Fears farmers could lose control of their co-operative has become the defining issue for critics of Silver Fern Farms' capital restructuring proposal.
Two former directors of the co-op - Lindsay Alderton and Ian Grogan - are among several farmers who have voiced concerns about aspects of the restructuring proposal, such as loss of farmer control, the board structure and potential conflict between paying a competitive price for livestock and a share dividend.
But Silver Fern Farms (SFF) chairman Eoin Garden has said previously the proposal would preserve farmer control by securing 60% of voting shares for supplier shareholders, and the company would have to pay competitive prices to ensure it got the livestock.
The extra capital was needed to reduce reliance on bank debt and was a prudent step to take, given the current economic uncertainty.
SFF proposes creating a hybrid co-operative to raise at least $80 million through a bonus share and cash issue.
Shares would be tradeable on the Unlisted Exchange but only if farmer shareholders chose to sell them on the open market.
Traditionally, meat co-operatives have operated on share capital of dollar-in dollar-out, and SFF has said listing on the Unlisted Exchange would determine a share value based on company performance.
It was not a way to raise equity from general investors.
SFF planned to use the money to pay down debt, invest in new technology and help roll out its plate-to-pasture integrated supply chain.
Another critic, Gore farmer Hugh Gardyne, said security of ownership was the cornerstone of a pure co-operative which was driven by committed livestock supply, but that commitment was based on a company's comparative performance.
He said SFF had strengthened its balance sheet in recent years, making it much more bankable, but shareholders had not been given exact details on how the money would be spent and whether the best source of funding was from equity, borrowing or retained profits.
The proposed new structure would reduce the board from 12 to eight.
Five of those, including the chairman, would be elected by farmer-shareholders, but Mr Gardyne said farmer-directors had served the company well in the past.
Farmer directors would be elected without a ward system, an issue Manawatu-based Mr Grogan raised as a concern for North Island suppliers in last week's New Zealand Farmers Weekly.
Only rebate shareholders who were current suppliers could vote, but there were few of those in the North Island.
Mr Alderton has questioned whether independent directors had knowledge about co-operatives.
Mr Garden said any director must have the required skill to govern a company.
SFF needed expertise in international marketing, finance, banking and livestock farming.
A former SFF shareholder, Lindsay Malcolm, said farmer directors had served the company well in the past but appeared no longer to fit the board's requirements.
He said a hybrid co-operative with publicly tradeable shares might encourage farmers to supply "a pure form of co-operative".
SFF holds shareholder meetings in Timaru and Oamaru tomorrow and Otautau and Gore on Friday.
