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Wednesday, 6 June 1984
Page: 2585

Senator JACK EVANS(10.24) —by leave-I move:

That the Bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows-

The Corporations (Employee-Owned Co-Operatives) Bill provides a legal framework to enable and encourage the transformation of corporations into corporations operating as employee-owned co-operatives.

Australia has been undergoing a period of economic recession which has resulted in the failure of many businesses, the loss of thousands of jobs and the dispersal of expertise. While it may be argued that recession prompts much needed rationalisations within business, there are many corporations which cease trading to the detriment of the community. Often, companies with a potential to operate profitably and efficiently are squeezed out of business by short term external factors. In some cases, transfer of control and ownership of the firm to the employees and other concerned parties would enable the business to grow into a profitable operation.

If a company has no reasonable hope of being successful, then market forces should be allowed to have their way. If, however, a company is potentially profitable and it would benefit from transferring ownership and control to its employees and others, then there should exist a legal framework for this to occur.


The Bill establishes an Employee-Owned Corporation Board, to which a corporation may apply if it wishes to be registered as an employee-owned co- operative. A corporation is qualified as such if its memorandum and articles provide that-

(a) a majority of the members of the corporation are employees of the corporation,

(b) all employees of the corporation are eligible to become members,

(c) no property or income shall be transferred to the members, except for remuneration and dividends,

(d) a majority of employees of the corporation control or have a right to control a majority of the votes at a General Meeting of the corporation, and

(e) on dissolution or winding up, no remaining assets shall be distributed amongst the members.

A corporation is not eligible if it employs less than 10 persons.

The above criteria also allow representation of other interested parties. For example, creditors, suppliers and customers would have an opportunity to become members.


Under this Bill, a corporation may place before the Board, a proposal for re- organising itself to enable it to become an employee-owned co-operative. Such a proposal would have to be approved by a majority of the employees of the corporation. It would contain:

(a) particulars of the existing structure of the corporation;

(b) particulars of the business carried on by the corporation; and

(c) particulars of any arrangements which would enable the corporation to carry on business during the transition period.

It would also discuss the need for, and availability of, financial assistance and the need (if any) for the corporation to operate for a period under official management.

The Board may approve or refuse the proposal with regard to factors such as:

(a) the prospects of the corporation carrying on its business profitably;

(b) the prospects of the corporation operating successfully as an employee- owned co-operative;

(c) the proportion of employees in favour of the proposal;

(d) the provisions to be made for protecting the rights and employment prospects of employees opposed to the proposal;

(e) the need for, and availability of, financial assistance; and

(f) the desirability of the corporation operating under official management for a period of time.

If the Board approves a proposal, then the corporation may be provisionally registered as an employee-owned co-operative.

As a provisionally registered co-operative, the corporation must report the things it has done each year in fulfilment of the proposal, and of its business activities. The Board may de-register the corporation if it fails to fulfil the terms of a proposal.


The Board may grant financial assistance to a provisionally registered corporation, if, in its opinion, it is proper, in all the circumstances, to do so to enable the corporation to develop as a co-operative on a sound financial basis. Financial assistance may be by way of loan guarantees. (Loan guarantees to an individual corporation may not exceed $250,000 or an amount as prescribed) .

The Board may, if it is of the opinion that it is proper to do so, resolve that a provisionally registered corporation be placed under official management. In general terms, the official management process operates as though a resolution of creditors had occurred under the provisions of the Companies Code.

These powers and conditions provide a framework to enable and assist corporations to survive a transition period between their original state and their becoming employee-owned co-operatives.

In order to provide an incentive for corporations to be registered as employee- owned co-operatives, the Bill provides that the income tax of registered co- operatives shall be reduced by 8 per cent in each year of income.

The legal framework for transition and the 8 per cent income tax incentive will provide a positive solution for ailing, yet potentially healthy businesses.

It will also provide an incentive for the creation and establishment of new co- operative enterprises.

Co-operatives offer a grass roots form of industrial democracy. They offer a form of business organisation which is responsive to the needs of those groups most affected by an organisation's activities. Employees, creditors, customers and other groups will be keen to play a meaningful role in guiding the organisation.

Co-operatives are particularly suited to small business. In many cases, small businesses are already co-operatives by definition. The employees are frequently the owners and controllers, and vice versa. This Bill will provide assistance for small business of this nature.

Co-operatives, as a result of being responsive to employee needs, are likely to provide more stable employment conditions than a normal corporate employer. A co -operative is unlikely to be eager to retrench or to lay off employees. It is unlikely to attempt to exploit its employees and it is unlikely to pursue excessive profits to the detriment of its workforce.

Profit, however, is not undesirable. Co-operatives should be healthy and efficient organisations. It is likely that profit would, as in any other commercial organisation, be an important measure of success.

It is likely, that in hard times, the owner-employees of a co-operative would strive to keep the organisation viable and to maintain it as an ongoing concern. There would be little incentive to close a business and cut one's losses. Jobs will be maintained and businesses will continue as ongoing concerns with the attendant benefits for the entire community.

This Bill provides a legal framework and financial assistance for both the establishment of new employee-owned co-operatives and for existing corporations to undergo a transition to become co-operatives. This Bill does not seek to replace existing corporate structures. It seeks to provide a class of organisational structure which will allow businesses to be responsive and responsible to employees and other interest groups and thereby to create businesses which are more durable and efficient, and of greater benefit to the country as a whole. If jobs and businesses are to be preserved, then it is essential that corporations have recourse to a legal framework such as is provided under this Bill. Likewise, if grass roots industrial democracy is to occur, then incentives as contained here, need to be implemented.

The Corporations (Employee-Owned Co-Operatives) Bill provides such a framework and incentives. This Bill therefore, will preserve jobs and businesses, and will provide benefits to the community as a whole.

The Australian Democrats are introducing this Bill in the expectation that senators and members, employers, employees and other interested groups will consider its contents and its implications with an understanding that constructive comment will be welcomed by me.

The Bill will now lie on the table until the Budget session to provide that opportunity.

I commend the Bill to the Senate.

Debate (on motion by Senator Ryan) adjourned.