As I’m a software developer I love edge cases… well, when I don’t have to deal with them anyway. Over the years I’ve learnt about the various types of business that exist in New Zealand. It’s a bit esoteric, but interesting to me so I’m going to write about it!

The most common businesses are sole traders - a person, partnerships - several people, and limited liability companies - a legal entity that pretends to be a person until you try to put it in jail. So here are some examples of none of the above!

First, lets look at the AA (or the New Zealand Automobile Association, inc. Not Alcoholics Anonymous). The AA is an incorporated society, this is a type of member-owned business that has to operate for the benefit of its members. Everyone who pays for an AA membership ‘owns’ part of the AA while their membership lasts, and everything the AA does must be for the benefit of its members - in the AA’s charter this is providing roadside assistance and advocacy for motorists. In addition an incorporated society cannot make a profit, and can only retain surplus funds if there’s a justification. In reality the AA’s main business is selling its membership database, but this subsidises the roadside rescue. Which is contracted out to the lowest bidder…

OK. What next? Fonterra! Fonterra is a producer co-operative*! This is another type of membership-owned* business, with ownership of the company being granted in proportion to the member’s contribution*, in the case of Fonterra the amount of milk each farmer produces* defines their ownership*. Unlike an incorporated society, a co-operative does make a profit, but this must be distributed to its members. So Fonterra’s job is to make the most money for the milk produced as they can, which is then distributed back to the CEO’s pocket the farmer’s in proportion to their ownership*.

What’s with the *s? Fonterra is weird and has special laws that make it different to other co-operatives. But for other producer co-ops like Tatua (dairy), Zespri (the kiwifruit people!) and the co-operative I used to work at, Ion Technologies (software consulting), don’t have the *s, though the exact way contribution determines ownership varies.

Speaking of co-operatives, The Co-operative Bank is a co-operative. It’s in the name! However it’s a consumer co-operative - it’s owned by everyone who deposits money in the bank, and consequently all profits get distributed back to the account holders rather than siphoned off to Australia (For anyone who knows a bit about finance, this sounds a lot like a credit union… but the Co-operative Bank, or rather its predecessor PSIS, is specifically excluded from being a credit union by law). Farmlands is also a consumer co-operative, the members are farmers who use their collective buying to get better deals.

What’s next? Another sort of co-operative! They’re everywhere! Foodstuffs - New World, PAK’nSAVE, Four Square etc - is a co-operative. Actually it’s two, one for the North Island and one for the South Island. So are ITM and Mitre10, but these are all vendor co-operatives. Their co-operative combines bulk purchasing and centralises advertising and branding to get a better deal for the store owners - not the consumers!

One last one, Southern Cross Health Society. It’s not an incorporated society like the AA, and it’s not a for-profit company. It’s a Friendly Society, which is yet another kind of member-owned business, but for specific kinds of mutual insurance. Unlike a for-profit insurer whose goal is to take in more fees than it pays out, Southern Cross has a legal obligation to only take in exactly as much as it pays out each year (plus administrative overheads). This is significant as some people regard for-profit insurance as gambling, but a Friendly Society is mutual aid.

Friendly Societies are regulated by the Friendly Societies and Credit Unions Act 1982. Credit unions? Yes, this is the act that specifically says The Public Service Investment Society Limited, or PSIS, or now the Co-operative Bank, isn’t a credit union, despite walking and quacking like one. Why? Alas I’m not a lawyer.