Modernization of the Cooperatives Act: What is changing
On February 24, 2026, the Quebec government assented to Bill 111, marking the most significant modernization of the Cooperatives Act in over 20 years. The majority of the new provisions are already in effect, while others will come into force at a later date by decree. This reform aims to: reaffirm the cooperative identity modernize and strengthen governance introduce certain new features for cooperatives harmonize the Act with other legislative and regulatory frameworks Reaffirming the cooperative identity The revised Act begins with a series of fundamental provisions that clarify and consolidate the legal identity of cooperatives. It does so notably by adding the core characteristics of the cooperative model, providing explicit guidelines regarding capital stock, non-speculation and introducing a legal definition for rebates. Together, these measures aim to dispel ambiguities and clearly reaffirm the non-speculative and collective nature of the cooperative model. Clearly stating the characteristics of the cooperative The Cooperatives Act now includes a preliminary provision that clearly states that cooperatives are collectively owned, democratically controlled by their members, do not seek profitability as an ultimate goal, are created by and for their members and are firmly rooted in their communities. This provision serves as a benchmark for interpreting the entire Act. By explicitly setting out the fundamental principles that characterize cooperatives, it provides a frame of reference and purpose to guide both the legal analysis of the sections and their practical application. Non-speculative purpose Further additions to Chapter I of the Act now specify that interest payments on capital stock must be limited and not for purposes of speculation. Above all, a cooperative’s transactions with its members never constitute a means of profit, whether or not rebates or interest is paid. These additions are primarily intended to explicitly reaffirm that a cooperative is not a financial investment vehicle and must not pursue a speculative purpose, unlike corporations. This clarification is important to settle the legal and economic nature of the cooperative model. By embedding these principles in Chapter I of the Act on application and interpretation, the legislature endows them with a foundational scope that can serve as an interpretive guide for the entire Act. A legal definition of a rebate The rebate is now explicitly defined as a benefit arising from member status and corresponding to a refund of surplus earnings or a price adjustment, and not a profit. By providing an explicit legal definition of a rebate, the Act avoids misinterpretations that could equate it with a dividend or a profit. By specifying that a rebate derives from member status and not from holding capital, the provision reaffirms that the economic benefit is tied to using the cooperative and participating in its business activities rather than to a financial investment. Frequently asked questions – Rebate – Is a member discount in a housing co-op considered a rebate? No, a member discount in a housing co-op is a “member benefit.” This concept is not defined in the Act, but it is part of the business model. A member discount is a reduced price applied immediately (reduced price at checkout, reduction on monthly rent) and is not tied to annual surpluses. Rebates are decided after the end of the financial year and distributed based on business volume and in proportion to transactions conducted. In the case of cooperatives that issue rebates at purchase, particularly through member discounts, does the discount disappear if the general reserve is negative? No, a member discount is not a rebate. The new rule prohibiting the payment of rebates if the general reserve is negative has no impact on discounts offered to members throughout the year. New provisions introduced in the Act The modernization of the Act is not limited to clarifying existing principles; it also introduces several foundational new features. These notably affect the recognition of non-profit cooperatives, the governance framework for collective interest cooperatives and the adaptation of certain rules depending on the type of cooperative. These additions reflect a desire to better capture the diversity of practices and missions observed in practice. Non-profit cooperatives The Act now recognizes the ability for a cooperative that prohibits, in its articles, any rebate and any interest on preferred shares issued to members, to declare itself as a non-profit entity. This is a clarification aimed at formalizing an existing practice. Many cooperatives already operate with non-profit tax status, but they occasionally encountered obstacles getting that status recognized. This recognition will hopefully make it easier for these cooperatives to qualify for various programs. Learn more about these types of cooperatives Collective interest cooperatives The Act now allows a cooperative to be operated in the interest of a collective expressly defined in its articles. This legal recognition confirms a reality that is already well established in practice. As an example, the health cooperative model has proven its value and demonstrated its relevance in recent years. However, due to health insurance regulations, these cooperatives cannot prioritize their services for their members and, as a result, could never meet the operational threshold required by the Act. Until now, these cooperatives often struggled to reach the threshold of 50% of business conducted with their members. By introducing this option, the Act takes into account their mission and operating model. Moving forward, collective interest cooperatives that do not reach this threshold will simply need to explain the reasons in their annual report. It is important to clarify that non-profit cooperatives and collective interest cooperatives are not new categories but rather attributes that a cooperative can adopt. The patronage relationship with members remains a fundamental element of their operation. Furthermore, existing cooperatives that wish to adopt these attributes may need to amend their articles of incorporation. Learn more about these types of cooperatives Other interesting new provisions by cooperative type Among the other new provisions introduced, the Act: provides tailored measures for different types of cooperatives to facilitate their operation and management allows consumer cooperatives to create a “family” member category, better suited to their reality, and to delegate member admission powers (with the exception of housing cooperatives) relaxes the requirements for forming producer cooperatives by allowing them to be established with just three founders instead of five introduces a reserve for future rebates to offer an additional financial management tool, allowing surpluses to be allocated to a reserve with a view to paying rebates at a later date and spreading payments over several financial years. Frequently asked questions – Family member – Does the “Family” member category also apply to housing cooperatives? Yes, however, this category does not apply automatically. For a housing cooperative to provide for a “Family” member category, it must be explicitly set out in its by-laws. An amendment to the by-laws is therefore required if the cooperative wishes to incorporate it. – Is the “Family” member category also possible in a solidarity cooperative that includes user-consumer members? Yes. Strengthening governance The reform also brings significant changes to governance, both in terms of obligations and the tools made available to cooperatives. It introduces new requirements for accountability, transparency and member participation, while offering organizations greater flexibility to adapt their internal rules and prevent or manage disputes. Frequently asked questions – Notice of a meeting Do the provisions concerning resolutions also apply to notices of a meeting for board of directors meetings? No, section 123 of the Act applies only to general meetings. New annual obligations The Act also introduces new annual obligations aimed at strengthening transparency and member participation. Cooperatives must now include in their annual report a description of cooperative training initiatives, make certain information regarding shares accessible to their members and allow two members to call the annual meeting when the board of directors fails to do so. At the same time, the Act grants cooperatives greater self-regulatory capacity by offering them increased flexibility, notably to change their head office address by by-law, limit the number of terms for directors, spread rebates over several financial years and create new financial reserves. Obligation to adopt a mediation by-law The Act introduces an obligation for all cooperatives to adopt a mediation by-law in order to encourage internal dispute resolution in a structured and constructive manner. This obligation had already been in place since 2025 for housing cooperatives, but it now applies to all cooperatives. Existing cooperatives have a 12-month grace period following the assent of the Act (until February 2027) to comply with this requirement, failing which penal sanctions should be expected. This new provision aims to promote a culture of dialogue, conflict prevention and accountability within cooperatives, while reducing reliance on judicial proceedings, which are often costly and adversarial. It thus helps protect member cohesion, preserve democratic governance and strengthen the sustainability of cooperative organizations. Frequently asked questions – Mediation Do we need to fill out a form for the mediation by-law, or is it enough to simply adopt it? There is no form to fill out. The cooperative must formally adopt a mediation by-law. The CDRQ will make a template mediation by-law available to its members very shortly. Cooperatives will be able to adapt it to their needs. Does the obligation to adopt a mediation by-law also apply to federations? Yes, this obligation also applies to federations, pursuant to section 227 of the Act. Frequently asked questions – Training Can community education and representation activities be considered “training”? Previously, the Act imposed a general obligation to “provide training.” This obligation is now explicitly stated in the Act, which clarifies its existence without detailing its scope. Since this provision is very recent, it is still too early to know how it will be interpreted or applied by the Ministère de l’Économie, de l’Innovation et de l’Énergie (MEIE). Administrative guidelines or clarifications may be issued at a later date. For the time being, there are no official guidelines confirming whether community education or representation activities will be formally recognized as training within the meaning of the Act. Frequently asked questions – Shares Must share information be included in the annual report, made public or made accessible to non-members? How should the cooperative go about this? It is up to each cooperative to determine how it makes this information available. However, new section 49.5 specifies that information regarding shares must be accessible at a “location” designated by the cooperative. Legally, the concept of location is broadly interpreted. It can be a physical place (for example, the head office) or a digital space, such as an electronic link. What is meant by “information relating to shares”? Does this apply only to preferred shares? This obligation applies to all shares issued by the cooperative, namely common shares and preferred shares. New section 49.5 provides that the cooperative must, once a year, communicate this information to all shareholders or make it available at a location it designates. The information to be provided includes, in particular, the classes of shares outstanding at the end of the financial year, the total value of each class or series of shares, the privileges, rights and restrictions attached to each class of preferred shares, including redemption, repayment or transfer conditions, the amount of repayment requests received for each class of shares and an indication as to whether third-party authorization is required prior to any redemption of capital stock. It must also state the redemption and repayment policy for preferred shares and the repayment plan for those shares, where applicable. With respect to members, this obligation can be fulfilled by attaching this information to the notice of annual general meeting as an explanatory document. Harmonization and legislative updates The reform also includes various harmonization and legislative updating measures aimed at modernizing the legal framework for cooperatives and strengthening its coherence. In particular, it provides for an update of penal provisions, as well as a comprehensive winding-up regime, offering a clearer and more secure framework in the event of a cessation of business. The Act also clarifies the scope of limited liability for shareholders, thereby contributing to a better understanding of the associated risks. Finally, certain measures, such as the simplification of rules applicable to cooperative mergers, will enter into force at a later date by decree, allowing for a gradual and tailored implementation. What’s next? The next steps of the reform will consist essentially of operational and administrative adjustments. The entire official text of the Act will be updated and made accessible on LégisQuébec in the coming weeks. At the same time, administrative forms will be gradually adapted by the MEIE to reflect the new provisions. An amended regulation pursuant to the Act is also expected in 2026, hopefully to raise the threshold for producing financial statements without mandatory recourse to a CPA to $500,000 for certain cooperatives. Overall, Bill 111 marks a major turning point for the Quebec cooperative movement. It modernizes the legal framework, making it more flexible and, above all, better adapted to current realities while strongly reaffirming the foundations of the cooperative model. The reform clearly confirms that a cooperative is not an investment vehicle for speculative purposes, but a collective tool serving its members, their usage and their community, thereby strengthening its identity, credibility and long-term viability. Do you have any questions? If, after reading this post, you have questions or would like clarification regarding the amendments to the *Cooperatives Act*, we invite you to contact our Legal Services Department.They will take the time to provide a personalized response to your inquiry.
