Preferred shares
The share capital of cooperatives.
Understanding Shares
A cooperative must be adequately capitalized if it wants to achieve its mission and ensure its sustainability. Among the funds necessary for its operation, it can count on its share capital: all the shares in which its members and its community have invested, or, in other words, the members’ equity on the balance sheet.
But what exactly are we talking about?
A cooperative share can be compared to a company share. It is a capital security. But unlike in the case of corporations, holding a large number of shares does not give more powers within the cooperative.
There are three types of shares.
- Reserved
For cooperative members, the shares are registered and have a value of $10. They are issued in the name of a member (natural or legal person). They offer no interest income and do not increase in value.
- The board of directors may be authorized by by-law to issue preferred shares. It determines the conditions by resolution: interest, term, value, etc. Preferred shares may be issued to cooperative members (individual or corporation) and non-members (depending on the exemptions permitted). However, holding preferred shares does not in itself give access to the rights reserved for members (e.g. voting rights).
- Participating preferred shares are adopted by regulation at a general meeting. Intended for non-members only, they are rarely used. Their holders may, if regulations allow, participate in the general meetings and financial results of the cooperative, but without the right to speak, vote or stand for election to the board of directors. They can generate interest income and surplus sharing.
And the qualifying shares?
The qualifying shares are the minimum number of shares or preferred shares to which each member of the cooperative is required to subscribe. Each cooperative determines the amount and composition of its qualifying shares in its general by-laws. They can be modified at the general meeting according to the needs of the company.
What are the shares used for?
By issuing shares, the co-operative obtains the funds necessary for its operation; it increases its liquidity for its current needs and development prospects; it reduces the burden of its debt and increases its financial autonomy. Finally, it activates a lever for obtaining external financing.
Local social economy enterprises tell their stories
Courant Alternatif is a worker cooperative which collaborated with its members by issuing preferred shares. See how it did so through the testimony of cooperative member Simon Leclerc, and discover the advice of Sébastien Girard of the Coopérative de développement régional du Québec !
Be careful!
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- Issuing shares is an important action that should not be done lightly under any circumstances. Since these are securities, many formalities are required.
- In addition, every cooperative has a duty to manage with foresight the sums it collects from its members to support its activities. This capital contribution is a testament to the members’ involvement and their confidence in their co-op. It is important to be transparent and to carefully maintain this bond of trust, since it is a major component of what guarantees the success of any cooperative enterprise.
- When a member requests the reimbursement of his shares, they become a debt for the cooperative.
By the numbers*
3 000
The number of cooperatives and mutuals active in Quebec
8,8 M
The number of producers, consumers and workers in cooperatives
60 000
The number of people working in cooperatives
18,6 G$
The overall annual revenue of cooperatives in Quebec
*Source: CQCM