Co-op Management
Who can be on a co-operative's board of directors?
The majority of the directors must live in Canada and at least one must ordinarily live in British Columbia. Directors must be at least 18 years old.
A co-op's Rules may allow up to one-fifth of the board members to be non-members so that investment shareholders or other interests can be represented.
Section 79 of the Act sets out further qualifications for directors, and notes that co-ops can provide for additional qualifications in their Rules.
How is a co-operative's board of directors established?
Co-op members elect a board of at least three directors. Every year at the annual general meeting members confirm the election of directors and elect new directors to replace those members whose terms of office have expired or will expire at the end of the meeting.
How much are directors paid?
At each annual general meeting, members of the co-op determine the remuneration, if any, for directors, including how much will be allowed for expenses.
What is the responsibility of directors and officers?
A co-op's directors must manage the business of the co-op directly, or supervise its management by the co-op's officers.
Directors and officers have a duty to act honestly, in good faith and in the best interests of the co-operative. They must exercise the care, diligence and skill of a reasonably prudent person. The co-op's Rules may set out additional duties and liabilities of directors.
Directors or officers who receive or have charge of the co-op's money will be required to provide security (e.g. bonding under the Bonding Act).
Can members overrule a decision made by the directors?
Members elect directors to manage the business of the co-op and to make decisions on their behalf. Members who do not agree with the general direction of the board can vote to replace directors as their terms expire.
If there is a significant concern related to the direction the board has taken on a specific issue, the Act provides that a specified number of members may ask the board to call a special general meeting to address the issue.
Can a co-op indemnify directors from personal liability for actions taken by the
co-op?
Co-ops can buy insurance to protect directors and officers from liability.
Even without insurance, the new Act reduces costs and uncertainty by making it easier for co-ops to indemnify directors and officers against personal liability for the actions of the co-op, including judgments, fines and settlements. Previously, all indemnifications had to be approved by the court.
Indemnification is not available if directors or officers fail to act in good faith, honestly and within the law.
Co-ops can pay the actual and reasonable expenses experienced by directors and officers during a proceeding as long as the director or officer agrees in writing to pay back these expenses if it is determined that the payment is prohibited under the Act. In these circumstances, co-ops should seek professional advice.
How do directors declare a conflict of interest?
Directors or officers must declare a conflict of interest right away and abstain from voting on a contract or activity that would benefit them directly. If they fail to do so, a member or shareholder may ask the court to prohibit the co-op from entering into the contract or require that the director or officer account for any resulting profits.
The Act sets out situations that are not considered a conflict, such as a loan to the co-op or a transaction that benefits all co-op members. The Act requires that directors or officers disclose declared conflicts to members and investment shareholders at the next annual general meeting unless the disclosure would harm the business of the co-op or its subsidiaries or if a court has waived or deferred disclosure.
Can a director be removed?
A director can be removed through a special resolution before their term of office expires. The ensuing vacancy can be filled through a resolution requiring a simple majority to pass.
Can directors authorize investments or borrowing?
The board of directors may borrow and invest on the co-op's behalf. Under the Act, co-operatives may choose to place a limit on the amount that directors can borrow, how much they can invest outside of the co-operative, and the type of investments.
Where and how can a board of directors meet?
The new Act allows board meetings to be held outside B.C. with the Registrar's approval, and also allows participation by telephone or any other communications means as long as all participants can communicate with each other. Directors can also conduct business by written resolution signed by all directors.
More information about co-operatives in British Columbia is available at the Ministry of Finance and at the Canadian Co-operative Association - BC Region. [BROKEN LINK]