WHAT IS A CO-OPERATIVE CONSORTIUM?
Co-operative Consortia strengthen the position of their member businesses in the market place by providing common services. Membership of the co-operative consortium is made up of co-operatives or other small businesses who wish to use the co-operative’s services.
This form of co-operative is very flexible and has been used in many different ways e.g. by farmers, taxi drivers, craftspeople, actors’ agencies and doctors practices. It can be used very creatively, for example to rent premises in common from a landlord. The wide range of use has led to what is basically the same type of co-operative called a marketing co-operative, a secondary co-operative or an agricultural co-operative.
Times are tough for small businesses. And they are not getting any easier in the foreseeable future. The pressure is on to increase sales and to keep costs under control.
Co-operative consortia are a tried and tested model which help small businesses to increase sales and reduce costs. Across the world, millions of small businesses have formed co-operative consortia.
For businesses, lack of scale often means difficulty in negotiating good discounts or accessing the more profitable markets. The co-operative consortium is a means to enable independent businesses to work together (such as in buying, selling, purchasing or sharing facilities) and gain the advantages of scale without compromising their independence.
The benefits of choosing a Co-operative Consortium
A consortium structure is usually used where the members have a common need. Co-operative Consortia are used for:-
- Marketing and selling
- Purchasing goods, equipment etc
- Leasing premises/equipment
- Providing common services (R+D, Quality Control etc)
- Strategic representation/industry groups
The members of co-operative consortia remain independent businesses or organisations. The members therefore gain the benefits of scale in the marketplace whilst maintaining their own independence and identity.
Co-operative consortia operate on the basis of one member, one vote. Each member business has an equal vote. Co-operative consortia can set up under a variety of legal forms, but all are incorporated with limited liability for the members. So if the consortium fails, the other member businesses are not held liable for its debts.
SUPPORT FROM CMS
We can help with the design and registration of the appropriate legal form. It is also advisable for there to be a written agreement between the co-operative and its members setting out clearly the rights and duties of both. CMS can help you draw up a members’ agreement.
In theory it is the individual member who contracts with customers, not the co-operative (although it may charge a fee or commission to cover its costs). The co-operative only trades with its own members to whom it provides services. If the co-operative is able to persuade HMRC that this is the case, then it can claim Mutual Trading Status which would exempt the co-operative from paying Corporation Tax. CMS will advise each co-operative on whether it is eligible for Mutual Trading Status.
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