Harbour Co-op Constitution

The following is a summary of the important points in the Harbour Co-op constitution. As a co-operative company, the Co-op is governed by the Companies Act and the Co-operatives Act, in addition to its own constitution, so the legislation and the constitution should also be read for a definitive understanding; this page is just intended to bring the main points to your attention, and present them in a more readable form.

You can download a full copy of the constitution here.

You may also be interested in the following legislation, which controls much of the way that the Co-op runs:

Summary of the Harbour Co-op Constitution

Contents

Shares

Distributions

Shareholder Meetings

Directors

Other Provisions

Shares

Types of Shares

There are two main types of Harbour Co-op shares: Transacting Shares, and Supporting Shares. A Transacting Share is a share that is held by a someone who does business of some sort with the Co-op, and having a Transacting Share is what makes that person a member of the Co-op. Supporting Shares are additional shares that transacting shareholders can purchase in order to provide additional financial assistance to the Co-op, in return for a modest return.

Transacting Shares

Each person or organisation can only hold one Transacting Share, and this share gives them the right to one vote at shareholder meetings.

If the board decides to give rebates in a particular year, the value of the rebate for each shareholder will be in proportion to the amount of business that the shareholder has done with the Co-op in that year. i.e. the more that you have purchased from or sold to the Co-op, the larger your rebate.

The are different types of Transacting Shares, corresponding to the different ways that someone might do business with the Co-op. These are as follows:

Household Shares These are held by individuals or households (i.e. 2 joint owners who live at the same address) who shop (or intend to shop) at the Co-op.
Institutional Purchaser Shares These are held by businesses or organisations that purchase goods or services from the Co-op, in bulk.
Producer Shares These are held by individuals or businesses that sell goods or services to the Co-op.
Employee Shares These are held by Co-op employees.
Supporting Shares

Supporting Shares can only be issued to those who hold a Transacting Share of some sort.

If you hold Supporting Shares, you will receive a fixed preferential dividend of 2% of the value of your Supporting Shares, on an annual basis, provided that the Co-op can afford to pay a dividend.

Supporting Shares do not give you any voting rights in addition to the voting rights you have as a transacting shareholder.

The board may set a minimum number of Supporting Shares that can be purchased (if any) from time to time. Initially the minimum is set at 500.

Shareholder Rights

Shareholders exercise their rights to have a say in how the Co-op is run, at shareholder meetings, where shareholders:

  • must be given a reasonable opportunity to question, discuss, or comment on the management.
  • make decisions regarding the Co-op by voting on resolutions
  • decide who will sit on the board of directors.

Shareholders make decisions regarding the Co-op by voting on resolutions. The Companies and Co-operative Acts outline a variety of things that shareholders have the right to vote on and the Co-op may also give shareholders the opportunity to vote on other matters. Voting can take place at the annual meeting, which must be held every year, or at special meetings of shareholders.

Special meetings can be called at any time by the board, or by shareholders. If you, as a shareholder, want to call a special meeting, you and at least 5% of the shareholders who are eligible to vote must make a written request to the board, and the board will then call the meeting.

In most cases over 50% of the shareholders voting on a resolution must be in favour for the resolution to pass.

However, 75% support of those voting is required if the Co-op is to do any of the following:

  • alter or revoke the constitution
  • approve a high value transaction (i.e. a transaction worth more than half of the current value of the co-op)
  • approve an amalgamation
  • put the co-op into liquidation or appoint a liquidator
  • unregister the co-operative

If the Co-op wanted to change the rights that the constitution gives shareholders, the board would have to notify all the shareholders of a shareholders meeting, and at that meeting, at least 75% of the voting shareholders affected by the change would have to approve the change.

If a resolution is passed at a meeting, the Co-op must send a copy of the resolution to all the shareholders who did not sign the resolution, within 5 working days.

Issue of Shares

The Co-op will issue Household shares continually, and Supporting Shares from time to time – for example, if funds are needed to support some particular Co-op plans. The Co-op also plans to offer Producer shares, Institutional Purchaser shares, and Employee shares in the future.

Before offering shares, the Co-op will decide on the price to be paid for those shares. If a share is later redeemed, the Co-op will pay the shareholder the value that the share was worth when it was issued (or the amount that has been paid up on it, if it has not yet been fully paid up).

The price for Household Shares has been set at $365 per share.
The price for Supporting Shares has been set at $1 per share, with a minimum purchase of 500 Supporting Shares, if any.
The prices for Producer, Institutional Purchaser, and Employee shares have initially been set at $2,000, $1,000 and $365 respectively, but these values will be reviewed before any shares of these share classes are offered.

Shareholder Liability

If the Co-op encountered any financial difficulties, the only amount that a shareholder would be liable to pay would be any portion of their share that they had not fully paid.

Redeeming Shares

You can choose to redeem your transacting share (e.g. household share), giving up your Co-op membership, and getting your $365 share price back, in any of the following circumstances:

  • You are no longer shopping at the Co-op and haven’t shopped at the Co-op at any time during the preceeding year.
  • You are no longer in a position to shop at the Co-op e.g. if you have moved out of the area.
  • You have had the share for 2 years of longer.
  • The Co-op has not purchased the Lyttel Piko business by the end of August 2012.

The board can choose to redeem your household share, in any of the following circumstances:

  • You haven’t shopped at the Co-op in the last year, and the board believes you are not likely to do so in the immediate future.
  • You have behaved in some way that seriously threatens or obstructs the Co-op.
  • The Co-op has not purchased the Lyttel Piko business by the end of August 2012.

You or the board can choose to redeem any supporting shares you might have, after you have held the supporting shares for 2 years, or if the Co-op has not purchased the Lyttel Piko business by the end of August 2012.

In any case, your shares can only be redeemed if the Co-op can satisfy the Solvency Test.

Solvency Test

The board is not able to take some actions, such as redeeming shares, or making distributions, if it is not able to satisfy the solvency test. This means that the Co-op must be able to pay its debts as they become due in the normal course of business, and the value of the Co-op’s assets must be greater than the value of its liabilities, including contingent liabilities, immediately after taking the action in question.

Transferring Shares

You can transfer your share(s) to someone else, with the approval of the board, but it will be up to you to organise the transfer and any payment. The board will normally approve the transfer, provided that there is no money owing on the share, and the person you are transferring the share to is eligible to hold it. However, it would be more usual to redeem your share, rather than transfer it.

Forfeiture of Shares

If you owe money on a share and do not pay that money by the due date, the Co-op can notify you in writing that you are required to pay the overdue amount, along with any interest and expenses, by a specified date (at least 10 days following the date of the written notice). If the payment is not made by that specified date, your share can be forfeited, meaning that you will no longer hold that share or have the right to any unpaid dividends associated with that share.

Share Register

The Co-op maintains a share register detailing the names and addresses of all shareholders, the number and type of shares held, and the date the shares were issued. The share register is available on the http://www.harbourcoop.co.nz website.

Financial Assistance

The Companies Act specifies that if a company was to provide financial assistance to help someone purchase shares (which includes allowing someone to pay off their share over time), the company would have to, at minimum, notify all the shareholders about the financial assistance, letting them know all the details of the financial assistance, including the name of the person being assisted. We feel this is unsuitable in the context of the co-op, and this is why, when you apply for a Co-op share, you must indicate that you agree that the Co-op can allow people to pay off their shares over time without having to ask you for your consent and without notifying you about the financial assistance each time it is offered to another shareholder.

Distributions

The board may, at its discretion, issue distributions to shareholders, provided that the Co-op will satisfy the solvency test after doing so. A distribution may take the form of a payment, shares, vouchers, or loyalty points. The value of the distribution will be in proportion to the amount that the shareholder has spent at the Harbour Co-op in the immediately preceding year. i.e. if the board decided to give rebates in a particular year, if you had spent $5,000 at the Co-op during the year, the rebate you would receive would be 5 times larger than the rebate for someone who spent $1,000.

Shareholder Meetings

Proceedings

Shareholder meetings are chaired by the chairperson of the board, if he/she is present; otherwise the shareholders present choose a shareholder to chair the meeting.

The chairperson can adjourn the meeting until another time and/or place. The adjourned meeting can just be announced at the meeting, rather than being notified in writing, provided it is to take place within 30 days. At an adjourned meeting, only the business that was not finished at the original meeting can be conducted.

Written notice (e.g. by email) of the time and place of the shareholders meetings will be given to every shareholder some time between 10 and 30 working days before the meeting. The notice will indicate the business that will be conducted at the meeting, and the text of any special resolution that will be voted on.

Business can only be transacted at a meeting if a quorum (a minimum number of shareholders) is present. A quorum at a shareholder meeting is 10% of the total number of members, if the Co-op has 300 or fewer members, or the lesser of 5% or 50 if the Co-op has more than 300 members.

If a quorum is not present within 30 minutes of the meeting start time, the meeting is dissolved if it was originally initiated by the shareholders, or adjourned if the meeting was originally initiated by the board.

The board will ensure that minutes are kept at all shareholder meetings. The minutes will be signed as correct by the chairperson, and function as evidence of what happened at the meeting.

Method of voting

The chairperson will indicate at the meeting whether voting will be by voice or show of hands. Alternatively, a poll can be used. This can be initiated by the chairperson, or by at least 5 shareholders, or by at least 10% of the shareholders at the meeting. The poll can be initiated either before or after the vote has been taken on a resolution. The chairperson does not have a deciding vote.

The board may decide that voting on certain issues can be done by post. In this case, the board will let you know that postal voting is allowed, when they give you notice of the meeting.

Proxies

As a shareholder, you can vote in person, or by proxy. This means that, if you cannot go to a meeting, you can appoint someone else to go in your place, and vote on your behalf. To appoint a proxy, you must email or write to the secretary to let him/her know who your proxy is, at least 48 hours before the meeting. You should also indicate whether that person is your proxy just for the next meeting, or for an indefinite period of time.

If you have joint ownership of a share, the first Shareholder listed for the share has the right to vote. As the first shareholder, you can appoint your joint shareholder as your proxy if you wish them to vote on your behalf.

Money Owing

If you have an overdue share payment, you may not vote at shareholder meetings.

Shareholder Proposals

If you want to raise a matter of discussion or a resolution at the next shareholder meeting, you should write to or email the board, at least 30 working days before the meeting. The board will then notify the shareholders about the proposal. If you miss the 30 day deadline, but still notify the board at least 15 days before the meeting, the board will still notify the shareholders, but you will be required to pay any costs associated with doing so.

If the matter you have raised is something that will be voted on, you can give the board a statement of not more than 1000 words in support of the proposal and the board will send this, along with your name and address, to the shareholders when they notify them of the meeting.

Directors

Appointment and Rotation

The initial board of directors was formed from the steering committee responsible for setting up the Co-op. Members of the initial board will be progressively replaced or reappointed each year at the annual meeting.

Each director can serve on the board for up to 3 years before offering himself or herself for re-election, and each year, one third of the board will be up for re-election. The purpose of this rule is to ensure that at any one time only a portion of the board is new, to maintain continuity. If less than one third of the board members have completed their 3 year term (as will be the case at the first and second annual meetings), the board will determine which of the seats are up for re-election, usually by drawing a lot.

Directors must give their consent in writing before they can be appointed.

Directors are appointed by a vote of over 50% of the voters at a meeting.

A director can be removed from office by a vote of over 50% of the voters at a meeting called for the purpose of removing the director.

Distribution of board seats amongst share classes

If the Co-op membership includes shareholders of multiple share classes (i.e. producers, institutional purchasers, and employees, in addition to householders), the board will reserve a certain number of seats on the board for representatives of each share class. This means that the shareholders of that share class are responsible for voting one of themselves into each of those seats. Some seats may remain unreserved, in which case all shareholders can vote to fill that seat, and the seat may be filled by someone from any share class, or by someone who is not a shareholder.

When reserving seats, the board will, where practical, attempt to do so according to the following rules:

  • 1 seat will be reserved for the managing director
  • up to 4 seats may be reserved for persons who are not Transacting Shareholders (e.g. people with expertise needed by the board, or community representatives).
  • Between 1 and 3 seats may be reserved for Producer Shareholders, with 1 seat being reserved for each 10 producer shareholders.
  • 1 or 2 seats may be reserved for employee shareholders, with one seat being reserved for every 5 employee shareholders
  • 1 or 2 seats may be reserved for institutional purchaser shareholders, with one seat being reserved for every 10 institutional purchaser shareholders.
  • 3 to 7 seats may be reserved for household shareholders.
  • If there are insufficient shareholders within a share classes to require a seat to be reserved for that share class, the board may reserve a seat for that share class or may reserve a seat to be voted for by holders that share class and other share classes.

The intention of these rules is to ensure that the various stakeholders are represented on the board in proportion to the stake they have in the Co-op, with no one group having a majority of the seats.

The board may appoint anyone to be an additional director, to fill a casual vacancy, or as an addition to the existing directors. That appointed director will only hold office until the next annual meeting (rather than having a 3 year term).

Alternate Directors

A director may appoint any person to attend meetings, vote, and sign resolutions on his or her behalf, when the director is not present.

Powers and Duties of the Directors

The board is responsible for managing or supervising the management of the Co-op.

The board may appoint a managing director, and may give that person whatever powers it sees fit.

Directors have a duty to act in good faith and in the best interests of the Co-op.

Directors must not act or agree to the Co-op acting in any way that contravenes the Co-op’s constitution, the Companies Act, or the Co-operatives Act.

Directors must not agree to any actions likely to create a substantial risk of a serious loss to the Co-op’s creditors, and must not agree to any obligations unless they believe that the Co-op will be able to fulfil those obligations when required.

Directors must perform their duties with the appropriate care, diligence and skill, taking into account the nature of the Co-op, the nature of the decisions they are making, and the nature of their responsibilities as directors.

Directors may rely on reports and other information supplied by professionals, experts, or employees who are believed to be competent in relation to the information they are providing, as long as the directors act in good faith, make appropriate inquiries, and have no reason to believe that they should not rely on the information provided to them.

Self-interests

Directors must enter details of any interests they have in a proposed transaction, in the interests register, unless the transaction is between the co-op and the director, or if the transaction is to be entered into in the ordinary course of the Co-op’s business and on usual terms and conditions.

If the company does not receive fair value for a transaction that a director had an interest in, the transaction can be invalidated by the company within 3 months of the transaction being disclosed to all shareholders.

A director can attend meetings about, sign documents related to, and vote on a transaction that he or she is interested in.

Use of Co-op information

Directors must not disclose or use any information that they have obtained due to their capacity as directors or employees of the Co-op, except for the purposes of the Co-op, or as required by law, or as allowed by the Companies Act.

The constitution details some circumstances in which a director who has an interest in a transaction can disclose or use information.

Directors Meetings

Directors elect one of themselves to be the chairperson.

A director can call a board meeting by giving at least 2 working days’ notice to all of the directors, detailing the date, time and place of the meeting, and the matters to be discussed.

A board meeting can still proceed without proper notice being given if all of the directors agree, or attend without protesting the irregularity.

To transact any business at a board meeting, more than 50% of the board members must be present.

Each director has one vote, and the chairperson does not have a casting vote. A resolution is passed if all directors present agree, or if a majority of the votes cast on it are in favour.

A director present at a board meeting is presumed to have agreed to a resolution unless he or she abstains from or votes against the resolution.

The board will keep minutes at the board meetings.

The board can pass a resolution without having a meeting, if all of the directors agree to the resolution in writing. A copy of the resolution must be entered into the minute book of board meetings.

Other Provisions

Contracts

The Co-op can enter into a contract if the contract is signed under the name of the Co-op by two or more directors, or by an attorney appointed by the company.

Company Records

The Co-op must keep the following documents at its registered office:

  • the constitution
  • minutes of all meetings and shareholder resolutions within the last 7 years
  • certificates given by directors within the last 7 years
  • full names and addresses of the current directors
  • copies of all written communications to all shareholders or all holders of the same class of shares during the last 7 years, including annual reports
  • copies of all financial statements for the last 7 completed accounting periods.
  • accounting records for the current accounting period and for the last 7 completed accounting periods.
  • the share register

Accounts

The board is responsible for ensuring that accounting records that correctly record and explain the Co-op’s transactions are kept. The accounting records must enable the board to determine the financial position of the company with reasonable accuracy.

Annual Report

The board must prepare an annual report within 5 months after the balance date of the company (i.e. by the end of August). At least 20 days before the annual meeting, the board will notify the shareholders to let them know that they can request a copy of the annual report and that they can download a copy from the Co-op’s website.

Auditor

Because the Co-op offers shares to the public, it must appoint an auditor each year to audit the financial statements.