Dairy giant Fonterra is pressing on with plans to hold a vote on the future of its capital structure, despite not yet having government support for the proposal.
File image. Photo: 123RF
The co-operative's board is recommending changes to make it easier to join the company, while maintaining farmer ownership amid falling milk supply.
Its proposal would require farmers to hold a minimum of three shares for every kilogram of milk solids they produce, allow different types of farmers to own shares in the co-operative, and capping the size of the associated shareholder's fund.
In an update released on Tuesday, it said following further consultation with stakeholders, it was recommending that thresholds be introduced so the total number of shares on issue were within 15 percent of total milk supply, permitting different types of farmers to own dry shares, and limiting the size of shareholder's fund to 10 percent of all shares on issue.
"The board is unanimously recommending the changes to our capital structure to put us in the best position to deliver the value outlined in the strategy and protect farmer ownership and control of our Co-op," Fonterra chair Peter McBride said.
"The decision to go ahead as planned has been informed by a significant volume of shareholder feedback that shows strong support for the changes."
For the proposal to be approved, it would require 50 percent support form the Co-operative Council (which is an elected body by farmers to represent their interests), followed by 75 percent support from eligible farmers at the annual meeting next week.
The co-op said the council had already voted 92 percent in support of the recommendations.
If the vote is successful, Fonterra was aiming for the changes to take effect by June 2021.
However, it notes that its still working with government to determine what the new capital structure would mean under the Dairy Industry Restructuring Act (DIRA).
When Fonterra was formed in 2001, special legislation (DIRA) was created to allow the country's two biggest co-operatives at the time, New Zealand Dairy Group and Kiwi Co-operative Dairies, along with the marketing and export agent the New Zealand Dairy Board, to merge.
"Fonterra notes the government is not in a position to support DIRA changes to facilitate the proposal at this stage, but understands the government wants to work together to reach an outcome that works for both parties," the company said.
"As some aspects of Fonterra's current capital structure are reflected in the Dairy Industry Restructuring Act 2001 (DIRA), any vote would be conditional on the necessary changes to legislation being passed."
Fonterra said it was confident there was a regulatory framework that would support the flexible shareholding structure.
