What is a cooperative?
The International Cooperative Alliance (ICA) defines a cooperative as "an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise."
Written by Abigail Sked
Paralegal
Cooperative enterprises can carry out any lawful economic or social activity, but the cooperative principles set out by the ICA, must be applied to their operation and organisation. Those principles are voluntary and open membership, democratic member control, member economic participation, autonomy and independence, education, training and information, cooperation among cooperatives and concern for community.
The cooperative is the most appropriate legal structure for collective socio-economic projects. It is a democratic business model, in which the importance of the activity carried out by the partners (work, consumption, product contribution, etc.) prevails over capital.
Law 12/2015, of the 9th of July, on cooperatives regulates cooperatives that carry out their main cooperative activity in the territory of Catalonia. This law does not prescribe a single model of cooperative enterprise, but rather offers a range of possibilities. It is the cooperative itself which, through the free will of its partners, self-regulates by means of its Articles of Association and decides which of the various possible models best suits its reality, all while respecting the principles that characterise cooperatives and, more generally, the social economy.
The regulations are somewhat different for cooperatives that operate in other autonomous communities or in several of them. If this is your case, please contact us for a more personalised explanation.
The name of Catalan cooperatives must include the term "sociedad cooperativa catalana" (SCC or SCoopC) ("Catalan cooperative company" in English) on all documentation.
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Categories of cooperatives
Cooperatives can be categorised as either first or second-degree cooperatives. First-degree cooperatives are those composed of natural or legal persons, while second-degree cooperatives must be composed of at least two legal persons, at least one of which must be an active cooperative. In other words, it is a cooperative of cooperatives. In this article, we will focus on first-degree cooperatives.
First-degree cooperatives are grouped into the following categories (although they may be set up with different social objectives):- Agricultural
- Maritime, river and lake
- Insurance
- consumers and users
- Credit
- Education
- Housing
- Health
- Services
- Associated work
- Comprehensive
Minimum share capital of cooperatives
The cooperative is to be set up with a minimum share capital of 3,000 euros. The members' contributions, including those relating to the minimum share capital, may be made in cash or not. Non-cash contributions must be represented by assets or property rights that can be valued economically.
The Articles of Association must establish the minimum compulsory contribution required to become a partner of the cooperative, which may be different for each type of partner or for each partner in proportion to the cooperative activity carried out or undertaken. Any contribution to the share capital which exceeds the compulsory contribution necessary to become a partner is considered to be a voluntary contribution.
Do cooperatives benefit from limited liability?
Yes, cooperatives operate under a regime of limited liability of partners in relation to third parties. Partners are liable for company debts only up to the amount of their subscribed share capital, whether or not they are paid up. However, partners are liable to the cooperative with their personal assets, present or future, for non-fulfilment or defective fulfilment of their relevant obligations which by their nature are not rendered redundant by the loss of their status as partners.
How many partners must a cooperative have?
First-degree cooperatives must have a minimum of two partners who carry out the cooperative activity, except for consumers and users cooperatives, which must be made up of at least ten partners who are natural persons. Within five years from the date of their incorporation, cooperatives initially formed with two partners must bring in a third partner of one of the following types: ordinary partner, working partner, collaborating partner. From the fifth year onwards, these cooperatives must notify and certify to the General Register of Cooperatives, in the manner to be determined by regulation, that they have brought in this third partner; if they fail to comply with this requirement, the cooperative must be dissolved.
What rights do cooperative partners have?
Partners shall have, without any restrictions other than those arising from a disciplinary procedure or the requirements of good faith, all the rights recognised by law or by the Articles of Association for each type of partner.
Without prejudice to the specific provisions laid down by law and the Articles of Association for the different types of partners, the partners of a cooperative have the right to:
- Participate in carrying out the corporate purpose of the cooperative.
- Elect the members of the company's governing bodies and be elected to these positions.
- Participate with voice and vote in the adoption of all resolutions of the General Assembly and other bodies of which they form part.
- Request information on matters affecting their economic and social interests.
- Participate in surpluses, if any, in accordance with the Articles of Association.
- Receive reimbursement of their regularised contribution in the event of deregistration or liquidation or transformation of the co-operative, which must not be affected by temporary suspension of rights due to disciplinary proceedings, without prejudice to the provisions of the Articles of Association in relation to contributions whose reimbursement may be unconditionally rejected by the Governing Board.
- Exercise the other rights resulting from legal regulations and the Articles of Association, as well as from the resolutions validly adopted by the cooperative's bodies.
What obligations do cooperative partners have?
The partners of a cooperative are obliged to:
- Participate in the activities which represent the purpose of the cooperative and carry out the cooperative activity in accordance with the requirements of the prevailing law, the Articles of Association and other agreements validly adopted by the cooperative.
Fulfil the financial obligations incumbent upon them. - Attend the meetings of the General Assemblies and other bodies to which they are summoned.
- Accept company duties, unless they have a justified reason, as determined by the General Assembly, for not doing so.
- Comply with the resolutions validly adopted by the governing bodies.
- Not to engage in activities that may compete with the aims of the cooperative nor to collaborate with anyone who engages in such activities, unless expressly authorised to do so by the Governing Board.
- Participate in training and inter-cooperation activities.
- Maintain confidentiality with regard to the affairs and data of the cooperative, the disclosure of which could be detrimental to the cooperative's interests.
How are cooperatives managed? What are their governing bodies?
Every cooperative must have the following governing bodies:
- The General Assembly (asamblea general), made up of all the partners.
- The Governing Board (consejo rector).
The General Assembly
The General Assembly of the cooperative is the sovereign organ for the expression of the cooperative's will. Its resolutions are binding on all partners, including dissidents and those who did not attend the meeting that adopted them, unless they have been suspended or declared invalid by administrative or judicial decision.
General Assemblies may be ordinary or extraordinary. The ordinary General Assembly must meet once a year, within six months following the end of the financial year, for the purposes of examining the management carried out by the Governing Board, approving, where appropriate, the annual accounts and deciding on the allocation of profits and losses.
The General Assembly may discuss and decide on any matter of the cooperative expressly attributed to it by law or by the Articles of Association. In some cases, the assent of the General Assembly is required, for example, with regard to the examination of the corporate management, the approval of the annual accounts, the appointment and revocation of the members of the Governing Board, the modification of the Articles of Association and internal regulations, any decision which, according to the Articles of Association, implies a substantial modification of the economic, social, organisational or operational structure of the cooperative, etc.
In first-degree cooperatives, each partner has one vote. However, except in the case of associated work cooperatives and consumers and users cooperatives, any first-degree cooperative with more than two partners may establish in its Articles of Association a system whereby the ordinary partner has a plural vote weighted according to his or her cooperative activity in the cooperative.
The Governing Board
The cooperative's administrative body is the Governing Board, which is responsible for the representation and governance of the cooperative, the permanent and direct control of the executive management, where appropriate, and the power to establish the general guidelines for the cooperative's actions, subject to policy established by the General Assembly.
The Governing Board must act in accordance with the provisions of Law 12/2015, the cooperative's Articles of Association and internal regulations, where applicable, and the general policy established by the General Assembly.
The Articles of Association must determine the minimum number of members, which may not be less than three, except in the case of two-partner cooperatives, in which the Board shall be made up of these two partners.
Both natural and legal persons may be members of the Governing Board. Persons forming part of the Governing Board must be partners of the cooperative, unless the Articles of Association provide for non-partner members who, in any case, may not exceed one quarter of the total number of members of the Governing Board.
The members of the Governing Board must exercise their office with diligence and loyalty to those they represent and must manage the enterprise in an orderly manner.
The members of the Governing Board are subject to joint and several liablility in relation to the cooperative, to the partners and to the creditors of the enterprise for any damage caused by acts contrary to the law or to the Articles of Association or for acts carried out without the diligence required of them in their office. They are not liable for acts in which they have not participated or if they have voted against the resolution and their opposition to it has been recorded in the minutes, or in a reliable document submitted to the Governing Board within ten days of the resolution.
Can a cooperative employ workers?
Employment contracts are limited on the basis that the work shall be carried out by the working partners.
The number of hours per year worked by workers with an employment contract may not exceed 30% of the total number of hours per year worked by the working partners.
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