Saving Kaniva – the business detail

Does your town face a similar dilemma?

Tony Gill, Director, Co-operative Development Services Ltd gives the business detail of how Kaniva – the last Victorian town before the SA border on the Western Hwy – saved their petrol station:

In mid 2002, an administrator was appointed to run Kaniva’s petrol station for Mobil Australia. In April 2004, the administrator decided to close the business after failing to find a buyer for the site.

In response to community concern, the Shire of West Wimmera brokered a deal to keep the site open while a buyer was found. Eighteen Kaniva residents and businesses formed a group to take the position of “buyer of last resort” if a buyer could not be found.

In September 2004, with no buyer coming forward, the group, acting on legal advice, formed a proprietary limited company, Kaniva Community Roadhouse Pty Ltd (KCR), to buy the site. Members of the group contributed $82,000 towards the estimated $400,000 needed to purchase and retank the site and fund the business.

After reviewing the financial position of the business, KCR entered into a contract with Mobil to purchase the site. Mobil then signed an agency agreement with KCR for the supply of fuel until settlement took place, and following the removal of the old fuel tanks later that year.

The limitations of a proprietary limited company soon became apparent and threatened to scuttle the project. And although 200 Kaniva residents, businesses and community groups had previously offered financial support for a community-owned petrol station, they were informed that the maximum number of non-employee shareholders of a proprietary limited company is 50. A proprietary limited company is also prohibited from inviting the public to buy shares.

With the prohibitive cost of forming an unlisted public company, the KCR board decided to explore the idea of forming a cooperative. A co-operative does not have the same restrictions. It is less costly to form than a public company, and can raise funds from the public.

After seeking advice from Co-operative Development Services Ltd (CDS), the KCR board decided to form a trading co-operative to give the 1,000 Kaniva residents, businesses and community organisations the opportunity to become members and share in the benefits of being owners of the town’s only petrol station.

The preferred option was to convert the company to a co-operative, however, due to anticipated time delays in deregister the company, the board decided to form a new co-operative to meet the deadline imposed by Mobil for purchasing the site.

Over 200 people attended the formation meeting of the co-operative on 7 December 2004 and pledged over $280,000 to the enterprise. Registration of the co-operative took place on 14 December 2004. The board of directors, elected at the formation meeting, agreed to raise the remaining funds needed to reopen the petrol station.

As KCR had previously entered into a contract with Mobil to buy the site, the
co-operative bought out the existing shareholders of KCR and the company became a subsidiary of the co-operative, holding title to the land and building. The petrol station was reopened in May 2005 as a community-owned co-operative enterprise.

These details appeared in ‘Community Cooperative Connections E-news’ March 2006, published by the Centre for Australian Community Organisations & Management, University of Technology, Sydney.