Capital Structure

Capital structure can be defined as the way a company manages the balance between its debt and equity to finance its activities, assets and growth. 

As a farmer-owned Co-operative, we think about other things as well, like: how should the price of our shares be set; how can we give farmers flexibility with their capital; to what extent should non-farmers be able to invest in the Co-op; how much capital do we need to support our strategy. 

Flexible Shareholding

Following the passing of the DIRA Amendment Bill by the New Zealand Government in November 2022, our Flexible Shareholding structure is set to take effect in late March 2023. This is subject to the Board being satisfied that the necessary preparations are completed before then. The structure is intended to make it easier for new farmers to join our Co-op, and for existing farmers to remain with our Co-op, by allowing flexibility in the level of investment required. This supports our strategy by helping to maintain a sustainable milk supply, protecting farmer ownership and control, and supporting a stable balance sheet.

Flexible Shareholding is also more inclusive, with Sharemilkers, Contract Milkers and Farm Lessors of a farm supplying the Co-op able to join and hold Co-op shares as Associated Shareholders. There will also be the ability for ceased shareholders to transfer shares to their Permitted Transferees, being their relatives and related parties.

Farmers who would like a step-by-step guide on what the structure means for them can go to

  • Increased Flexibility

  • Capped Fund

  • Future Owners

  • Extended Exits

  • Easing Entry

Giving all supplying farmer owners more flexibility in the number of shares they hold.

Capping the Fonterra Shareholders' Fund (Fund) and moving to a farmer-only market.

Creating a more inclusive pathway to becoming a Co-op member where Sharemilkers, Contract Milkers and Farm Lessors could buy and sell shares as associated farmer owners.

Providing greater choice about how long farmer owners retain an investment in the Co-op after they cease supply.

Easing entry provisions to allow new entrants (or existing supplying farmer owners who have a material increase in milk supply) six seasons to achieve their 33% Minimum Holding.

A brief history of our capital structure

Fonterra was formed in 2001 from the merger of New Zealand’s two largest dairy co-operatives and the New Zealand Dairy Board following a long history of consolidation among dairy co-operatives across the country.

At that time, Fonterra issued Co-operative Shares to farmers in proportion to their supply. Our Co-op was required to redeem shares of exiting farmers or those reducing supply. The value of the Co-operative Share was set annually by an independent valuer. When a large number of farmers exited or reduced supply (e.g., during periods of drought), Fonterra had to redeem those shares and pay out the value – known as “redemption risk”. 


A consultation process on proposed changes to the Co-operative’s capital structure began in 2007. At Fonterra's annual meeting in November 2009, Fonterra farmers voted through the first changes of a three-step process to restructure the Co-operative.

At a special meeting in June 2010, they voted through the third step, titled Trading Among Farmers (TAF). TAF – with the two key parts of it being the Fonterra Shareholders’ Market and the Fonterra Shareholders’ Fund – was implemented in 2012, primarily to manage redemption risk.

Fonterra’s Board communicated its intention to review the capital structure following the Co-op’s strategy refresh in 2019.

A consultation process began in May 2021, with the initial findings released in July 2021.

Based on farmer feedback, as well as further expert advice, a proposal was put forward in September 2021 to move to Flexible Shareholding, and farmers informed in November 2021 that it would proceed to a vote.

In December 2021, the new structure received a strong mandate with 85.16% of total farmer votes cast in support of the recommendation and 82.65% participation based on milk solids voted.

At that time, the Board announced that Flexible Shareholding would come into effect once they were satisfied any steps necessary for implementation had been completed, which included changes to the Dairy Industry Restructuring Act, the legislation that enabled the formation of Fonterra back in 2001. Submissions made to the Government by Fonterra and the Fonterra Co-operative Council during the legislative process can be found below:

June 2022


JUNE 2022






With the relevant amendments now having progressed through Parliament, Flexible Shareholding is due to be implemented in March 2023, subject to the Board’s final approval.