plan stays more or less on track. Affirm that everyone is learning as they go, together. 5. Analyze who you really are and what you can really do (Member survey!) Before you go much further, take some time to do some real digging. Consider an actual survey that goes beyond people's resumes and asks open-ended and probing questions. This process always brings pleasant surprises; everybody ends up newly impressed with the group and all of the capabilities represented. So it doesn't just clarify the resources available to the co-op, it's also good for group bonding. Also, ideas for new markets and new services often arise from this process, things that people may never have considered as independent operators. 6. Feasibility check: look before you leap So, it's time for the “look before you leap” step. It's not just about an appropriate sense of caution (aka “due diligence”); it's also about making sure that all of your members are aware of all of the opportunities that are out there for you. Another reason to do this is member education - you need to be sure that everyone is making the same assumptions about your new co-op's process and expectations. Conduct a SWOT analysis—itemize your Strengths, Weaknesses, Opportunities, and Threats, and brainstorm about how to mitigate the negatives and make the most of the positives. Put together a subcommittee of the number-lovers in your group, spend some serious time with spreadsheets, and create a presentation for the whole group. Pay special attention to capitalization —although you may not need a huge investment from each member, the commitment that goes with capitalization is the heart of worker co-op success. Double-check your margin, expenses, tax liabilities, etc. Make conservative projections of your expenses and income. Create optimistic and pessimistic scenarios, and make sure everybody knows, and is committed to, the collective risks. 7. Business Plan “Putting it all together”: A traditional business plan usually contains: an executive summary, a company summary, an itemization of products and services, a marketing plan, a management summary, a financial plan, and any supporting documents. It's important that your business plan clearly explain financial and other risks to participation so that your prospective members can make an informed decision before they invest their time, energy and capital. (So, again: if you're starting small and self- capitalizing, you may not need a very formal business plan. If you need to attract members or borrow start-up capital, you'll need to be much more formal.) 8. Organizational Plan Based on your choice of legal structure, create your fundamental chartering documents, governance and operating procedures. Among other things, these should cover initial member capitalization, ownership, decision-making, profit distribution, succession, member exit, and dissolution procedures. If you've developed your own documents, you should have an attorney at least review them before you proceed. You should also create an initial operating plan to describe the policies and procedures of your co-op as you imagine it working. 9. Incorporation and Start-up File any required organizational chartering documents and wait for their approval; register your business with your city or locality; Collect initial capital contributions (“buy-in”) from your initial members; set up bookkeeping and open a bank account; investigate and acquire business insurance. 10. Operations You're done! Oh, wait—you're just beginning. Start operating your business! Broadcast your new identity proudly to your clients, or advertise to find new customers. ## Appendix C - OCA's 10 Steps to Develop a Co‐op _Available online: [:page_facing_up: OCA FACT SHEET Best Practices BP01 Developing a Co-op](https://www.ontario.coop/sites/default/files/BP01_Developing%20a%20Coop_0.pdf)_ This 10‐step list is deceptively simple. Starting a business, whether a co‐operative or a private business, is a complex human activity. It requires perseverance, courage, entrepreneurship, the ability to sell, organizational, interpersonal and negotiation skills, management ability, and leadership. These qualities are rarely exhibited by one individual, but a group of people who pool their skills, experiences, and resources, will likely find all of these qualities amongst themselves. This is the fundamental reason co‐operatives work so well: people work together to accomplish something they could not accomplish on their own. You may also be wondering how long this process might take. That will depend on your group’s situation, how often you can meet, how complicated your proposed business is, your group’s access to support and resources, timing and other factors. Given all of these variables, **you can expect to spend many hours over the course of weeks or months before you’re ready to open for business**. 1. Identify a real opportunity to serve people’s needs better. 2. Begin to work with others who share your commitment to the idea. 3. Investigate the financial and market feasibility of your idea. 4. Write (or hire a consultant to write) a comprehensive business plan. 5. Determine the organizational structure that is most suitable for your business. 6. Incorporate the co‐operative. 7. Recruit and educate members. 8. Raise the necessary start-up capital, including member investment, outside investors and lenders. 9. Organize the first General Membership Meeting and elect the first Board of Directors. 10. Open for business. ## Appendix D - Industry Canadas's The Seven Steps in Forming a Co-operative _Available online: http://www.ic.gc.ca/eic/site/106.nsf/eng/h_00073.html#seven_ PHASE I – DEVELOP THE CO-OPERATIVE BUSINESS IDEA Step 1: Assemble a group of interested people - Identify the needs to be met: - unavailability or instability of work, - unavailability of certain products and services, - poor quality of certain products and services, - products and services that are overpriced, - market development. - Identify professional assistance needed to launch the business: - co-operative developer, - feasibility study, business plan and financial consultant, - accounting consultant, legal consultant, others Step 2: Conduct a pre-feasibility study - Conduct a preliminary market review - Identify available technical and financial assistance - Assess receptiveness to the co-operative business in the local community - Evaluate if the co-operative is the best legal framework to use or if the kind of co-operative selected is the most suitable - Define the intended benefits of the co-operative for members, (eg. quality, price) and characteristics: - products and services offered (consumers’ co-operative) - or products and services marketed (producers’ co-operative) - or salaries and working conditions (workers’ co-operative) - Evaluate the project’s potential to attract the minimum number of members required. If this study is not conclusive, the group should re-evaluate its business idea. If this study shows that the planned co-operative is feasible, the group can proceed to the second phase. PHASE II – CO-ORDINATE THE PRE CO-OPERATIVE’S ACTIVITIES Step 3: Hold an organizing meeting - Choose the corporate name of the co-operative and the location of its head office - Define the co-operative’s mission (objectives, purpose) - Elect a temporary board of directors and secretary to the board - Officially submit an application for incorporation as a co-operative from the provincial ministry responsible for co-operatives or from Industry Canada, if you are incorporating federally Step 4: Conduct a viability study - Obtain financing for the viability study from such sources as: - internal financing by the members - special grant - and/or negotiate a technical assistance or business start-up agreement with a specialized organization. - Define the strategic objectives - Evaluate the various strategic scenarios, production costs, and human, material and financial resources necessary - Evaluate the various start-up financing scenarios - Do a preliminary projection of budgeted statements and of a cash budget (revenues and expenditures, investments by members in share capital, partners, credit union or bank loans, grants). If this study concludes that, although the planned co-operative looks feasible it would not be financially viable, the group should consider terminating the project. If the study shows that the new co-operative will be financially viable, the group can proceed to the third phase. PHASE III – ORGANIZE AND START UP THE CO-OPERATIVE Set up ad hoc committees to distribute the workload among the members of the temporary board of directors. For example: - planning committee - training committee - committee to draft by-laws Step 5: Organize the association - Decide on the association’s structure and define the various categories of members, if necessary (consumers, suppliers, workers) - Determine the roles and responsibilities of the various democratic bodies (general meeting, board of directors, committees) - Establish the articles and by-laws - Recruit members - Organize and offer a program to train members in the administration and management of a co-operative, the chairing and running of annual meetings (eg. “parliamentary procedure”), the operation of a committee or board. Step 6: Organize the enterprise Step 6.A: Plan the operation of the enterprise - Draw up an organization chart of the enterprise - Do the operational planning for the first year of activities - Negotiate contracts for the supply of necessary products and services (inputs) and, as required, sales or marketing contracts (depending on the kind of co-operative and the nature of the enterprise) - Devise and implement an accounting system - Define the duties and responsibilities of each position - Develop a salary policy - Select and recruit the person to occupy the position of chief executive officer/general manager Step 6.B: Plan and organize the enterprise’s start-up financing - Determine the value of the membership share to become a member - Determine the value of the share capital on start-up and during the first three years of operation (in terms of the expected growth in the number of members) - Prepare the preferred share by-laws (if applicable) - Prepare the loan by-laws (if applicable) - Draw up the overall financing plan for the first three years of operation - Draw up the business plan - Negotiate the capital contribution of external financial partners (if necessary); venture capital corporations, private funds or credit union investment programs - Apply for a government start-up grant (if they are available and if required) - Negotiate medium term credit union or bank loans and a line of credit Step 6.C: Recruit and train the enterprise’s staff - Select and recruit employees (responsibility of chief executive officer, except in the case of a worker co-operative where recruitment decisions are usually made collectively) - Organize and offer a staff training program - Organize and offer a co-operative training program Step 6.D: Ensure the legality of the enterprise’s operations Take care of the legal formalities and obtain the legal authorization necessary to start up the enterprise’s activities: - federal: employer numbers for government discounts, for GST/HST) for, Canada Revenue Agency - provincial: numbers for the provincial revenue department, for provincial tax - co-operatives may also have to register with, or be licenced by, other legislation or federal or provincial departments - municipal: municipal permit, employer number, etc. Step 7: Hold the initial general meeting - Adopt the by-laws - Adopt the business plan - Approve the co-operative’s membership in a sectoral federation or an intersectoral interco-operative organization - Appoint an external auditor - Elect the members of the board of directors, and of any other committees (if the general meeting has the power to do this)
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