Booklet 2: Rules of the game in Rural Social Enterprises

Booklet 2

Rules of the game in Rural Social Enterprises

Each organization and institution has “rules of the game”. In a family, church, soccer, baseball, school, in a cooperative…there are rules. For example, in soccer 3 rules mean that it ca be played anywhere, in a field, on the street or a soccer stadium; these three rules are: only the goalie can touch the ball with his hands, out of bounds and foul (pushing or kicking another player). Generally, organizations that follow their rules run better.

RSEs also have a few rules: 21. Pretty well tested. Subject to being changed partially by the assembly of shareholders. They are applicable to any RSE. We list these rules in what follows:

On investments:

  1. The investors can be from inside or outside the community. The family that operates the initiative can also be a shareholder (be it a store, roaster or other initiative)
  2. 1 share = C$ 1000 (1,000 Córdobas)
  3. A person becomes a “shareholder” with 1 share or more, and with that share or shares becomes an investor in all the initiatives.
  4. In the case that the family that runs it invests, they will have a dual role, investor and at the same time the family that operates the initiative.
  5. If the shareholder dies, automatically that person´s spouse and children are left as the owners of those shares. In case the shareholder does not have a spouse or children, then the closest relative is left as owner of the shares.
  6. No shareholder will have more than 35% of total shares.

On the work of the family that runs an RSE

  1. Each family that operates it is creative and responsible for making the initiative more successful, so that they can include any other way of buying new products or adding new services, always in function of the “company.”
  2. If the family that operates an initiative decides to no longer continue with the initiative, they will completely withdraw all the products or assets, without those products or assets being provided on credit.
  3. The shareholder group can close an initiative and recover the products and assets if that initiative ceases to be profitable.

On earnings, reinvestment and expenses

  1. From gross profits (sale or service price minus costs and expenses), 30% is for the family that runs it (store, roaster or other initiative).
  2. From net profits (gross profits minus 30%), 20% is for reinvestment, 20% is for a social fund, 10% for equipment repair and 50% is to be distributed among the shareholders in accordance with their number of shares.
  3. In the distribution of shares, for the person who has more than100 shares, each share over that 100 will have the right to 50% of the amount of each share held by those who have 100 or less shares.
  4. The reinvestment done (that 20%) will be added as part of the shares of all the shareholders. In other words, if that 20% comes in as additional products for sale or as a piece of equipment for the roaster, the value of that 20% is added as part of the shares of all the shareholders. Operation: the amount of the reinvestment divided by the total number of shares; that amount is added in accordance with the number of shares held by each shareholder.
  5. If a shareholder decides to withdraw or recover part of their shares, those shares will be bought by any person or shareholder.

On losses or damaged products or assets

  1. If products or assets are lost through theft, it is the responsibility of the family that runs it. The value lost is deducted from their 30%.
  2. If some product is damaged in the store, it must be reported in the monthly audit. The corresponding measure will be taken from a mutual agreement. In any case, the value of the loss will be assumed equally, 50% by the family operating the initiative and 50% by the investors.

On Follow up/ audit/ transparency

  1. The family that operates the initiative will register each operation and have all information up to date.
  2. The supervisor and the operating family will provide followup/audit every 30 days. In doing so, they will audit the numbers, together analyze the month by its results and, taking into account the results from the previous month, will make decisions guided by the rules.
  3. The 30% of gross profit that goes to the family operating the initiative will be paid at the end of each month.
  4. The distribution of surplus based on net profits will be done every 3 months.
  5. On the 10th of each month each shareholder will receive information on the financial results of the previous month from all the initiatives.

 

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