2017/09/10 12:40 Margaret Vincent, Brian Iler, “International Platforms and National Legal Frameworks”, Disrupting the Disruptors

Workshop Margaret Vincent, @brianiler @CoopsCanada #platformcoop, platformcoop.ca/, Beeton Room, Toronto Public Library

This digest was created in real-time during the meeting,based on the speaker’s presentation(s) and comments from the audience. The content should not be viewed as an official transcript of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. The digest has been made available for purposes of scholarship, posted by David Ing.

Margaret Vincent, Stocksy, legal counsel

Brian Iler, (Iler Campbell) one of the top legal expertise in the country

[Margaret]

Margaret Vincent

Had a series of legal jobs

  • Joined Stocksy as a photographer, trying to get out of legal role
  • Tried to join as photographer, failed
  • Started 10 hours part time, then became full time

Handle governance, intellectual property, contracts

Were incorporated in Alberta, operating in BC

  • So, a few years in, got to revisit everything
  • Couldn’t have redone bylaws without getting into this

Don’t be specific in your bylaws, only as much as you need to be

  • Use bylaws a guidelines
  • Then have a separate member agreement, which can be adjusted

Multistakeholder

  • 7 member board, over 900 artists
  • Membership shares, not equity shares, $1, don’t change in value
  • Purchase share on the first sale
  • Ongoing supply requirement:  if you’re not growing content, you run out of new content for clients

What we would have done differently?

  • Never put a member cap, it’s our most heated topic
  • Have been able to provide rising tides lift all boats, people afraid that flood gates would open
  • Could have managed without bylaw
  • Have 150 members who aren’t uploading, contact them, give seat to someone else

International is unique, 65 countries, all independent contractors, which is normal in the industry

  • So, don’t deal with taxes, they’re responsible for their own jurisdiction
  • Can join at age 16, if your jurisdiction allows it
  • We can’t check everyone’s laws
  • Am U.S. based, licensed in the U.S, working for a Canadian company, not an employee of Stocksy, don’t receive benefits, we’re okay with that
  • Pros:  diversity of content
  • Challenge:  time zones, can’t have meetings
  • Language barriers, can’t do all languages in 65 countries
  • Annual General Meeting is always recorded, and then do a transcript, so people can follow along with the video
  • People with a geography band together to help each other understand, e.g. Chinese
  • Use Payoneer to pay internationally

Why are we not a federal coop?

  • Having a physical location in two provinces, can’t incorporate as federal when all online
  • Majority of board members have to be Canadian, but international mix of people, can’t bring in Silicon Valley people
  • Canadians aren’t in the majority
  • Have elected director, but can’t control where they come from

Questions:   Other countries there permit?

We can allow anywhere, but majority have to be Canadian

  • Haven’t done research on other coop jurisdictions
  • Time zones make it hard, but we can deal with that

Question:  Compensation?

Lawyer gets paid salary

  • Also gets royalty for photograph
  • Can’t sit in two classes, and for some, it’s a big difference
  • As staff, can’t vote for artist’s director

Every artist gets 50% to 75% of sales

  • Used to pay 100%, but then was losing money
  • Put it up to a vote, unanimous vote
  • Bulk of profits go back into the business
  • 5% of surplus goes to classes other than artists
  • Board sets surplus amount
  • Percentage is in the charter and bylaw, could be changed with a resolution

Questions:  Membership recruitment?

  • Everyone can apply
  • Content is reviewed
  • When evaluating members, one reviewer gets on video chat, and has a discussion about mission and vision
  • Need enough content, and then on board with the rest
  • Competitive industry
  • A lot of collaboration on the way we do it
  • An industry where other companies pay out so much less

Brian Iler, lawyer in Toronto

Brian Iler

Unrepentant 68er

  • Came through radical student movement
  • Started in engineering, decided to be more useful to society
  • Firm focused on progressive organization, largely coops
  • Also charities and non-profits

Started with housing coops funded by federal governments

  • Problems today:  how to access the equity

Worked with food coop, when trying to open a store in Cabbagetown

1980s energy coops

Canadian coop law is well-developed

Each province has coop legislation

  • Also federal, if have more than 2 physical legislation

Securities regulation is provincial, coop is exempted

  • In Ontario, coops can access capital through members by offering shares and bonds, without going through lawyers
  • Used a lot in renewable energy
  • $30M in solar resources
  • Money flows in, don’t have to do much about it

All legislation is based on business law model

  • Do enshrine coop
  • One member, one vote
  • After paying operating expenses, surplus is distributed
  • Patronage return, depending on the amount of business

Nonprofits don’t distribute net revenue, they retain them for operating

  • Energy coops issue 5% shares, then the rest used for renewal energy sector

Net assets on dissolution is divided among members

  • Alternative, pay to another coop or charitable

Impossible for IPOs

Raising capital is different

  • Instead large amount from small numbers, small amounts from large number

Renewable energy:

  • Person who was bored, has invested time and money
  • Separate:  Community Power Capital, $25M, to make it available during solar power development, when it could fail
  • Asked government asking $10M, inspiring by German and Danish
  • Got $3M from government, cheque, at end of the budget year
  • Used that money to fund NGF
  • Didn’t constrain private sector, who have come in

Percentage of directors who are Canadian

  • Have had good experience with government, little tweaks in coop act

Question:  How long did it take to get money?

Green NGF didn’t take long, as strong political ties

Comment:  1992 identified as strategic area of partners

Question: Choosing partners?

Coops usually have more voting shareholders

  • Toronto Energy Coop retained shares amongst directors
  • Solarshare opened up with 1500 members, we get 100 to AGMs
  • Do some vetting of people on the board of 9
  • Recommendation to the AGM of the people who have the qualifications and skill sets

See more conflict in housing coops, amongst 150 people who live together

  • Issue is how well the conflict is resolved, so they feel okay with it

Question:  Board veto power?

No board veto power

  • It’s the board that manages the coop
  • In member coops, often see board taking all decisions to 75 people, but then the board is elected to make decisions on the behalf of the coop

Russ:  MEC, $5 membership.  Farmer coops have big membership contracts.  Depends on comments

  • Both benefits and responsibilities of membership

Question:  Multistakeholder coops, seats on boards, distribution?  Founders controlling?

Brian:  For many years, wouldn’t use multistakeholder in Ontario

  • Requirement that had to be a board member in each class had to be physically at meeting, would hold up
  • Fixed that in legislation

Margaret:  Board hasn’t been filled out

  • Have had 2 for founders, 2 for staff, 2 for artists
  • Haven’t had conflicts, yet
  • So far, have all gotten behind class

Stocksy:  Founders have advisor status, could disagree with staff and artists

Brian:  Democracy can be messy

  • Most of the time, you can trust the results
  • Conflicts between stakeholder groups, can look for a way to resolve

Comment:  Setting norms and processes for governance

Brian:  Worry about diluting profits, have seen stop members coming in

  • Agropur, large coop, hasn’t taken members for years
  • Gay Lea, always accepts new members, and is taking in goat farmers in Ontario and Manitoba
  • Rejuevenation, sophisticated delegate structure in Gay Lea
  • Board is 100% dairy farmers, Ontario allows 20% of people can be non-members, although Gay Lea hasn’t found the 2 people yet

Margaret:  Work hard on transparency

  • Could be 6 people working on language

Comment:  OSC on equity crowdfunding, approved 2 years ago, $2500 per investment.  Exemptions play?

Exemptions are different

  • Risk for coops is different for crowdfunding and IPOs, because not misleading
  • Members selling to members

Comment:  OSC equity crowdfunding investment has regulations around portals

Brian:  Until 10 years, not just exempt from prospectus

  • Don’t have to register as a security dealer
  • Concern in solar shares, see promotion on subway, fear may have to register as a dealer

Comment:  Coop solves how to take of money how it gets in, and then now to get the money back, problems not solved on equity crowdfunding

Brian:  Disadvantage, right to ask for investment back, in par value

  • Banks will look at that as not secure capital

Comment: Board of directors, democratically organized.  As grow, need more expertise.  Some large coops require more control in nominations committee.  Slippery slope.  Where do we cross the line on self-perpetuating leadership group?

Brian:  On the side of trusting the members

  • As get larger, need some vetting
  • Some statement from board of what they need
  • Now arguing with a client:  only those individuals who are put up 45 minutes before, and approved as nomination — will arise as an issue
  • There’s lots of good people who get it

Russ:  At an AGM, bylaws may allow nomination from the floor (or not)

Dionne:  Expertise on board.  Have been creating robust training processes, so can get up to speed to be a good board member.  Doesn’t have to be at front end.  Can train, e.g. reading financial statements.  Coop principle is education.

Brian:  Could have elections in regions, and then delegates vote for the board

  • Rule that have to have been a delegate to be nominated to the board

Question:  How to run meetings internationally?

Margaret:  Can’t guarantee understanding

  • Use GoTo, or Livestream
  • Chat alongside meeting
  • If one person can’t get in, another will help
  • Give lead time

Stocksy: Also, transcript written of meeting after the fact, can be translated later

  • Voting of resolution moved outside of meeting, as needed more than 5 minutes to think about
  • Major resolutions are discussed in forums
  • Motions still need quorum, generally procedurea.

Margaret:  Try to push for definition, when we can

  • A meeting is an entirety of a discussion

Brian:  In Ontario, just coming up to substantial renewal of the Ontario act.

  • Need to be clear on virtual meetings, and virtual decision-making

Margaret:  An issue not just in coops

  • Technology to catch up
  • Try to stay true to the intent
  • The purpose of having a meeting is so everyone can discuss
  • In a forum, everyone can discuss

Comment:  Startup, role of the board of directors.  Volunteers, then change as staff comes on.  Boards often start up more hands-on.

  • Angst on governance as heavy, but if done well, it’s amazing
  • In international meetings, it’s the coop people who know how to handle conflict

Russ:  In a small rural community, took over a movie theatre as a coop

  • Our leaders recognized

Brian:  Solarshare has limited recourse financing, looking primarily to the assets

  • Community Power Capital, initially didn’t know if we could be an investment coop, regulators recognized the fear of not knowing, bringing directors was reassuring
  • Have to ensure the value of assets doesn’t fall below bonds
  • Feed and tariff is steady
  • Do have second mortgage structure, so eligible for RSPs

Question:  Spirit of coop act, beyond the letter of the law.  Board elections at the AGM.  AGM simultaneously at multiple locations with Skype.  Quorum in one room.  In the board elections, use a single transferrable vote (proportionate vote).  Laws don’t include or exclude

Brian:  Regulators aren’t funded to regulate, so the issue is internal.

  • Best to avoid a lawyer’s letter
  • In Ontario, electronic communication in board meetings okay, as long as everyone can hear what everyone is saying

Comment:  Multistakeholder:  workers eventually get more confidence, feel against representation

Brian:  Not a surprise

  • Not so much experience of multistakeholder outside of Quebec

Comment:  Housing coops, why not expanding?

Brian:  Two types of housing coops

  • Own their own property:  people interested in lowest possible living cost, not interested in increasing size
  • Others are land trust, on a long-term lease.  After 35 years, can mortgage the land on new investment.
  • Hard to access equity.
  • Billions of dollars in real estate.
  • People in coops are getting cheaper and cheaper housing.

Dionne:  Differences across types of coops at stages of time. Governance isn’t static and set, it’s a process.  Who gets to decide what and how.

Three challenges:  incentive

  • free rider;
  • adapting changing needs of the business and environment
  • managing and retaining legitimacy, both externally and internally

These rise, no matter what type of business

Margaret:  Stocksy just about where can share new bylaws, written in plain language

Comment:  In practice, across classes aren’t to straightforward.  Credit Unions often single location, few consumers show up, mostly also employees, so it looks more like a worker coop

Brian:  Credit union governance is fundamentally flawed.

Comment:  Multistakeholder governance:  what stops 200 members from showing up and dissolving the other classes

Brian:  Usually bylaws require defined majorities in each class

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