“It’s not what you pay a man, but what he will cost you that counts.” (Will Rogers)
With apologies to American humourist, Will Rogers, we’ve taken some poetic licence and adapted his famous quote to read “it’s not what you pay for compliance, but rather what non-compliance will cost you” as a truth from which no business owner can escape.
Regardless of which industry you are involved in, you are required to comply with Laws, Rules, Regulations, and probably a set of industry-specific standards, and while compliance is often regarded as unnecessary red tape, imagine a world in which there were no standards or Rules and Regulations. I would submit that compliance is probably the lesser of the two evils.
The fact is, compliance in business can no longer be regarded as something you can approach as a tick-box exercise. It is non-negotiable. Unfortunately, the fact of non-compliance becomes a crisis because, more often than not, it’s put on a back burner until it can no longer be avoided.Co-operatives are the oft-overlooked cousin of companies, and are, in my opinion, under-utilised in a country where the model could do so much good.
Co-operatives are governed by the Co-Operatives Act 14 of 2005, as amended (“the Act”). The Act is intricate and thorough, accounting for many different variables. For what is essentially a simple business model, the Act can be overwhelming and leaves room for uncertainty when looking to ensure the overall compliance of a co-operative. The fact that co-operatives are used as the business vehicle of choice in small business development initiatives should not mislead one into believing that it does not require corporate governance or compliance.
The foundation of a co-operative is that all members thereof are regarded as having ownership therein. The way in which the business model has developed allows for all members to be equally involved (there are specific nuances in this regard) in the decision making process.
The first port of call in any co-operative’s compliance journey should be ensuring that the co-operative has a comprehensive and robust constitution.
The constitution of a co-operative is considered as an authoritative document which governs all aspects of the way in which the co-operative conducts business, how its members are chosen, removed and replaced, how membership fees are dealt with, how the proceeds of the co-operative’s business are utilised and how its members benefit from that business. If drafted correctly, the constitution of a co-operative can ensure that a co-operative could grow from a grassroots, employment-creating vehicle, to a healthy business supporting numerous members and their families.
The Act contains a really good compliance checklist that any constitution should be tested against, and if it does not adhere to this checklist, we recommend amending it now, while the going is good and before its veracity is tested when the co-operative is faced with real business challenges that have the potential of derailing it entirely.
And of course, compliance does not start and stop when the initial constitution is drafted, no matter how good the document is. Make sure the co-operative’s books and records are kept up to date, and that they are a true reflection of the financial position of the business.
Ensure that all members participate in the business of the co-operative (this is, after all, the essence of the model), be clear on what action can be taken when a member is unwilling to pull their weight, and take that action as soon as possible, bearing in mind that process and procedure is also, by its nature, a form of compliance.
Just because a co-operative does not carry the red carpet appeal of a company does not mean it should be left to its own devices. Start your co-operative with the proper documentation in place, and make sure it stays the course throughout its lifetime – fixing a problem is always more costly than preventing the problem in the first place.
Joshua Pahl
Candidate Attorney
082 314 7922
josh@NLAteam.com
