Commentary on Cooperative By-laws

Introduction

If you were to ask about the main feature of a cooperative, you would likely be told that it is an association of people where there is no boss... This is both true and false. While a cooperative is a company run democratically by theoretically equal members, we often forget that there are many types of democracy: from direct democracy where everything is decided collectively, to the other extreme of representative democracy, where most of the powers are centralized with a manager and in which the members meet only once a year in a general assembly. In between, we find different structures of division of powers. The more numerous and complex the decisions, the clearer the division of powers must be. Many decisions cannot be made arbitrarily by the leaders of the cooperative; the members need to set rules to guide decisions regarding the governance of the cooperative.

It is therefore essential that a set of regulations adopted by the General Assembly guide managers in the management of the cooperative. In practice, the General Assembly adopts internal by-laws at the founding of the cooperative and it alone has the power to change them later. We advise you to take particular care in drafting these by-laws and especially that all members fully understand them, because they form the foundation on which the whole democratic edifice of the cooperative is built. The internal by-laws must also be seen as a didactic tool. It not only allows members to better understand certain characteristics of their cooperative but can also be used to inform members of some of their rights. It may therefore be appropriate to include some general information that is not necessarily specific to the cooperative concerned. For example, the acceptable delay for calling an annual general meeting after the end of the fiscal year or the rules of convening an extraordinary general meeting. Although these components are based on law, we recommend integrating them into internal by-laws. This information may be useful for members who, for the most part, will not be inclined to consult the law.

It is important to understand that the internal by-laws are a living document that must adapt to the evolution of the cooperative. One can also add to it, as necessary, other regulations or appendices such as a labor agreement, disciplinary rules, a member of contract, etc. In most cases, the regulations will be adapted and modified several times during the early years of the cooperative. In its first version, the internal by-laws should therefore not be too comprehensive and detailed, so as not to tie the hands of the directors and management in unexpected situations. These are often the experiences that will help to identify additional items that should be incorporated into the by-laws. While detailed regulations give more guidance to leaders and managers, they also limit their discretion to act as appropriate. In the event that an item of the by-laws prevents the board or a director from properly managing a situation, a General Assembly should be convened and amendments should be proposed to the regulation. It is therefore up to the General Assembly to determine the level of autonomy that it wants to grant to its officers and managers.

Some elements of the internal by-laws are immutable because they must correspond to the law of cooperatives, while others are determined by the members. In drafting the by-laws, it is essential to always refer to the law of cooperatives because it sets the minimum basis of internal by-laws. Any article, provided it does not contradict any law and does not infringe rights protected by law, can be integrated into the by-laws. We suggest consulting a specialist to advise on the nuances of such documents. The attached framework includes only recognized models of by-laws. Cooperatives do not have to be limited to these models, but it should be useful when drafting a first revision of the by-laws.

Requirements of the Law on Cooperatives

  1. The items marked with an asterisk (*) must be adopted by the General Assembly and entered into the by-laws to apply.
  2. Articles marked by two asterisks (**) correspond to articles of law. They are therefore included in the by-laws for informational purposes only.

Commentary Structure

Each by-law has a corresponding commentary page. Each chapter and article of the by-laws is linked to its matching section in the commentary. These are marked with a question mark icon (). Likewise, each section in the commentary is linked back to its matching chapter or article with a bookmark icon ().