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M1: Learner Manual

11. Legal Requirements

Associations and co-operatives must comply with any relevant State and Commonwealth laws that apply to its operations, in particular the co-operatives National Law applies to cooperatives in all states while each state has its own legislation for the incorporation of co-operatives

In NSW, the directors and officers of a co-operative have obligations and duties under the Co-operatives National Law (CNL) and general law. These include:

  • acting in good faith - must act honestly and in the best interests of the co-operative and for a proper purpose
  • acting with care and diligence - directors need to keep adequately informed of the financial status and business performance of the co-operative and obtain professional advice if necessary
  • not misusing position or information - directors must not improperly use their position and information to gain an advantage for themselves or someone else or to cause harm to the co-operative
  • avoiding conflicts of interest - any conflict must be declared and dealt with in accordance with the CNL
  • preventing insolvent trading - directors must prevent the co-operative incurring a debt whilst it is insolvent or if it will become insolvent as a result of incurring the debt.

Directors are responsible for ensuring the co-operative complies with its obligations under the CNL, including:

  • keeping financial records - financial records must correctly record and explain its financial transactions, financial position and performance
  • notifying co-operative changes - change of directors, secretary, CEO, registered address and rule changes must be notified to Fair Trading within 28 days
  • maintaining registers - ensuring specified registers are maintained and are available for inspection by members and other persons as required
  • reporting to members - provide financial reports to members within 5 months of the end of the co-operative’s financial year
  • lodging annual returns - annual returns or reports are required to be lodged with Fair Trading within 5 months of the end of the co-operative’s financial year
  • complying with rules - ensuring the co-operative operates in accordance with its rules.

Directors must ensure the co-operative keeps a:

  • register of directors
  • register of members (including their shareholding, if any)
  • register of:
    • loans to, securities given by, debentures issued by and deposits received by the co-operative and
    • the names of people who have given loans or deposits to, or hold securities or debentures given or issued by the co-operative
    • register of loans made or guaranteed by the co-operative, and any securities taken by the co-operative
    • register of Co-operative capital units (CCUS) issued by the co-operative and their holders
    • register of memberships cancelled due to inactivity
    • register of notifiable interests
    • register of fixed assets
    • register of subordinated debt.

The registers must be kept in NSW at:

  • the co-operative’s registered office
  • principal place of business
  • an office where the work involved in maintaining the register is done, or
  • another place approved by the Registrar

The registers must be kept in either written or electronic form and contain the particulars specified in Schedule 2 of the Co-operatives National Regulations (the Regulations).

The co-operative must notify the Registrar within 28 days if the registers are not kept at the registered office or are moved from one office to another.[1]