There is a long history of electrical and utility cooperatives as described in wikipedia and here. These were primarily used to bring electricity and/or telephone services to remote regions when investor-owned or commercial utilities would not provide service believing there would be insufficient revenue to justify the capital expenditures. Many electric cooperatives banded together to form their own wholesale power cooperatives. Cooperatives are still a very big and vibrant part of the business climate and more information can be found here.
A shares based cooperative model using blended financing may have a balance sheet that looks like this:
Project Costs
- 400,000 Capital Expenses – water generator system and surrounding construction
- 40,000 Program Management
- 20,000 Pre-Project Costs
- 460,000 Total
Project Financial Plan
- 100,000 Development Grant
- 110,000 Bank Loan
- 250,000 Community buy-in investment (Shares)
- 460,000 Total
Also, cooperatives can and often do work together to negotiate better purchase prices for necessary materials, supplies and services, better rates on services generated and favorable loan agreements from banking partners. This ability to create an economy of scale in a market place is a powerful force. Many cooperatives set aside a certain amount to benefit and invest in other new cooperatives further spreading their reach and impact.
A (belgian) cooperative established after review by the National Council of Cooperation (Royal Decree of 01/08/1962) is subject to specific rules:
- the maximum rate of dividends is fixed by law (currently 6%)
- Net operating surplus may give rise to a dividend to cooperators
- the right to vote in general meetings must be limited (max 10%shareholder)
In most of teh cases, banks and regulators require to build up reserves to ensure financialviability of the project contingency. As long as these reserves are notestablished, it is not possible to distribute a dividend.
But it derives certain benefits in parallel:
- Exemption from withholding tax on dividends for each cooperator to the first installment of 170 euro (2008 value, indexed); beyond,withholding tax of 15%
- Reduced rate of corporation tax
- No requirement to submit prior to the CBFA a prospectus when making a public call for capital
A Cooperative must meet the five general principles of cooperation:
- 1. voluntary participation (Article 10)
- 2. equality of voting rights at general meetings (Article 22)
- 3. the appointment of directors by the general meeting (Article 4)
- 4. caped dividend shares (Articles 6 and 29) shareholders (Article 6)
and the following principles:
- membership of the society must be free of any element of upset (Article10)
- the goal of society should be to provide an economic and/or social benefit/satisfaction in their professional or private purposes (Article 3)
- Mandate of directors are not subject to fees (Article 17)
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