With a new Government crossing the threshold at Number Ten, Tom Potts, a partner in the corporate agriculture team at national law firm Clarke Wilmott LLP, says Labour must deliver 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.
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 Tom warned that sound legal advice for farmers and growers will be key in ensuring their success.
The new administration plans to support the development of co-operatives and mutuals with financial incentives, education and training and regulatory support. 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.
“There are multiple aspects to consider when joining a co-operative or mutual including the rules, standards and contracts that you will be committing to,” warns Tom. “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.”
