Corporation and Cooperative Society: A Guide
Corporation
General Characteristics
The most important characteristics of a corporation are:
- Limited Liability: The liability of members is limited to their capital contribution.
- Minimum Capital: The minimum capital is 60.101,21 €. This capital is divided into registered shares or bearer shares. Corporations can be created by simultaneous foundation (all shares are disbursed at the time of creation) or by successive foundation (the shares are disbursed over time). The capital must be fully subscribed and at least 25% paid in. The amounts pending payment are called dividends.
- Name: The name must consist of the name of the corporation or limited company followed by the initials SA.
- Share Transfer: The transfer of shares is free.
- Taxation: This company is taxed on corporation tax.
Constitution
A public deed must be established and registered within two months in the Commercial Register. The articles of association should combine the bylaws and contain:
- The name of the company
- The object
- The registered office
- The social capital, expressing the undisbursed portion, the shape, and the maximum to be paid in dividends.
- The number of shares into which the capital is divided.
- The way(s) of organizing the administration.
- Other lawful agreements established by partners.
Administrative Organs
- General Meeting: The meeting of members decides on important business issues. There are three types of meetings:
- Annual General Meeting: Meets in the first six months of each year to review management, approve accounts for the previous year, and decide on the application of results.
- Special Board: There may be several per year at any period. They must be convened by the directors.
- Universal Board: Shall mean and shall be validly convened to discuss any matters, while the entire capital is present, and assistants accept conclusions unanimously.
- Admins: Consists of a single administrator or a Board of Directors. Administrators are appointed by the General Meeting and must meet several requirements:
- It is not necessary that they are shareholders.
- They should implement the annual accounts.
- They cannot be employed in the same kind of trade that constitutes the object of the company.
- They serve for the time period stipulated by the charter.
- They are responsible to the company, shareholders, and creditors for social damage they cause through acts contrary to law or statute.
Shareholders & Shares
Shareholders are owners of one or more shares of the company and have the following rights:
- Right to participate in social benefit-sharing and wealth resulting from liquidation according to their participation in the company.
- Preemptive right in issuing new shares.
- Right to attend and vote at meetings.
- Right to challenge social arrangements if they are contrary to law or statute.
- Right to information on matters to be discussed at the meeting of shareholders.
The capital of a corporation is divided into equal parts called shares. Book entries are accounting entries that set out the number of shares held by each partner and the various acquisitions.
Share Classes
Shares can be classified according to the following criteria:
- Depending on the rights:
- Common: They have no special rights.
- Privileged: They have some privilege, such as receiving a minimum dividend.
- According to ownership:
- Nominative: The share incorporates the owner’s name.
- Bearer: The share is the property of the possessor.
- According to capital:
- Regular: Are those that are paid by money (the purchase is paid in local currency).
- Own: Are those in which, in return for payment, a contribution in kind (goods) is accepted.
- Released: In this case, the share is reported against reserves on the one hand, or, if they are fully released, in its entirety.
Basic Concepts Relating to Shares
- Value: Is the value of each share, which appears in the title or book-entry form.
- Cash Value: The market value at the time of sale of a share.
- Theoretical Value: The value of a share based on various objective criteria.
- Subscription: It is the preferential right of shareholders to subscribe to new shares to keep the same amount of capital the company had before the capital increase.
- Income and Profitability: Is the stock performance.
Cooperative Society
A cooperative society is an association of individuals or legal entities with common interests and needs, developing a particular business activity. Economic performance (called surplus) is charged to members once community funds are served, depending on the cooperative activity performed. These societies create a common heritage with limited transferable and non-profit.
General Characteristics
- Membership: Cooperatives can be of the first grade (minimum 5 members, except in Extremadura where it’s 3, and members are natural persons), the second degree (minimum 2 members who are legal persons), and the last degree (minimum 2 members who are both legal and natural persons). Incorporation and membership are voluntary and free. Cooperatives can also be associated with capital providers who charge interest for their contribution and are not liable for debts.
- Limited Liability: The liability of partners for debts is limited to the amount of their contributions.
- Minimum Capital Stock: Fixed in the statute and varies according to the number of partners. No member may own more than 25% of capital in the first degree or more than 45% in the second degree.
- Name: Must include the abbreviation “Cooperative Society” and the region. In Extremadura, it would be “S. Coop. Ext.”
- Surplus Allocation: 30% of the surplus should be allocated to the Mandatory Reserve Fund and the Fund for Education and Promotion.
Constitution
To acquire legal personality, a memorandum and articles of association must be drawn up, notarized, and recorded in the General Register of Cooperatives.
Executive Bodies
- General Assembly: The meeting of members reviews management, approves annual accounts, authorizes the allocation of surplus, and sets the general policy of the cooperative.
- Governing Board: The governing body and management of the cooperative. Must have at least three members who are also members and can appoint a director.
- Resources Committee: Exists only in primary cooperatives where the statutes provide for it. Its function is to hear and decide appeals against penalties imposed on partners.
- Speakers: Their function is to audit the annual accounts. There must be between one and three partners.
Partners
Rights of Partners
- Participate in the activities of the cooperative.
- Receive information for the exercise of their rights and fulfill their obligations.
Obligations of Partners
- Attend meetings of the General Assembly and other organs to which they belong.
- Meet the agreed arrangements for corporate bodies.
- Participate in training activities.
Types of Cooperatives
- Consumer cooperatives
- Housing cooperatives
- Agricultural cooperatives
- Service cooperatives
- Sea cooperatives
- Carrier cooperatives
- Health cooperatives
- Teaching cooperatives
- Credit cooperatives