Statement on the approval of the sale of substantially all of the assets of Mountain Equipment Co-operative

For the past six years, I’ve been nominated by to be a candidate in the Mountain Equipment Co-op Board of Directors Election and was on the ballot for four of those elections. The results for the 2020 election have not yet been released. During this period, I have had extensive discussions with members across the country, have asked questions at every Annual General Meeting, and have carefully reviewed the financial statements and annual reports. This is all to say that I have studied the recent history of the co-op in great detail.

This morning, the Supreme Court of British Columbia approved a transaction which will result in substantially all of the assets of Mountain Equipment Co-operative being sold to a private company. This marks the end of an incredible 49 year era. I am grateful for the members who came forward over the past two weeks to try to find a way to avoid this outcome. A group called SaveMEC raised over $110,000 for legal fees to allow members to participate in the Companies’ Creditors Arrangement Act proceedings and more than 140,000 people have expressed their support through a petition. Unfortunately, by the time members were notified of the sale, it was too late for any intervention to be successful.

I have a lot of thoughts about what has happened over the past 10 years and especially the last 10 days but I will save those for another time. Today, I want to emphasize two main things:

1) The co-operative still exists and it still may have a future

Technically, the co-op is not being sold. Substantially all of the assets (buildings, inventory, contracts, branding, intellectual property, etc.) of the co-op are being sold but the co-op itself still exists. There is a possibility that the co-op will not be officially wound up if a number of things occur during the CCAA process. For starters, all of the liabilities and obligations of the co-op would need to be resolved (paid off from the proceeds of the asset sale or permanently forgiven by the court.) Additionally, the court would need to approve a plan that would allow the co-op to emerge from the process with a large enough bank balance to cover basic administrative costs in the following year (insurance, accounting services to ensure taxes and an annual report are completed correctly, IT services to securely maintain a database of 5.7 million members, legal services to re-write the bylaws, administrative services to manage an election and AGM, etc.) If that happens, the shell of a co-op with 5.7 million members could then recommence business activities from the ground up. For example, in the first year it could simply sell branded toques through an online store (it would need a new brand though.) One thing that I would like to understand is if the co-op entered into any type of a non-compete agreement with the entity that purchased the assets.

1) Legislation must be changed to make sure that this never happens again

It is unreasonable to expect that every co-op will continue to be viable forever. However, I believe that we should expect that this specific method of failure is never repeated again. There are a number of things that are notable about how Mountain Equipment Co-op failed:

• Prior to September 14th, the last financial statements that the members had access to were for the period ending in February of 2019 (eighteen months earlier.)
• Despite the Act stating that “(2)An association must not dispose of the whole or substantially the whole of the undertaking of the association unless (a)the disposition is authorized by a special resolution of the members…” the CCAA allowed the co-op to complete a sales transaction that did not require membership approval and did not provide members with an opportunity to provide a stronger offer.
• It appears that the $190 million of member shares (initial shares and patronage returns) will be completely wiped out during the CCAA process. Other stakeholders will also experience meaningful losses.

In January of this year, I received a letter from the BC Government which stated:
“Our government is currently in the process of determining whether a review of the British Columbia Cooperative Association Act (CAA) is necessary. Your feedback has been noted and will be considered as part of this process. If a review of the CAA is undertaken, be assured that further opportunities for public consultation may be provided.”

I hope that there is no longer any question about the need to review the Act and that governments at the provincial and federal level undergo an immediate review to make the required changes.

All the best,

Steve Jones

stevejoneshikes@gmail.com