Can Labour Deliver More Agricultural Mutuals & Co-Operatives?

With a new Government crossing the threshold at Number Ten this week, Tom Potts a partner in the corporate agriculture team at national law firm Clarke Wilmott LLP, discusses how Labour will make their pledge to double the number of agricultural co-operatives and mutuals a reality.

A key Labour manifesto pledge for agriculture was to double the number of co-operatives and mutuals in the industry from the current level of around 800. Approximately half of UK farmers are currently members and co-owners of these businesses, which play an important role in the UK’s agricultural sector by giving farmers more control over the supply chain, helping them cut costs on key inputs through economies of scale, and allowing the sharing of innovation that can boost output and productivity. Successful examples include the likes of Arla, one of the country’s biggest dairy co-operatives, owned by 2,000 British dairy farmers and responsible for supplying more than a quarter of the nation’s milk pool.

The volatility and uncertainty currently facing UK agriculture means our farmers are already looking to alternative business models. Joint ventures, share/contract farming, and Producer Organisations (POs) are all different forms of co-operation and offer opportunities and benefits to different owners. Government support for creating more of these businesses will be welcome, but sound legal advice will be key in ensuring their success.

The new administration plans to support this initiative by introducing a comprehensive package of measures designed to encourage the formation and growth of co-operatives and mutuals. This includes:

• – Financial Incentives: Introducing grants and low-interest loans specifically for the development of co-operatives and mutuals.

• – Education and Training: Providing farmers with access to education and training programs on the benefits and mechanics of forming co-operatives.

• – Regulatory Support: Simplifying the regulatory framework to make it easier to establish and operate co-operatives. Forming a co-operative is currently a separate process (overseen by the FCA) from setting up a typical private company (registered at Companies House).
• Whereas Companies House charges £50 and typically processes the application within 24 hours, the FCA can levy fees of up to £950 and aims to register a co-operative within 15 working days. Any measures that narrow this gap, whilst ensuring the unique ethos of co—operatives is maintained, will be very welcome.

• – Partnerships and Networks: Facilitating partnerships between co-operatives and research institutions to drive innovation and efficiency.

• – Marketing Support: Assisting co-operatives in developing strong marketing strategies to promote their products both domestically and internationally.

To spearhead this initiative, Labour propose to establish a dedicated task force that will work closely with industry stakeholders, legal experts, and financial institutions to identify and overcome barriers to the creation and expansion of co-operatives. Within our agricultural team at Clarke Willmott our specialist corporate lawyers have extensive experience in the formation of various trading entities and groups. There are multiple aspects to consider when joining a cooperative or mutual including the rules, standards and contracts that you will be committing to. It is also important to think about what returns you are expecting from your involvement. In this regard, there is a fundamental difference between private companies, where profits and capital are distributed in accordance with how many shares you have bought, and co-operatives, where returns are typically based on how much you have participated in or traded with the society.

Like any contract it is important to consider the impact they will have one your business operation, succession planning and the flexibility you may need if your circumstances change. While using a standard document (such as model articles of association for companies or a co-operative sponsoring body’s model rules) may be convenient in the short term, it can lead to problems further down the line. As such it important to take experienced legal advice based on your particular circumstances.