“To be successful, Fonterra must be an attractive option to farmers, many of whom have a choice on where their milk goes,” McBride told the meeting.

“Farmers leave for different reasons, but one of the most influential ones is the high level of compulsory investment that’s required to be part of our co-op. A capital structure with flexible shareholding would help to level the playing field with competitors, many of whom are foreign-backed and don’t require farmers to invest capital,” he said.

Without the changes, Fonterra was concerned it would continue to lose market share, with its milk supply potentially falling by as much as 20 per cent by 2030, making it less efficient and unable to pay farmers as high a price for their milk, or invest back in the business.

The other major change will see Fonterra cap the size of its shareholder fund which is listed on the NZX and gives those outside the co-operative access to Fonterra’s dividends.

Limiting the size of the fund will keep the balance of power in farmers’ favour, and they will no longer be able to freely exchange their shares into units on a day-to-day basis.

The size of the fund will be restricted to 10 per cent of the co-operative’s total shares, from 20 per cent. It currently represents about 6.7 per cent of total shares.

Fonterra’s board wants the changes to take effect from next season, starting in June 2022, although it would allow six months for shareholders to adjust to the new settings.

The changes would require the Government to amend the Dairy Industry Restructuring Act which enabled Fonterra to be set up 20 years ago.

Agriculture Minister Damien O’Connor has said he is concerned the proposals would remove key mechanisms that risk weakening performance incentives on Fonterra.

In a letter to McBride last month, O’Connor said he is concerned that the proposals would create a higher risk of diverging shareholder interests inside the co-operative, between farmers with minimum shareholdings for supply only and those with larger shareholdings held for investment purposes.

“My concern is that this could result in competing shareholder priorities relating to Fonterra’s future direction and strategy,” he said.

O’Connor said it would be difficult for the Government to support an amendment, although he would consider “an alternative, more balanced proposal”.

In a letter to shareholders, McBride said Fonterra would need to keep working with the Government on what the changes might mean under the Dairy Industry Restructuring Act.

McBride told farmers at the special meeting that he has spoken to O’Connor since receiving his letter, and he remains confident that they can find a regulatory framework that supports the flexible shareholding structure.

Jarden head of research Arie Dekker said the proposed capital structure changes may secure Government support without amendment, given the Government’s indication of a willingness to engage, and such a strong endorsement from farmers for the changes.