Understanding Cooperatives: A Comprehensive Guide
Understanding Cooperatives
Origin and History
Cooperatives originated in the United Kingdom during the 20th century, initially known as the “primitive cooperation movement”. A key milestone was the establishment of the Rochdale Pioneers cooperative.
Key Principles (DLF No. 5, September 25, 2003)
- Democratic Control: One vote per person.
- Equal Rights and Obligations: All partners share equal responsibilities.
- Free Membership and Withdrawal: Open entry and exit.
- Limited Interest on Capital: Capped returns on investment.
- Surplus Distribution by Trading Volume: Profits shared based on transactions.
- Spot Sales Only: Immediate transactions.
- Quality Goods: Unadulterated and high-quality products.
- Neutrality: Political and religious impartiality.
- Cooperative Education: Promotion of cooperative principles.
Mid-20th century Chile saw the formation of mutual aid societies, considered precursors to modern cooperatives.
Legal Evolution
The 1925 Constitution, followed by Law No. 17,398 (published January 9, 1971), enshrined cooperative guarantees.
Legal Definition (Article 1, LGC)
Cooperatives are associations based on mutual assistance, aiming to improve the living conditions of their partners.
Key Features:
- Equal rights and obligations (one vote per person), voluntary entry and exit.
- Surplus distribution based on trading volume.
- Political and religious neutrality.
The phrase “mutual aid” can be ambiguous and may be confused with other charitable organizations.
Types of Cooperatives (Chapter II, LGC)
- Work Cooperatives
- Agricultural Cooperatives
- Peasant Cooperatives
- Fishery Cooperatives
- Service Cooperatives (including school, utility, housing, and credit unions)
Cooperative Constitution
Key Steps:
- Formation of an organizing committee to draft statutes.
- Convening of a constituent general meeting by the organizing committee.
- Fulfillment of legal formalities, including documentation, registration, and publication.
Statutes
Essential Content:
- Name, address, and duration (indefinite if unspecified).
- Specific objectives.
- Initial capital, contribution methods, and valuation of non-monetary contributions.
- Membership requirements, rights, obligations, and grounds for expulsion.
- Regulations.
Extract and Social Writing
A notarized summary of the cooperative’s constitution must be registered and published. The extract should include the name, address, duration, objective, number of founding members, subscribed and paid capital, notary information, and registration date. This process must be completed within 60 days of the constituent general meeting.
Penalties for Non-Compliance
- Saneable Nullity (Art. 9 LGC): Errors in essential information can be corrected.
- Void Nullity (Art. 10 LGC): Failure to register or publish renders the cooperative void.
Cooperative Operation
Cooperatives function through various bodies:
- General Meeting
- Board of Directors
- Manager
- Oversight Board
General Meeting (Art. 21 LGC)
Composed of registered members, each with one vote. Statutes define the structure of general meetings, which may include elected delegates in larger or geographically dispersed cooperatives. Key decisions include surplus distribution, statute reform, mergers, asset disposal, collateral provision, objective modification, and governance structure.
Board of Directors
Elected by the general meeting, responsible for senior management, accounting, and extrajudicial matters.