Co-op Member Equity Structures

Voting Shares

Cooperative members must purchase “voting shares.” Ownership of this share is limited to one share per person and confers membership and voting rights to the holder. This share is limited to active members of the co-op only, and is redeemable at par value, by the cooperative, whenever a member leaves. 

Membership shares

Membership shares gives members ownership in the cooperative. They have different rights to dividends, different priority, and different rights to repayment, than the rights that are attached to additional shares. Ownership is also linked to what is called residual claimant rights, which are rights to a particular share of the company’s net income from operation, or a claim of divided assets if the coop is dissolved.

Common Shares

• Common shares is issued to members when they make an initial equity investment into the cooperative. It represents a claim on profits the co-operative will earn in the future. Common shares has variable dividends that are never guaranteed.
• Members may lose the entire amount invested in common shares if the co-op goes out of business. In the case of bankruptcy, common shareholders do not receive money until the creditors, bondholders, and preferred shareholders are paid.

Investment Shares Deposits

Additional upfront equity investment requirements are tied to membership, or to projected use of cooperative services. In such cases, other nonvoting classes of shares with different par values and different redemption policies are issued in exchange for these additional equity payments. These classes of shares may or may not pay dividends.

Purchase of Investment shares is restricted to members only. In other words, before someone can own investment shares, that individual must become a member of the co-op, by purchasing a membership share, to gain those member rights. Investment shareholders can hold no more than 20% of Co-op capital

Preferred Shares

• The cooperative may retain the option to re-purchase the shares from preferred shareholders at a premium.
• Cooperatives can customize different classes of shares, e.g., Class A, Class B, etc., of preferred share
• Dividends on preferred shares in the co-op, must not exceed eight percent (8%). 

Need for Capital

At different stages of development, the cooperative might consider issuing additional Nonvoting shares (or debt) to fund the requirements of that particular period of development.

 Shares Buy Back

shares will be sold back to the cooperative at par (face) value unless other repurchase provisions have been stipulated in the share offering or in the articles or bylaws. The co-op must develop an internal schedule outlining the expected timing of the re-purchase of members' shares. The timing is subject to board and general members’ approval and is predicated on the current financial needs of the cooperative. The co-op Shares are not tradeable on a stock exchange, but they may be transferred to another member of the co-op.