Here's a proposal for the financial structure and practices of our legal entity.
Perhaps we could think on these things before the next meeting? Shall I put it on the agenda, or with James' and Shannon's moving and the rest of us traveling great distance, perhaps this is too much to bite off at this time?
In general, such a step might be expected to happen after vision, mission, purpose, membership process, etc. but I think we can do some of these steps in parallel, since we're a small group!
Note: a BC Coop must have a single class of "members" and multiple classes of financial shares. They differ in governance and in voting rights. There also must be directors. Generally, directors make executive decisions, members have general voting rights, and funder only have rights regarding dissolution or bankruptcy. I recommend making every member a director, although we may want to empower certain people in certain roles as directors. The Act is very flexible regarding the balance of power between members and directors.
Having examined non-profit Societies, non-profit Coops, for-profit Coops, and corporation, I think the for-profit Coop is the way to go.
- A for-profit coop purchases and owns a piece of land.
- It currently has two joint financial share owners: James/Shannon and Carol/Jan.
- The balance is tracked by number of financial shares. Let's say, par value $1,000. Internal books track fractional shares to the penny.
- Infrastructure is built, pay as you go, with credit for any individual's costs paid out with additional financial shares (or fractions thereof, tracked internally).
- We decided that all buildings will be held in common, secured by investment shares.
- Once per year, a dividend is calculated based on the Core Consumer Price Index and that amount is paid out as new financial shares, in proportion to the amount of share ownership. (These are known as "share dividends" in the US.)
- Soon after acquisition, we establish a sustainability figure for the land, and attempt to reconcile that with zoning "densities" through a new bylaw (zoning). (The "Brandy" approach.)
- We go through an admissions process among ourselves, intended to be substantially the same process that future additional residents will have.
- One of the requirements for members is to own a certain number of financial shares.
- Membership confers residency right. Coupled members are joint members. (Controversial if there's proportional voting, but should not be a problem with consensus, as a joint member vote could possibly be defined as a consensus of the joint members.)
- Cost to someone joining will be calculated as the cost of the land and improvements, plus inflation, divided by the legal or biological carrying capacity (whichever is less).
- (Controversial: do we want to index this by size of family? Should a single person joining pay the same as a large family? Should singles and couples be expected to help carry families somehow, thus recognizing that children are an investment in the future of the community? Should there be limits -- official, or by peer pressure -- on family growth?)
- Market value has no say in membership cost, thus removing speculative value from the land and replacing it with a generally-derived inflation rate.
- The new member purchases financial shares from existing members, proportional to number of shares they each own.
- The existing members may at that time allow issuing new financial shares, and then members should be allowed to re-invest some portion of the proceeds of selling shares to new members. These new investment shares will be used to create more infrastructure and capital value as needed.
- The members may decide from time to time to loan sufficient financial shares as to qualify for membership. The member joining by this mechanism contracts with the coop an aggressive payment schedule, with variable interest at the rate of inflation.
- We also track our labour. It is unlikely later residents can be expected to contribute the same labour as the founders, but we should also keep some sort of books on labor. Perhaps we could value it conservatively and pay ourselves an appropriate number of investment shares. I, for one, am willing to work for very little -- especially if it is benefitting my future!
I think by this method, we are being fair to ourselves and to others, with the number of shares constantly and accurately representing the investment capital, and with speculative value effectively removed.
Those who are heavily funded will get most of the proceeds of adding new members -- it is really repayment on the loan to get the land. At that time, they may choose to reinvest the proceeds.
We will not be getting a return on our funding more than the rate of inflation -- BUT we'll be the primary beneficiaries of that funding, so we'll be getting a return every time we eat our own food or use our own energy.
Hi members, - a question here for you: From the Capital vs. Operations section I find the phrase additional investment shares are issued to members who contribute needed capital resources, such as equipment, furnishings, structures, etc. that the members all agree to "purchase" from the member. To clarify, does this mean that any material item which could be used for building capital, (ie. the means to produce more capital through the operations of the organization) and which is currently owned by a member would be subjected to a process of inventory and agreement by consensus of all members in order for the ecovillage to purchase it and hold that item as an ecovillage capital item, in exchange for investment shares issued to those contributing it? I think I agree with this if my understanding is correct. Basically, only those items that members wish to put up for ecovillage capital items would be considered for this process? I am very unfamiliar with writing of financial, legal and economic type (and it can sometimes bog me down a bit, so i am seeking to clarify). Thank you for your feedback Shan 15:29, 29 January 2006 (PST)
- I think you got it exactly as I had intended! For example, someone has a biodiesel vehicle that everyone could be using, and everyone agrees that it should be a village resource. The owner of the vehicle then "sells" it to EcoReality Sustainable Land Use and Education Cooperative for fair market value, which is "paid" in the form of investment shares (or portion thereof). We might also want to put a constraint on a period of time before such shares could be redeemed -- the intention is that the vehicle is a contribution, with the investment shares as recognition that the equity of the member had been decreased and the equity of the village had increased. --Jan Steinman 16:00, 29 January 2006 (PST)
Hi members - another question. My understanding is that 'investment' shares are generated by capital, by resources that can be transformed into capital for the ecovillage, and by labour (the latter two must be agreed upon by all members to be realized). Those investment shares are held by individual members. My question is about 'member' shares. Where are they generated? Do members pay an annual membership fee to the ecovillage and this turns into a 'member' share. Is the cash component of this member share then used SOLELY for operational expenses, and not for capital costs (as it would result in dilution effect)? Is there another 'member' share definition that I'm not getting here? Please advise. Thank you Shan 15:36, 29 January 2006 (PST)
- "Member" shares are equity of the individual, and a liability of the coop -- in other words, they can be redeemed upon a member leaving EcoReality Sustainable Land Use and Education Cooperative. I don't envision anyone having the need for more than one member share.
- There may or may not be an operational deficit, in which case, there will be an assessment of some sort to pay. This is totally separate from member shares. There may also be an operational profit, on which happy day, we can decide whether to re-invest it, by issuing additional investment shares, or to pay it out, via dividends. A profit would typically be paid on the investment shares, rather than the member shares.
- I guess it would be fair to say "member shares" is the basic participation fee, and "investment shares" are how project funding happens. --Jan Steinman 16:00, 29 January 2006 (PST)
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