Somerset Rules Questions

Hazelhurst CSA > Rules > The Somerset Rules Co-operative Community Supported Agriculture > Questions

The Hazelhurst Committeee Meeting 3rd December 2009 looked at the Somerset Rules Co-operative Community Supported Agriculture and agreed that some further questions needed asking, the questions were emailed to Alex Lawrie on 4th January 2010 and he replied the same day and the answers are below, in italic. The answers were due to be discussed at the Committee meeting on the 6th January 2010.

See also the Hazelhurst CSA Committee List page which has some further questions and answers about the Somerset Rules CSA and the Somerset Rules discussion page.

Dividends

The Somerset Rules don't have any detail about how dividends work.

• How do they work, how would we make dividend payments?

Dividends for investors (we can call them dividends, though technically returns on withdrawable share capital is actually interest) can be paid at any time; but normally, after accounts have been prepared for a year, the committee will recommend a payment of dividends to the annual general meeting for their approval. The payment will depend on the profits made by the co-operative, but cannot be all of those profits (the rules you have in front of you require I think 50% to retained as common wealth). It must be the same for each share in a class, but may be different between classes.

This is interest paid on an investment, and should not be confused with a co-operative dividend paid to user members. This is a share of the profits based on transactions with the co-op - for example, it might be a penny in the pound of all purchases made over the year. For workers, a co-op dividend might be set as a few pennies for each hour worked. Note that there is also a limit on how much can be paid out this way.

• Are they only able to be paid based on the value of purchases, could they be paid on a volunteer time basis?

I see no reason why not.

There are at least 4 types of dividends which could be paid under The Somerset Rules:

Dividends for investors

Interest paid on the basis of the quantity of money invested.

Dividends for consumers

A dividend paid on the basis of the quantity of food purchased.

Dividends for producers

A dividend paid on the basis of the numbers of paid hours worked.

Dividends for volunteers

A dividend paid on the basis of the numbers of hours of voluntary work.

Shares

• What is the nature of the shareholding? (We assumed shares rather than loanstock but would like confirmation.)

Yes, you would normally raise investment in the form of shares rather than loanstock under these rules. Loanstock would only be needed if a) you wanted to receive funds from someone without making them a member at all; b) you wanted to set a closing date on their investment, at which point it would be repaid in full; c) you wanted to raise more than £20K from one person.

The shares in these rules are withdrawable - a type of share peculiar to IPSs. They can't be bought and sold like transferable shares, but only redeemed at the discretion of the co-operative. They don't change in value, but are always worth £1 each. The standard Somerset rules also allow transferable shares to be issued; but I'm expecting that CSAs will not want to go down this path, as it is really only necessary when dealing with large scale or high risk, high return investments.

Investors Vote Share

Under the Somerset Rules CSA, the investor class of members do not have a right to vote, although there may be the opportunity to amend this within the rules. What are the implications for making such a change?

Standard Somerset rules do allow this; the CSA rules that I have provided you with are based on our 'common ownership' variant, which assumes that non-user members (eg investors) aren't playing such a strong role in the co-op. By all means correct me if I'm wrong about this! You are the first CSA to wish to use these rules, so you are better placed than me to say what you do and don't need. The only limitation is that in order to comply with co-operative principles, non-user members should have no more than 25% of the votes.

For example:

• Could investors vote in some way other than in person?

The rules allow anyone who has voting rights to exercise them by proxy.

• Would we be required to facilitate such arrangements as postal voting, for example?

It's up to you; your standing orders could certainly include postal voting (or even electronic voting).

• How could such voting rights be managed in the context of a preference for consensus decision-making?

Ah, good question. I would suggest that your standing orders allow any member to request that a proposal be entered into a consensus building process to last no more than two months; at the end of that time, the proposal commanding the widest possible support is put to a vote, including such proxy and postal voting procedures as you may have in your standing orders.

• Would giving investors 10% of the vote and consumers 45% and producers 45% be a sensible compromise to allay the fears that not allowing any votes for investors would prevent them investing?

I see nothing against that - an easy amendment to make. However, bear in mind that major decisions (such as those that might damage the value of non-user members' investments) require a 75% vote to pass - 10% voting rights would not be adequate to veto them.