Common Characteristics of Cooperatives
In Ontario, a cooperative must incorporate under the Canada Cooperatives Act (Federal) or the Co-operative Corporations Act (Provincial). Regardless of the act governing the cooperative - whether provincial or federal - cooperative share three common characteristics:
A co-operative is a for-profit or non-profit business/enterprise jointly owned by its members who use its products or services.
Co-operatives are democratically governed under the principle of “one-member, one-vote”. This vote is exercised at the co-operative's annual general meeting (AGM), where members can vote directly for the board of directors, changes to the co-operative’s structure and/or governance, financial decisions, and more.
Distribution of Profits
Any surplus of a cooperative is owned by the member-owners who can decide how to distribute the profits at the AGM, which can include the following decisions:
Non-Profit Cooperatives allocate either part or all of the surplus to the general reserve for future investments;
For-Profit Cooperatives distribute the profits to all the members in the form of patronage dividends based on the individual member's usage of the co-operative over the past fiscal year.
In addition, depending on the governing legislation, a co-operative may become a non-profit entity. These non-profit co-operatives do not provide members with a patronage dividend. All surpluses are directed eventually into the general reserve.