2. Project No: 2017-1-IE01-KA202-025711
This project has been funded with the support of the European
Commission. This publication reflects the views only of the author, and the
Commission cannot be held responsible for any use which may be made of
the information contained therein.
2
3. 3
Module 2: Legal Framework of Cooperativism
Coming together is a beginning. Staying
together is progress. Working together
is a success.
Henry Ford.
4. 4
Develop competencies to implement relevant internal,
external, sectoral and institutional legal provisions in
the enterprise management of co-operatives.
Objective of the Module
5. What's in this module?
5
1. Cooperative Legislation
2. The Rules of Procedure
3. Roles and responsibilities of cooperative participants
4. Statutory responsibilities and rights of employees and
employers in cooperative societies
5. Statutory Responsibilities and Product Liability
6. Statutory responsibilities and fraud prevention
6. A cooperative is a society voluntarily organized by a
group of people to serve themselves and the
community.
It is based on mutual help and the assurance that its
members work together for a common good.
1. Cooperative Legislation
What is a Cooperative?
Remembering...
7. 7
Values of cooperativism
VALUES
ETHICAL CO-OPERATIVES
1. HONESTY 1. MUTUAL HELP
2. TRANSPARENCY 2. ACCOUNTABILITY
3. DECENCE 3. DEMOCRACY
4. SOCIAL RESPONSIBILITY 4. EQUALITY
5. CONCERN FOR OTHERS 5. EQUITY
6. SOLIDARITY
8. 8
The 7 cooperative principles
PRINCIPLES1. Voluntary
and open
membership
2. Democratic
control of
members
3. Economic
participation of
members
4. Autonomy and
independence
5. Education,
training and
information
6. Cooperation
between
cooperatives
7. Interest in
the community
9. Cooperative enterprise models and
other corporate models
COOPERATIVE ANOTHER CORPORATE
MODEL
The authority is held by the
partners
The authority is held by the person
who owns most of the capital.
Capital is a basic tool to
provide service to the partner
Work, customers, suppliers... To
achieve the capital objectives
Distribution of benefits
according to participation in
cooperative activity
Capital-based distribution of profits
10. 10
1. Cooperative Legislation
Each country has its own cooperative legislation.
SPAIN: Law on Cooperative Societies in Spain:
http://www.infoagro.com/legislacion/leyes_cooperativas/ley_espana.htm
IRELAND: Cooperatives Act in Ireland:
FRANCE: Cooperative law in France:
LATVIA: Cooperative law in Latvia:
11. 11
1. Cooperative Legislation
However, for cooperatives with members in several
European countries:
• Council Regulation (EC) No 1435/2003 of 22 July
2003 on the Statute for a European Cooperative
Society (SCE).
• The involvement of employees in the SCE shall
be governed by the provisions of Directive
2003/72/EC.
• Law No 3/2011 of 4 March 2001 regulating
European cooperative societies with their
registered office in Spain.
12. • The Statutes of a cooperative.
Regulate the social aspects of the
cooperative.
• Internal Regulations (IR).
Regulates working conditions
12
1. Rules of Procedure
13. 13
3. Roles and Responsibilities of
Cooperative Participants
ASSEMBLY
BOARD OF DIRECTORS
MANAGER
+
TECHNICAL EQUIPMENT
14. 14
3. Roles and Responsibilities of
Cooperative Participants
It is the meeting of the members
constituted for the purpose of
deliberating and adopting agreements
on matters that are legally within its
competence, linking decision-making to
the whole co-operative (including
absentees and dissenters).
The General Assembly
15. 15
3. Roles and Responsibilities of
Cooperative Participants
The Assembly: Competencies
Performs the analysis of social management.
Approves the annual accounts, management
report and the use of available surpluses or
imputation of losses.
Appoints and revokes the members of the
board of directors, auditors.
Approves the amount of remuneration of
managers and administrators.
F
16. 16
3. Roles and Responsibilities of
Cooperative Participants
Modify the statutes, approve or modify the
internal rules of the cooperative.
Approve new compulsory participations,
admission of voluntary participations, fix the
participations of new members, establish
the periodic incomes or quotas.
The Assembly: Competencies
17. 17
3. Roles and Responsibilities of
Cooperative Participants
The Assembly:
Competencies
The right
to vote
…One vote
per
representative
Adoption of
resolutions
18. 3. Roles and Responsibilities of
Cooperative Participants
The assembly is the highest
decision-making body in a
cooperative...
... but it is NOT the most appropriate
decision-making body.
19. 19
3. Roles and Responsibilities of
Cooperative Participants
The Board of Directors:
It is the collegiate governing body to which
corresponds, at least, the maximum management,
the supervision of the directors and the
representation of the cooperative, subject to the
laws, statutes and general policy established by the
general assembly.
The Board of Directors is the exclusive
representative and management body of the
cooperative.
20. 20
3. Roles and Responsibilities of
Cooperative Participants
The Board of Directors:
Jurisdiction and Representation
The board of directors is responsible to other legal
entities for any competence not reserved by law or by
the statutes.
The president of the board of directors will legally
represent it.
21. 21
3. Roles and Responsibilities of
Cooperative Participants
The Board of Directors: Functions
Provides guidelines for developing and
implementing the co-operative's strategic plan.
Controls the evolution of the cooperative based on
market and adopted planning.
It chooses and evaluates the management and
replaces it if necessary.
Controls and enhances the development of the
company's managers and technicians.
F
22. 22
3. Roles and Responsibilities of
Cooperative Participants
The Board of Directors: Structure
The structure will be established by the
statutes of the cooperative.
The number of members should not be less
than 3 or more than 15 and in any case there
will be a president, a vice-president and a
secretary.
A workers' representative may be included.
ORGANISATION CHART BOARD OF
DIRECTORS
PRESIDENT
SECRETARYTREASURE VOCAL
VICE-
PRESIDENT
23. 23
3. Roles and Responsabilities of
cooperative participants
The Boards of Directors: Election
Directors shall be elected by general assembly by
secret ballot and by relative majority.
The statutes or rules of procedure shall govern the
electoral process.
The offices of president, vice-president and
secretary shall be elected, from among the
members, by the board of directors or by the
assembly in accordance with the legal provisions.
24. 24
3. Roles and Responsabilities of
Cooperative Participants
The Boards of Directors:
DURATION: Period defined by the statutes,
between three and six years, they can be re-
elected.
RESCISSION: The members may be dismissed by
agreement of the general assembly, even if it does
not appear on the agenda.
VACANCY: The resignation of the directors must
be accepted by the board of directors or by the
general assembly.
25. 25
3. Roles and Responsabilities of
Cooperative Participants
The Manager:
The complex management of any company
requires computer skills, accounting, tax and
labor, there are more and more deadlines to
meet, more legal requirements, and more
administrative bureaucracy that makes that
traditional way of running cooperatives
unviable.
The Manager is an important cog in the
organization.
26. 26
The Governing Council defines the
powers of the Manager; in addition, it
may dismiss whoever occupies that
position, as well as modify and limit the
powers granted.
• Economic management - business
• Commercial management -
articulation to the market
• Production management - technology
• Social management of the entity.
The Manager: Functions
3. Roles y Responsabilities of
Cooperative Participants
Planning
Control
Directing
Organize
27. 4. Statutory responsibilities and rights of
employees and employers in cooperative societies
Workers' rights under European law can
be found in two major laws:
• The Treaty of the European
Community, signed in Rome in 1957.
• The Treaty on European Union, signed
in Maastricht in 1992.
28. 28
• Hire employees under clearly defined and
documented conditions.
• Labour productivity is higher when staff
understand their functions correctly.
• Employment contracts must be in
accordance with applicable law.
4. Statutory responsibilities and rights of
employees and employers in cooperative societies
4.1. Staff contract:
29. 29
• Working conditions must comply with
applicable laws and EC conventions.
• Employees and employers must live up to
the physical and mental demands of
working in the co-operative.
• Employers must have realistic expectations
of their employees.
• The working day must be sustainable and
not exceed legal limits.
4. Statutory responsibilities and rights of
employees and employers in cooperative societies
4.2. Working Conditions:
30. 30
• Infrastructure and equipment must not pose a
risk to the health and safety of personnel.
• Facilities must be well designed, properly
maintained and provided with the necessary
means of safety.
• Ensure the general health of staff by carrying
out routine health examinations.
4. Statutory responsibilities and rights of
employees and employers in cooperative societies
4.3. Work environment regulations:
I
31. 5. Statutory Responsibilities and
Product Liability
"A product is an item, service or idea
consisting of a set of tangible or
intangible attributes that satisfies
consumers and is received in
exchange for money or another unit of
value”
• Agent responsible for the product
• Defective product
32. 32
Extended responsability of the product
manufacturer:
The manufacturer is responsible for the
management of products that become waste.
• Council Directive 85/374/EEC on liability for
defective products
• Directive 2001/95/EC on general product safety
• Waste Directive 2008/98/EC
It is important to take out liability insurance.
5. Statutory Responsibilities and
Product Liability
33. 6. Statutory responsibilities and
fraud prevention
Fraud:
• An action contrary to the truth that harms
the person against whom it is committed.
• Acting to circumvent a legal provision
Types of fraud:
• Commercial Fraud
• Tax Fraud
• Financial Fraud
• Food fraud
J
34. 34
Commercial fraud: Corruption, money
laundering, transparency and good
business practices.
Tax fraud causes public money to be lost.
Financial fraud is the crime of making
one's own economic profit through illegal
channels, despite the prejudice of others.
6. Statutory responsibilities and
fraud prevention
F
35. 35
Food Fraud:
• Deliberate production and/or marketing of
non-compliant food for economic purposes
that could affect the health of the
consumer.
• Food fraud occurs when products do not
comply with current legislation.
Regulation (EU) No 1169/2011: Food
information provided to the consumer.
6. Statutory responsibilities and
fraud prevention
Open and voluntary membership.
Co-operatives are voluntary organisations open to all those who are willing to use their services and who are willing to accept the responsibilities of membership without discrimination as to gender, race, social class, political or religious position.
2. Democratic control of members
Co-operatives are democratic organisations controlled by their members who are actively involved in policy definition and decision-making.
Those elected to represent their co-operative are accountable to the members.
In grassroots co-operatives members have equal voting rights (One member, one vote).
Democratic control: Participatory democracy, responsible representative democracy, political equality.
3. Economic participation of members.
The members contribute equitably and democratically control the capital of the cooperative. At least part of that capital is the common property of the co-operative.
They usually receive limited compensation, if any, on the subscribed capital as a condition of membership.
Members allocate surpluses for any of the following purposes: The development of the co-operative through the possible creation of reserves, of which at least one part must be indivisible; the benefits to members in proportion to their transactions with the co-operative; and support for other activities as approved by the membership.
4. Autonomy and independence.
Co-operatives are autonomous mutual aid organisations, controlled by their members.
If they enter into agreement with other organisations (including governments) or have capital from external sources, they do so on terms that ensure democratic control by their members and maintain the autonomy of the co-operative.
5. Education, training and information.
Co-operatives provide education and information to members, elected representatives, managers and workers who can contribute effectively to the development of their co-operatives. They inform the public, especially youth and opinion leaders, of the nature and benefits of the co-operative.
6. Co-operation between co-operatives.
Co-operatives serve their members as effectively as possible and strengthen the co-operative movement by working together through local, national, regional and international structures.
7. Interest in the community.
Co-operatives work for the sustainable development of their communities through policies approved by their social fabric.
An illustrative table that allows a comparative analysis of the nature of the functioning of cooperative enterprises and another of a mercantile model.
The cooperatives are obliged to regulate their operation through the STATUTES, which serve to adapt the law to the needs and particularities of each company.
Minimum content:
Company name, corporate purpose, registered office, duration and territorial scope of application.
The minimum share capital.
The mandatory minimum shares in the share capital to be a member, the form and deadlines for payment and the criteria for determining the mandatory shares to be contributed by new members of the cooperative.
The way of crediting shares to the share capital.
Types of membership, eligibility requirements, compulsory payments and applicable regime.
Rights and obligations of members.
Right to the redemption of members' shares and the arrangements for their transfer.
Rules of social discipline, categorization of misdemeanors and sanctions, sanction procedure and loss of membership.
Structure of the board of directors, number of directors and duration of their respective posts. In addition, determination of the number of auditors and the period of their action and, if necessary, of the members of the appeals committee.
IR: On a voluntary basis, the cooperative will be able to carry out an IR, approved by the general assembly and whose content and structure will be defined by the members, always respecting the legal and statutory framework to develop corporate, organizational or management aspects.
Basic and illustrative organization chart of the organizational structure in a cooperative society that adapts according to each need and reality.
The following are also exclusive competences of LA ASAMBLEA:
Issuance of bonds, participative bonds, special participations or others.
Forms of financing.
Merger, spin-off, transformation and dissolution of the company.
Any decision that implies a substantial modification, according to the statutes of the economic, social, organizational or functional structure of the cooperative.
Constitution of second-degree cooperatives and groups of cooperatives or integration into them if they have already been constituted, participation in other forms of economic collaboration, adhesion to entities of a representative nature, as well as their segregation.
Performance of the social action of responsibility against the members of the board of directors, the auditors of accounts and the administrators.
Derived from legal regulations.
The right to vote
In the general assembly each member will have only one vote.
The articles of association may provide for the possibility of a weighted plural vote in proportion to the volume of cooperative activity of the member, which shall in no case exceed five social votes, and it shall not be possible to attribute to a single member more than one third of the total votes of the cooperative.
One vote per representative:
The member may be represented at the meetings of the general meeting by one other member, who may not represent more than two members.
He may also be represented by a relative with full legal powers and with the degree of kinship established in the statutes.
The delegation of votes, which may take place only under special conditions at each assembly, shall be carried out in accordance with the procedures laid down in the statutes.
Adoption of resolutions:
Except as provided by law, the general assembly shall pass resolutions by more than half of the votes validly cast and blank votes and abstentions shall not be valid for this purpose.
Two-thirds of the majority of the votes present and represented shall be required for the adoption of agreements amending the statutes, the accession or reduction of members in a cooperative group, as well as for the transformation, merger, division, dissolution and reactivation of the enterprise.
Agreements on matters not included in the agenda shall be considered null and void, except, inter alia, the following:
To convene a new general assembly;
The fact that the accounts are censored by members of the cooperative or by an outsider;
Expand the General Assembly meeting;
The performance of the action of responsibility against directors, auditors or administrators;
The revocation of social charges.
It's not the most appropriate decision-making body because:
It is a very large body that cannot debate in depth or deal with complex methodical decisions.
It is an organ that usually does not have enough information to give an informed opinion, consider possible alternatives and make the right decisions.
It tends to have emotional responses and to be dragged along by dialectical reasoning.
It is a manipulable organ.
The Board of Directors is the governing body of the cooperative by delegation of the assembly, from which it receives a mandate from the government for a certain period.
It is the fundamental organ, key for the development of the cooperative, so if the board of directors does not work or energize the cooperative, it blocks the functioning of the rest of the organs, it does not allow the competences of the managers and the technical personnel to function, the cooperative will NOT function.
Other functions of the Board of Directors:
To be the forum to resolve possible differences between partners and prevent them from disrupting the operation of the company.
Do not interfere repeatedly in daily business, except in cases of serious crisis.
Mediate in financial flows: monetarization vs. capitalization.
Legally represent the cooperative to all intents and purposes and in the face of possible consequences.
If the co-operative has more than fifty permanent employees and if the works council has been formed, one of them shall serve on the board of directors as a member and shall be elected and revoked by that council.
The company's bylaws may permit the appointment of qualified and experienced persons who are not members of the board of directors, provided that they do not exceed one third of the total, and in no case may they be appointed as presidents or vice-presidents.
All the members of the Board of Directors will be renewed simultaneously, unless the statutes establish partial renewals.
Functioning:
The Board of Directors, once convened, will be validly constituted if more than half of its members personally attend the meeting.
In order to adopt resolutions, more than half of the validly expressed votes will be necessary. Each director will have one vote. In the event of a tie, the chairman's vote shall be a tie.
The minutes of the meeting, signed by the chairman and secretary, shall contain summaries of the debates and agreements, as well as the results of the voting.
The Governing Council defines the scope of powers delegated to the Manager, so that this power of attorney may be as broad or as narrow as desired. In addition, the Governing Council may at any time dismiss the person occupying that position, as well as modify and limit the powers granted when it deems it appropriate.
Management functions: Interpersonal, informative and resolutive.
Qualities and skills: Technical, human and conceptual.
Keys to success: Training, experience and personal skills - leadership.
The existence of management in the cooperative does not modify or diminish the competences and faculties of the Governing Council, nor does it exclude the responsibility of its members for the actions of the Manager.
But it is also true that the empowered Manager may be the object of liability actions for damages caused to the cooperative, members and third parties by their illegal actions or when their actions do not fall within the scope of the powers conferred, either because they have exceeded their functions or because they have not exercised them in those cases in which it would have been necessary.
It is important to ensure that the working environment meets the requirements of health and safety regulations.
An agent responsible for the product is the producer or manufacturer, the Community importer, the supplier and, exceptionally, the distributor.
A defective product is one that does not offer the intended safety, taking into account all the circumstances and, in particular, its presentation, its reasonably foreseeable use and the time of its marketing.
The product may have a defect in manufacture, design or information.
Extended product manufacturer's liability:
Manufacturers of products that become waste participate in the prevention and organisation of waste management, promoting the reuse, recycling and recovery/valuation of waste.
Council Directive 85/374/EEC on liability for defective products
Directive 2001/95/EC on general product safety
Directive 2008/98/EC on waste
The contracting of a civil responsibility insurance for the protection and repair of possible damage for defective products, which covers the claims derived from them, is of great importance.
Commercial fraud can corrupt any business, without the company's managers realizing that this fraud is taking place. Related topics: corruption, money laundering, transparency and good business practices.
Tax fraud is a phenomenon with serious consequences for society.
Financial fraud results in material misstatements in the company's financial statements. Managers are ultimately responsible.
Food fraud: The deliberate introduction and sale on the market of food that is unfit for human consumption or that intentionally provides misleading information about food for the purpose of misleading the consumer for economic gain.
Regulation (EU) No 1169/2011 provides the basis for ensuring a high level of consumer protection in relation to food information.
Regulation (EU) No 1169/2011: Food information provided to the consumer
More frequent foods frauds:
Sustitution of an ingredient for a cheaper one.
Adulteration of a foods with cheaper ingredients.
Presece of undeclared ingredients.
Food adulteration to improve some of its characteristics.
No misrepresentation or misrepresentation of process.
Falce claims obout the origin or geographical production of a food.