Agricultural Co-operatives: Some Facts
Agricultural Co-operatives are different from other types of businesses because of their specific legal and fiscal status and their distinctive mode of governance.
Legal Status: a particular type of company, not private or commercial, its legal framework is defined by French Rural Code.
The goal of the agricultural co-operative is to give farmers the chance to mutualize their resources in order to facilitate or develop their economic activity or to increase the revenues generated from this activity. The co-operative is an extension of its members’ farms.
Three types of activity:
- Supply. This is the case of Limagrain (seeds, fertilizer, plant protection, small equipment).
- Production, processing and sales (a major part of Limagrain’s activity as a co-operative).
The activities are limited to a territory. Limagrain is an exception to the rule because it has access to the entire French continental territory. The territorial boundaries and any modifications are delivered by the Haut Conseil de la Coopérative Agricole (HCAA – High Council for Agricultural Co-operatives). There are three rules that characterize an Agricultural Co-operative:
- Exclusivity: a Co-operative has an obligation to only work with its Co-operative partners. Exception to the exclusivity rule: operations with non-partner third parties as long as they do not exceed 20% of the activity.
- “One man, one vote” which disassociates the amount of capital held from the right to vote.
- Tax exemptions for companies (with a certain number of exceptions)
Agricultural Co-operative partners
There is a difference between Co-operative partners (farmer members) and non Co-operative partners (Limagrain’s top executives).
They agree to participate in the capital, in the form of shares (depending on the volume of operations undertaken with the Co-operative, or the size of the farm). Because of this, the Co-operative’s capital is variable. It is re-evaluated each year.
As curious as it may seem, we can compare an agricultural Co-operative to a “not-for-profit” organization. The shares are not revaluated. In fact, when partners leave a Co-operative, they only get a nominal amount as reimbursement for their shares.
They are paid interest on shares and benefit from “patronage remuneration” on the profits made in the framework of contractual operations with the Cooperative. At Limagrain, the Co-operative can pay out dividends directly linked to the subsidiaries’ profits.
Partners meet every year for section meetings which are organized in each territory (there are a total of 8 territories at Limagrain) with the exception of non Cooperative partners (1 section of top executives). During the section assemblies, section delegates are appointed to represent their partners at the annual general meeting plenary session.
The Board of Directors is composed of individuals or legal entities who are elected during the Ordinary Annual General Meeting in two separate colleges: Cooperative partners and non Co-operative partners. They are elected for 3 years and are renewable by a third. The age limit is 65. The Board designates a Bureau internally that is in charge of preparing files, in relation with General Management and the top executives concerned.
At Limagrain, the Co-operative’s directors are specialized by division and sit on the Boards of Directors for the subsidiaries of the divisions for which they are responsible. Therefore, there is a codirectorship at the head of the Group as well as in the main subsidiaries consisting of a Farmer Chairman and a salaried CEO.
Corporate officers are not remunerated (no Director Fees).
The partners and their representatives do not benefit from any financial advantages in owning shares in the Co-operative. It is the outlets that the Co-operative offers to its farmers through value chains that are advantageous for them (Seeds, Ingredients and Bakery). This provides them with long-term opportunities for their farming activity and lets them pass this heritage on to future generations.
The controlling bodies:
In addition to statutory auditors, the Agricultural Cooperative is audited by “external controllers” and by the High Council for Agricultural Co-operatives, both of whom ensure the respect of Co-operative ethics.
Missions of the Co-operative
First and foremost, the Cooperative constitutes the Group’s parent company. Through its Board of Directors, it sets out the main orientations and strategy of the Group.
The Co-operative is the hub for the development of our different chains:
- Seeds (corn, sunflower, straw cereals, vegetables)
- Grain corn
- Milling wheat
Capacity for collection and storage is also essential for the performance of our plant chains. Limagrain has numerous silos, some of them efficient and others less so, and which are planned to be reorganized and renovated.
The Co-operative also has an important function for the distribution of chemical products, fertilizers and products intended for animal feed. Listing of new efficient products, the negotiation of attractive procurement prices, and providing advice are all part of the Co-operative’s mission.