Consolidated version from 1 May 2018
REPUBLIC OF LITHUANIA
LAW ON COOPERATIVE SOCIETIES (COOPERATIVES)
1 June 1993 No I-164
(As last amended on 16 November 2017 – No XIII-744)
Vilnius
CHAPTER ONE
GENERAL PROVISIONS
The State of Lithuania supports the cooperative movement, recognises as the main objective of cooperative societies (cooperatives) (hereinafter: ‘cooperative societies’) the provision of services to their members, promotes activities of cooperative societies, and legitimises their independence.
Article 1. Objectives of the Law
This Law shall regulate the establishment of cooperative societies and their unions, their activities, rights and duties of their members, management and control, formation of capital, distribution of profit, reorganisation, conversion, and liquidation.
Article 2. Definitions
1. ‘Cooperation’ means the joining of activities and resources on the basis of law for the implementation of common aims of members. For this purpose, cooperative societies may be established.
2. ‘Cooperative society’ means an enterprise established in accordance with the procedure specified by law by natural and/or legal persons established in the Republic of Lithuania, as well as by legal persons or other organisations and their branches established in another European Union Member State or in a State of the European Economic Area (hereinafter: a ‘legal person’) for the purpose of satisfying economic, social and cultural needs of its members. Its members shall contribute funds for the purpose of the formation of capital, share the risk and the benefit according to the turnover of goods and services of the members with this society and take active participation in management of the cooperative society.
3. ‘Document acknowledging the contributed member’s share’ means a document confirming the participation of a person in the formation of capital of a cooperative society and the obligations of the cooperative society to its member specified in this Law. Members’ shares of the cooperative society shall not be subject to the Law on Securities.
4. ‘Member’s contribution’ means a person’s monetary or non-monetary property contribution to a cooperative society.
5. ‘Turnover of goods and services of a member of a cooperative society with the cooperative society’ (hereinafter: ‘turnover’) means a monetary value of economic operations and economic events executed by a member of a cooperative society with the cooperative society in a financial year.
6. ‘Payments proportionate to turnover’ means the payments to a member of a cooperative society from profit, payable in proportion to turnover of goods and services of the member of the cooperative society with the cooperative society.
7. ‘Dividends’ means a portion of profit payable to a member of a cooperative society, distributed in proportion to the amount of the member’s share held by each member.
8. ‘Economic size of an agricultural holding expressed in standard value of products’ means an indicator expressed in monetary units which is used to describe a size of an agricultural holding and which is equal to the sum of standard value of all products and income of the holding received from the agricultural services supplied and the calculation of which is regulated in accordance with the procedure specified by the Minister of Agriculture.
Article 3. Status of a Cooperative Society
2. The property of a cooperative society shall be separated from the property of its members. A cooperative society shall be liable for its obligations to the extent of its property. A member of a cooperative society shall be liable for obligations of the cooperative society to the extent of a member’s contribution to be paid for its member’s share.
4. A cooperative society shall have its own name. The name must include the words ‘cooperative society’ or ‘cooperative’.
Article 31. Agricultural Cooperative Society (Cooperative)
1. An agricultural cooperative society (cooperative) shall be a cooperative society (cooperative) which is recognised as an agricultural cooperative society (cooperative) in accordance with the requirements specified in this Article. A registered cooperative society (cooperative) may be recognised as an agricultural cooperative society (cooperative) subject to the fulfilment of the following requirements:
1) value of products purchased from members and of goods sold and services supplied to the members exceeds 50% of all products purchased and of all goods sold and services supplied by the cooperative society (cooperative);
2) sales income included in a profit and loss statement for a previous reporting period (previous financial year) exceeds the minimum amount of sales income specified in paragraph 7 of this Article;
3) it has no tax arrears to the state budget of the Republic of Lithuania, municipal budgets or the funds the taxes paid whereto are administered by the State Tax Inspectorate (except for the cases of deferral of the payment of taxes, interest, fines or ongoing tax disputes in relation to these taxes, interest, fines) and it is not in arrears to the budget of the State Social Insurance Fund;
4) none of the members of the cooperative society (cooperative) is the member of another agricultural cooperative society (cooperative) purchasing the products of the same type, selling the goods of the same type, or supplying the services of the same type;
5) it fulfils one of the criteria specified in paragraph 2 of this Article and in proof thereof has submitted a list of the members – natural and/or legal persons fulfilling and non-fulfilling the recognition criterion selected by the cooperative society (cooperative), where the list contains personal identity data of each member, including a natural person’s personal number or a legal person’s registration number.
2. The criteria of recognition as an agricultural cooperative society (cooperative) selected by a cooperative society (cooperative):
1) more than 80% of its members are natural and/or legal persons whose income from agricultural activity in a previous year amounted to more than 50% of total income and whose income received from agricultural products sold to the cooperative society (cooperative), purchased by the cooperative society (cooperative), in a previous year amounted to more than 50% of income received from agricultural products sold to all economic entities, and where the quantity of each agricultural product sold to the cooperative society (cooperative) purchased by the cooperative society (cooperative) amounts to more than 50% of the total quantity of this agricultural product sold to all economic entities, whereas the total value of the members’ shares owned by these members amounts to more than 80% of the value of the members’ shares owned by all members of the cooperative society (cooperative). Agricultural products mentioned in this clause must be interpreted as they are defined in the Law of the Republic of Lithuania on Agriculture, Food Industry and Rural Development;
2) more than 80% of its members are natural and/or legal persons whose share of income from agricultural activity in a previous year amounted to more than 50% of total income, and where the value of goods and/or services purchased from the cooperative society (cooperative), sold by the cooperative society (cooperative), amounts to more than 50% of the value of these goods and services purchased from all economic entities, whereas the total value of the members’ shares owned by these members amounts to more than 80% of the value of the members’ shares owned by all members of the cooperative society (cooperative);
3) it has more than 30 members and more than 70% of its members are natural and/or legal persons whose economic size of agricultural holding expressed in standard value of products in accordance with the calculation performed by the state enterprise Agricultural Information and Rural Business Centre for a previous year from 1 January to 31 December is at least EUR 2,000, whereas the total value of members’ shares owned by these members amounts to more than 70% of the value of members’ shares owned by all members of the cooperative society (cooperative);
3. The procedure for the recognition of cooperative societies (cooperatives) as agricultural cooperative societies (cooperatives) shall be established by the institution authorised by the Government. A cooperative society (cooperative) aiming to be recognised as an agricultural cooperative society (cooperative) shall file to the state enterprise Agricultural Information and Rural Business Centre an application for the recognition as an agricultural cooperative society (cooperative) and the documents listed in the description of the procedure for the recognition of cooperative societies (cooperatives) as agricultural cooperative societies (cooperatives) adopted by the institution authorised by the Government.
4. A cooperative society (cooperative) shall not be recognised as an agricultural cooperative society (cooperative) if:
2) not all documents listed in the description of the procedure for the recognition of cooperative societies (cooperatives) as agricultural cooperative societies (cooperatives) adopted by the institution authorised by the Government confirming the fulfilment of the requirements mentioned in paragraph 1 of this Article have been submitted or incorrect data have been provided.
5. A cooperative society (cooperative) shall be recognised as an agricultural cooperative society (cooperative) by the institution authorised by the Government in accordance with the opinion on recognition issued by the state enterprise Agricultural Information and Rural Business Centre, which is authorised to issue a certificate. On the request of the state enterprise Agricultural Information and Rural Business Centre, a territorial state tax inspectorate and a territorial department of the State Social Insurance Fund Board shall provide the information specified in point 3 of paragraph 1 of this Article. The recognition shall be granted and the certificate shall be issued for two calendar years. A cooperative society (cooperative) may newly seek recognition as an agricultural cooperative society (cooperative) for the next two-calendar- year period of recognition.
6. A cooperative society (cooperative) must fulfil the requirements specified in this Article throughout the period of its recognition as an agricultural cooperative society (cooperative) on the basis of which it has been recognised. In accordance with the procedure established by the institution authorised by the Government to perform recognition, the state enterprise Agricultural Information and Rural Business Centre shall initiate inspections of fulfilment of the requirements specified in this Article by cooperative societies (cooperatives). After obtaining the opinion issued by the state enterprise Agricultural Information and Rural Business Centre that a cooperative society (cooperative) has been recognised in accordance with incorrect data provided or fails to fulfil the requirements specified in this Article, the institution authorised by the Government to perform recognition shall adopt a decision to withdraw the granted recognition as an agricultural cooperative society (cooperative).
7. The minimum amount of sales income included in a profit and loss statement for a previous reporting period (previous financial year) shall be the following:
1) for cooperative societies (cooperatives) in the cereals and milk sector – EUR 20,000 and when the recognition is sought for the first time – EUR 10,000;
Article 32. Forest Owners’ Cooperative Society (Cooperative)
1. A forest owners’ cooperative shall be a cooperative society that is recognised as a forest owners’ cooperative in accordance with the requirements specified in this Article. Forest owners’ cooperatives shall be subject to the status of agricultural cooperatives. A cooperative society registered in accordance with laws and other legal acts may be recognised as a forest owners’ cooperative subject to the fulfilment of the following criteria of recognition:
1) more than 70% of its members are forest owners being natural and/or legal persons who have registered an agricultural and rural holding and whose value of the members’ shares owned amounts to more than 70% of the value of members’ shares owned by all members of the cooperative society;
2) the share of income of the cooperative society from forestry activity amounted to at least 50% of total income;
4) it has no tax arrears to the state budget of the Republic of Lithuania, municipal budgets or the funds the taxes paid whereto are administered by the State Tax Inspectorate (except for the cases of deferral of the payment of taxes, interest, fines or ongoing tax disputes in relation to these taxes, interest, fines) and it is not in arrears to the budget of the State Social Insurance Fund;
Article 4. Founders and Memorandum of Association
3. Founders of a cooperative society shall conclude the Memorandum of Association of the cooperative society, draw up the draft of the Bylaws of the cooperative society, and convene the founding meeting. The Memorandum of Association shall be a public document.
4. The Memorandum of Association of a cooperative society shall include:
1) full name, personal number, and place of residence of founders being natural persons; name, registration number, registered office, and full names of authorised representatives of founders being legal persons;
2) rights and duties of founders while establishing the cooperative society, their liability for failure to fulfil the obligations related to the establishment;
4) persons (founders and other persons) authorised to represent the cooperative society being established, their rights and duties;
6) obligation of each founder to pay an initial membership fee and a member’s contribution no less than the minimum amount of a member’s share before the founding meeting;
7) procedure, terms, and limit for paying an initial membership fee and a member’s contribution, interest on the late payment of the initial membership fee and the member’s contribution;
10) procedure for repaying an initial membership fee and a member’s contribution, if the cooperative society is not established;
5. The Memorandum of Association of a cooperative society must be signed by all its founders: natural persons and/or persons authorised by legal persons. The signatures of natural persons who signed the Memorandum of Association of the cooperative society shall not be authenticated by a notary.
Article 5. Bylaws
1. The founding documents of a cooperative society shall consist of the Bylaws and the Memorandum of Association.
2. Bylaws of a cooperative society shall be a document on the basis of which the cooperative society operates.
3. Bylaws of a cooperative society must indicate:
5) initial membership fee, minimum and maximum amounts of members’ shares, procedure for paying the initial membership fee and a member’s contribution, additional member’s contributions as well as for evaluating a non-monetary member’s contribution;
6) terms of membership in the cooperative society, rights and duties of members of the cooperative society, procedure for disposing a member’s share;
7) bodies of management and control of the cooperative society, their remit, procedure for electing and recalling members of such bodies, requirements for a member and the chair of the board, the head of administration, and a member of the controllers’ commission (controller);
8) terms of and procedure for admitting new members of the cooperative society, terms of and procedure for withdrawing or excluding members of the cooperative society, procedure for entering members of the cooperative society in the register of members of the cooperative society;
10) procedure for registering and performing operations related to the turnover of goods and services of the cooperative society and its members, procedure for drawing up and approving annual financial reporting of the cooperative society;
4. The remit of and procedure for convening meetings of members of a cooperative society, the procedure for appointing and recalling its head of administration and his remit need not be provided for in the Bylaws of the cooperative society if such procedure and remit conform to those established in this Law and this fact is noted in the Bylaws. The Bylaws of the cooperative society may also include other provisions which do not contradict to the laws of the Republic of Lithuania.
Article 6. Registration
1. A cooperative society must be registered in the Register of Legal Entities in accordance with the procedure laid down by law. The cooperative society shall be deemed established and be granted the rights of a legal person after its registration in the Register of Legal Entities.
2. The founding meeting shall be convened and voting shall be held in accordance with the procedure specified in the Memorandum of Association. The founding meeting may be convened when founders pay all initial membership fees and member’s contributions set in the Memorandum of Association. The founding meeting must approve the Bylaws of a cooperative society. The Bylaws of the cooperative society shall be deemed concluded when they are approved by the founding meeting. An application for the registration of a cooperative society may be filed only after convening the founding meeting that has approved the Bylaws of the cooperative society and has elected its management bodies.
3. After the registration of a cooperative society, the founders and other persons that were authorised to represent the cooperative society being established must transfer, whereas the management bodies formed must accept the founding documents within ten days by drawing up a transfer and acceptance deed.
Article 61. Data of the Information System on Participants in Legal Persons
1. The administrator of the Information System on Participants in Legal Persons shall be provided the following data on members of a cooperative society:
1) full name, personal number, and place of residence of a member being a natural person (when a member of the cooperative society is a natural person and has indicated his place of residence and correspondence address to the cooperative society, the administrator of the Information System on Participants in Legal Persons shall be provided only the correspondence address); name, legal form, registration number, and registered office of a member being a legal person. When data are submitted on a member being a foreign natural person, the date of birth of the person (where under foreign legal acts no personal number is given, only the date of birth shall be indicated) and the name of the state that has issued personal documents shall be additionally submitted, whereas when data are submitted on a member being a foreign legal person, the state where the legal person is registered, the register where the legal person is registered, and the date of its registration in the register shall be additionally submitted;
3) amount (when a member’s contribution is monetary) and/or value (when a member’s contribution is non-monetary) of a member’s share;
2. The data specified in points 1–4 of paragraph 1 of this Article on members of a cooperative society shall be submitted to the administrator of the Information System on Participants in Legal Persons in accordance with the procedure laid down in the Regulations of the Information System on Participants in Legal Persons no later than within five calendar days after the registration of the cooperative society in the Register of Legal Entities and after the change of members of the cooperative society or data thereon, such information shall be submitted no later than within five calendar days of the changes.
3. The head of administration of a cooperative society shall be responsible for the submission of data on members of the cooperative society to the administrator of the Information System on Participants in Legal Persons.
4. The information prepared on the basis of the data collected in the Information System on Participants in Legal Persons shall be given for a fee to natural and legal persons entitled to receive it, except for the cases when it:
1) is given once each calendar year to members of a cooperative society, when the data thereon are processed in the Information System on Participants in Legal Persons;
5. Credit unions registered in accordance with this Law which are established and operate following the Civil Code of the Republic of Lithuania, the Law of the Republic of Lithuania on Credit Unions, the Law of the Republic of Lithuania on Financial Institutions, and this Law shall not submit data on their members to the administrator of the Information System on Participants in Legal Persons.
Article 7. Rights of a Cooperative Society
1. A cooperative society shall have the right to:
1) engage in activities which do not contradict to laws and the objectives specified in the Bylaws of the cooperative society;
4) form unions of cooperative societies, as well as other organisations in accordance with the procedure established by other laws;
7) borrow funds from its members on a contractual basis in accordance with the procedure specified in the Bylaws of the cooperative society;
Article 8. Members
2. A person wishing to become a member of a cooperative society shall file an application. The application shall be considered and the person shall become the member of the cooperative society under the terms and in accordance with the procedure specified in the Bylaws of the cooperative society subject to the payment of an initial membership fee and his/its member’s contribution amounting to no less than the minimum amount of a member’s share. If the person is refused to join the cooperative society, the paid initial membership fee and member’s contribution shall be repaid to him in accordance with the procedure and within the time limit specified in the Bylaws but no later than within three months after the adoption of the decision.
3. Members of a cooperative society shall be registered in the register of members of the cooperative society in accordance with the procedure specified in the Bylaws of this cooperative society.
4. The register of members of a cooperative society shall include:
3) amount of a member’s share (name of a member’s contribution and its monetary value) as well as each increase of the member’s share;
Article 9. Basis for the Expiry of Membership
The membership of a person in a cooperative society shall expire:
5) after the reorganisation or liquidation of the member of the cooperative society being a legal person;
Article 10. Procedure for the Expiry of Membership and the Settlement of Accounts after its Expiry
1. The procedure for a person’s withdrawal from members of a cooperative society shall be specified in the Bylaws of the cooperative society.
2. A person may be excluded from members of a cooperative society in accordance with the procedure specified in Bylaws by a decision of the meeting of members of the cooperative society if he/it fails to execute the member’s duties, infringes the Bylaws of the cooperative society, the decisions of the meeting of members, and laws of the Republic of Lithuania related to the activities of cooperative societies or causes damage to the cooperative society. If the person excluded from members of the cooperative society objects to such a decision, he/it shall have the right to appeal to a court within three months from the date when he/it became aware or ought to have become aware of the adoption of the decision.
3. The membership of a person who has assigned a member’s share to another person shall expire in a cooperative society after the entry into force of a decision of the meeting of members of the cooperative society on joining the cooperative society by a person who has acquired the assigned member’s share.
4. A cooperative society must settle accounts with a person whose membership expired in the cooperative society due to his/its withdrawal, exclusion, or assignment of his/its member’s share to another person no later than within one year after the date of the meeting of its members which approved financial reporting and profit and loss statement of the financial year of the expiry of the membership of this member in the cooperative society.
5. A cooperative society must repay to a person whose membership in the cooperative society expired due to his/its withdrawal, exclusion, or assignment of his/its member’s share to another person a member’s contribution paid for the member’s share, unless it has been assigned to another person, to refund in monetary equivalent at market prices a portion of assets assigned to the member by decisions of the meetings of members until the beginning of the financial year of the expiry of the membership in the cooperative society, pay the payment and dividend proportionate to the turnover, if a decision on payment thereof for that year has been adopted by the meeting of members. Non-monetary member’s contributions, if the person wishes so, shall be returned in kind, except for the cases when this is impossible or would cause disproportionate damage to the cooperative society or to the person whose membership in the cooperative society has expired. An initial membership fee shall not be refunded.
6. The heirs of a deceased natural person who was a member of a cooperative society, successors to the rights of a liquidated or reorganised legal person which was a member of a cooperative society, where they are not members of the cooperative society and do not become members of this cooperative society in accordance with the procedure prescribed by its Bylaws within a year from the acquisition of these rights, shall be refunded the member’s contribution specified in paragraph 5 of this Article and made for a member’s share, shall be returned a portion of the assets assigned to the member and shall be paid the payment and dividend proportionate to the turnover in accordance with the procedure and under the terms laid down in this Article.
Article 11. Rights and Duties of a Member of a Cooperative Society
1. A member of a cooperative society shall have the right to:
1) participate at a meeting of members of the cooperative society, elect members of management and controlling bodies and be elected thereto;
2) have one vote during the voting regardless of the amount of a member’s share. The Bylaws of the cooperative society with more than a half of its members being cooperative societies may specify that the number of votes of a member shall be established according to the member’s participation in the activities of the cooperative society (turnover), with the exception of capital investment (member’s contributions) and lay down the following procedure for calculating votes: each member may be allocated not more than five votes, in any case not more than 30% of all votes. The principle of voting according to participation in the activities of the cooperative society as specified in the Bylaws of the cooperative society shall not apply, and each member of the cooperative society shall have one vote regardless of the amount of the member’s share where the number of the members of the cooperative society which are cooperative societies becomes equal to or less than a half of all members. A member of the cooperative society shall have the right, in accordance with the procedure laid down in the Bylaws, to assign his/its voting right to another member of the cooperative society (a representative of members) or to a third party or to appoint a proxy to represent him/it at a meeting of members. The Bylaws of the cooperative society must specify the maximum number of members which a single proxy may represent;
3) dispose of a member’s share in accordance with the procedure prescribed by this Law and other laws as well as the Bylaws;
6) use the assets and services of the cooperative society in accordance with the procedure and under the terms laid down in the Bylaws;
7) receive a portion of the assets (in monetary equivalent) of the cooperative society being liquidated in accordance with the procedure established in the Bylaws;
9) be a member of several cooperative societies, unless the Bylaws of these cooperative societies provide otherwise;
10) lend funds to the cooperative society on a contractual basis in accordance with the procedure laid down in its Bylaws;
2. A member of a cooperative society must adhere to the Bylaws, implement decisions of the bodies of the cooperative society, carry out turnover with the cooperative society, have care of the assets of the cooperative society, and promote the increase thereof.
Article 12. Structure of Capital
1. The capital of a cooperative society shall consist of the equity and loan capital. The equity shall be formed from the initial membership fees and members’ contributions of members of the cooperative society, deductions from the profit of this society, other income not prohibited by law. The equity of the cooperative society, with the exception of the members’ contributions made for members’ shares, may be indivisible or assigned (the whole or a part of it) to the members of the society. The loan capital shall consist of loans and other borrowed funds.
2. The equity shall consist of the fixed and reserve capital. The fixed capital shall be used for business activities of a cooperative society and for the acquisition of assets. By a decision of a meeting of members, the reserve capital shall be used for covering extraordinary expenditure and losses, and a part of the reserve capital exceeding 1/10 of the equity may be used for other purposes by a decision of the meeting of members.
Article 13. Member’s Share of a Member of a Cooperative Society
1. The amount of a member’s share of a member of a cooperative society shall be equal to the value of the member’s contributions made by the member
2. The minimum and maximum amounts of a member’s share, the procedure for paying the member’s share and additional member’s contributions, liability for violations of this procedure as well as the procedure for evaluating non-monetary member’s contribution (items, results of intellectual activities, as well as other tangibles and intangibles) must be established in the Bylaws.
3. Agricultural land and assets the right to dispose whereof is restricted in respect of the person who makes a member’s contribution, also the assets to which a cooperative society may not acquire the right of ownership may not serve as a member’s contribution.
4. A member’s contribution made by a member of a cooperative society for a member’s share shall be registered in accounting documents, and the member of the cooperative society shall, in accordance with the procedure laid down by the Bylaws, be issued a document acknowledging the contributed member’s share. It shall indicate the following:
2) the full name, personal number of the holder of the member’s share being a natural person, or the name and registration number of a legal person;
5. Members of a cooperative society shall have the right to assign a member’s share to other persons in accordance with the procedure laid down by the Bylaws. A member of the cooperative society shall have the right of priority in acquiring the member’s share being assigned under the same terms. The member of the cooperative society must, in accordance with the procedure laid down by the Bylaws, give a written notice to other members of the cooperative society and the management body of the intention to assign the member’s share. Where none of members of the cooperative society who have been notified of the member’s share being assigned acquires the said member’s share within a month, the member who assigns the member’s share shall acquire the right to assign it to a third party, where the third party intending to acquire the member’s share applies, in accordance with the procedure laid down by the Bylaws of the cooperative society, to the cooperative society for admission to members of the cooperative society, and a meeting of members of the cooperative society adopts a decision on admission thereof to members of the cooperative society in accordance with the procedure laid down by the Bylaws of the cooperative society. The decision shall come into force as of the assignment of the member’s share. Admission of the person intending to acquire the member’s share to members of the cooperative society shall not be subject to the provision of Article 8(2) of this Law concerning payment of the amount of a member’s contribution not less than the minimum amount of a member’s share. The member of the cooperative society shall dispose of the member’s share in accordance with the procedure prescribed by this Law and other laws as well as the Bylaws.
Article 14. Distribution of Net Profit
1. The distribution of the net profit earned by a cooperative society during a financial year shall be approved not later than within four months of the close of the financial year.
2. Net profit shall be distributed in the following order:
Article 15. Bodies of a Cooperative Society
1. The bodies of a cooperative society shall be the meeting of members, the board and the head of administration.
2. In a cooperative society with more than 100 members, the meeting of members may be replaced by the meeting of representatives of members of the cooperative society. The meeting of representatives of members of the cooperative society shall have the powers of the meeting of members established by this Law. At the meeting of representatives of members of the cooperative society, each representative shall have one vote. The procedure for and terms of the election and dismissal of elected representatives of members of the cooperative society must be specified in the Bylaws of the cooperative society. Audit shall be mandatory for a cooperative society whose Bylaws provide for the substitution of the meeting of members with the meeting of representatives of the members.
Article 16. Meeting of Members of a Cooperative Society
1. The meeting of members of a cooperative society shall:
1) take decisions concerning the admission or exclusion of members of the cooperative society, expiry of membership upon assigning a member’s share to another person. The meeting of members may instruct the board to take these decisions, except those regarding the exclusion of a member;
3) elect, recall members of the board and chair thereof or, where the board is not formed, elect, recall the head of administration; also elect, recall members of the controllers’ commission and chair (controller) thereof or, if the controllers’ commission is not formed, approve a firm of auditors;
4) assess the work of the board, and where the board is not formed in the cooperative society, the work of the head of administration and the controllers’ commission (controller), also the opinion of the controllers’ commission (controller) or a firm of auditors with regard to the reporting of the cooperative society;
5) approve annual financial statements, adopt a resolution on the distribution of profit and covering of losses;
7) take a decision on the joining of unions by the cooperative society, withdrawal therefrom, establishment of branches and representative offices, other enterprises and organisations, termination of their activities, as well as other organisational issues;
8) approve the rules of procedure of the board, the head of administration and the controllers’ commission (controller);
9) approve the procedure of remuneration for the work of members of the board and chair thereof, and where the board is not formed – the head of administration, as well as the controllers’ commission (controller);
10) adopt a decision on acquisition, transfer, lease or pledge of fixed assets of the cooperative society, taking and granting of long-term loans, offering of surety or guarantee for the discharge of obligations of other economic entities, where the sum total of transactions exceeds 1/10 of the equity of the cooperative society;
2. The meeting of members of a cooperative society may have other rights and powers provided for in the Bylaws of the cooperative society.
3. The meeting of members of a cooperative society shall be convened by the board of the cooperative society, and where the board is not formed or the board does not convene the meeting in the specified cases and within the specified time limits – by the head of administration or at least ¼ of members of the cooperative society.
4. Regular meetings of members of a cooperative society shall be convened by the board (where the board is not formed – by the head of administration) on an annual basis, but not later than within four months after the close of the financial year.
5. Extraordinary meetings of members shall be convened by the board (where the board is not formed – by the head of administration) or on the initiative of at least 1/4 of the members of a cooperative society.
6. The Bylaws shall lay down a procedure for drawing up the agenda of a meeting of members and notifying the members of the meeting.
7. A meeting of members of a cooperative society may adopt decisions if it is attended by at least a half of the members of the cooperative society. If the meeting is not attended by the specified number of the members of the cooperative society, a repeat meeting concerning the same issues on the agenda must be convened. Decisions may be adopted at the repeat meeting if it is attended by at least 1/3 of the members of the cooperative society. Where the repeat meeting is not attended by the specified number of the members of the cooperative society, one more meeting shall be convened. It shall adopt decisions regardless of the number of the attending members of the cooperative society.
8. Decisions of the meeting of members of a cooperative society shall be adopted by the majority of votes of the members of the cooperative society entered on the list of participants of a meeting, with the exception of the cases indicated in points 2 and 11 of paragraph 1 of this Article and in the cases of exclusion of the members. In these cases, decisions shall be adopted by the majority of votes of least 2/3 of members of the cooperative society entered on the list of participants of the meeting.
9. Voting at a meeting of members of a cooperative society shall be by open ballot, except in the cases where voting by secret ballot is prescribed by this Law, the Bylaws of the cooperative society or when this is requested by at least 1/10 of the members of the cooperative society entered on the list of participants of the meeting. Members of the board of a cooperative society and its chair, and in the case when the board is not formed – the head of administration, as well as members of the controllers’ commission and its chair (controller) shall be elected by secret ballot.
10. Decisions concerning the acquisition, transfer or lease of a portion of fixed assets which exceeds 1/10 of the value of the equity of the cooperative society shall require a decision of a meeting of members adopted by majority vote, and decisions concerning guarantee or surety for the discharge of obligations of other economic entities, or pledge of assets, or taking and granting of long-term loans, when the amount of such a transaction exceeds 1/10 of the cooperative society’s equity, shall require a decision of a meeting of members adopted by at least 2/3 majority vote. The total value of such transactions made without a decision of the meeting of members over a financial year may not exceed 1/10 of the value of the equity of the cooperative society.
11. Minutes of a meeting of members of a cooperative society shall, not later than within five working days, be signed by the secretary, chair of the meeting and a member of the cooperative society authorised by the meeting.
Article 17. Board and Head of Administration of a Cooperative Society
1. The board shall be the collegial management body of a cooperative society. The activities of the board shall be directed by its chair. The number of members of the board shall be fixed in the Bylaws, but it may not be less than three.
2. The members of the board and chair thereof shall be elected by the meeting of members of a cooperative society for a term not exceeding four years. A member of the board, the chair of the board may be removed from office or the entire board may be dissolved or may resign before expiry of the term of office in accordance with the procedure laid down by the Bylaws.
3. The working procedure of the board, duties and powers of members of the board and chair thereof shall be specified by the rules of procedure of the board (the head of administration) approved by the meeting of members of a cooperative society.
4. The board shall adopt decisions at a sitting which shall be valid if attended by at least 2/3 of all the members of the board. The decisions shall be adopted by majority vote. The procedure for convening sittings of the board and the working procedure thereof shall be established in the rules of procedure of the board. The board shall invite to each sitting the head of administration, unless he is a member of the board.
5. Irrespective of the fact whether the board is formed or not, a cooperative society must have the head of administration.
6. The head of administration shall be elected and dismissed by the board, and if the board is not formed – by the meeting of the members of a cooperative society. An employment contract with the head of administration shall be signed by the chair of the board, and where the board is not formed – by a person authorised by the meeting of the members of a cooperative society.
7. A member of the board, the chair thereof, a member of a cooperative society as well as another legally capable natural person may be the head of administration. Requirements for the head of administration shall be set in the Bylaws. A member of the controllers’ commission, the chair thereof (controller) may not be the head of administration.
8. The head of administration shall be a single-member management body who directs the administration. The head of administration shall organise and carry out the economic and financial activities of a cooperative society, represent the cooperative society in relations with third parties, in court, arbitral tribunal, conclude transactions, hire and dismiss employees, conclude employment contracts therewith, submit to the board material pertaining to his own work, drafts of operational programmes of the cooperative society, revenue and expenditure estimates, financial statements and distribution of profit (loss), carry out other actions assigned to him in the Bylaws of the cooperative society. The working procedure of the administration shall be laid down in the rules of procedure of the administration.
9. The head of administration shall participate in sittings of the board in a deliberative capacity, unless he is a member of the board.
10. Members of the board and the chair of the board, the head of administration must compensate a cooperative society for the losses incurred by decisions of the board or the head of administration made in violation of the Bylaws of the cooperative society or the laws related to the operation of cooperative societies. The resignation or removal from office of a member of the board and the chair of the board or the head of administration shall not release them from the obligation to compensate for the losses incurred through their fault.
11. Members of the board of a cooperative society shall jointly and severally compensate for the damage incurred to the cooperative society. The individual members of the board who voted against when adopting unlawful decisions harmful for the cooperative society (this must be recorded in the minutes) shall be released from compensation for the damage.
Article 18. Control of Activities
1. The economic and financial activities of a cooperative society shall be controlled by the controllers’ commission (controller). The members of the controllers’ commission and the chair thereof (controller) shall be elected by the meeting of members of the cooperative society for a term not exceeding four years. The Bylaws of the cooperative society may provide that its economic and financial activities shall be controlled by an audit firm approved by the meeting of members of the cooperative society.
2. A member of the board of a cooperative society, the chair thereof, the head of administration, as well as a person related to the member of the above mentioned management bodies by blood, marriage or partnership may not be members of the controllers’ commission or chair thereof (controller). Other requirements for a member of the controllers’ commission (controller) shall be established in the Bylaws of the cooperative society.
3. The controllers’ commission (controller) or an audit firm shall:
2) report all violations established in the activities of the cooperative society to the meeting of members of the cooperative society, the board and the head of administration;
4. The meeting of members of a cooperative society, the board (if it is not formed – the head of administration), the controllers’ commission (controller) may invite experts to take part in inspections.
5. The working procedure of the controllers’ commission (controller) shall be laid down in the rules of procedure thereof.
Article 19. Reorganisation of a Cooperative Society
1. Reorganisation means termination of a cooperative society as a legal person without going into liquidation.
3. The possible modes of merging cooperative societies shall be merger by acquisition and merger by formation of a new cooperative society:
1) merger by acquisition shall be joining of one or several cooperative societies to another cooperative society whereto all rights and duties of the cooperative society being reorganised are passed;
4. The possible modes of dividing cooperative societies shall be division by acquisition, division by formation of a new cooperative society:
1) division by acquisition shall mean parcelling out the rights and duties of a cooperative society being reorganised to other cooperative societies which continue their operation;
5. The management bodies of the cooperative societies which are being reorganised must draft terms of reorganisation. They shall indicate:
1) the name, registered office, registration number of each cooperative society being reorganised, the VAT payer’s code, the register wherein data on these cooperative societies are accumulated and stored;
2) the mode of reorganisation, the cooperative societies which terminate their operation and the cooperative societies which continue operation after the reorganisation;
3) the procedure for, the terms and time limits of becoming by a member of a cooperative society being reorganised a member of a cooperative society which continues operation after the reorganisation, as well as payments to the members of the cooperative society;
4) the moment from which the rights and duties of the cooperative society which terminates its operation are passed to a cooperative society which continues operation after the reorganisation;
5) additional rights granted to the management and controlling bodies of the cooperative societies being reorganised as well as to experts during the period of reorganisation;
6. The Bylaws of each cooperative society which will operate after the reorganisation must be drafted together with the terms of reorganisation.
7. The management bodies of each cooperative society being reorganised must draft written reports. Such reports must indicate the purposes of reorganisation, explain the terms of reorganisation, continuity of the operation of the cooperative society, as well as specify the time limits and economic grounds of reorganisation, if this is requested by the members of the cooperative society being reorganised who hold at least 1/20 votes.
8. The terms of reorganisation of a cooperative society must be assessed by the independent experts of proper qualification. Each cooperative society being reorganised shall assign an expert.
9. Drafting of the terms of reorganisation must be published three times, with at least 30-day intervals between the publications, or it must be published once, notifying all the creditors of the cooperative society thereof in writing. The notice must specify: the name, registered office, registration number of each cooperative society being reorganised, the VAT payer’s code, the register wherein data on this cooperative society are accumulated and stored, mode of reorganisation, the moment from which the rights and duties of the cooperative society which terminates its operation are passed to the cooperative society which continues operation after the reorganisation, the venue whereat and the time from when it is possible to familiarise with the terms of reorganisation, the founding documents of the cooperative societies which continue operation after the reorganisation and/or the cooperative societies which are established anew, or drafts thereof, and the reports prepared by the management bodies of all the cooperative societies being reorganised, expert assessments and financial statements for the last three financial years.
10. A decision on reorganisation of a cooperative society must be adopted by the majority of votes of least 2/3 of members of the cooperative society entered on the list of participants of a meeting. The decision on reorganisation of the cooperative society may be adopted only after the lapse of 30 days from the publication of the terms of reorganisation. The decision on the reorganisation of the cooperative society must approve the terms of reorganisation and amend the Bylaws or adopt new Bylaws.
11. A documentary proof of a decision on reorganisation of a cooperative society must be submitted to the Register of Legal Entities not later than on the first day of publication. The administrator of the Register of Legal Entities must publish the decision on the reorganisation of the cooperative society in accordance with the procedure laid down by legal acts.
12. Reorganisation shall be deemed completed upon registration of the new cooperative societies formed after the reorganisation or the amended Bylaws of the cooperative societies continuing operation after the reorganisation in the Register of Legal Entities.
13. The first meeting of the members of a cooperative society formed through reorganisation must elect the management and controlling bodies of the cooperative society.
Article 20. Conversion of a Cooperative Society
1. A cooperative society shall be converted in accordance with the procedure laid down in the Civil Code and this Law. A legal person continuing operation after the conversion shall become a successor to all rights and duties of a cooperative society being converted.
2. A cooperative society may be converted into a small partnership when all members of the cooperative society are natural persons and the number of them is not more than ten.
3. A decision on the conversion of a cooperative society shall be adopted and the documents of a legal person continuing operation after the conversion shall be accepted by the meeting of members by at least 2/3 of the members of the cooperative society entered on the list of participants of the meeting.
4. The conversion of a cooperative society must be published in accordance with the procedure provided for in the Bylaws three times, with at least 30-day intervals between the publications, or it must be published once no later than 30 days before the adoption of the decision on conversion notifying all the creditors of the cooperative society thereof in writing. The notice must specify:
6) procedure, terms, and time limits of becoming by a member of the cooperative society being converted a member of a cooperative society which continues operation after the conversion;
7) moment from which a legal person continuing operation after the conversion becomes a successor to the rights and duties of the cooperative society being converted;
8) the venue whereat and the time from when it is possible to familiarise with the terms of conversion, if they are drawn up, the founding documents of the legal person which continues operation after the conversion and the annual financial statements of the cooperative society being converted for the last three financial years.
5. A documentary proof of a decision on conversion of a cooperative society must be submitted to the Register of Legal Entities not later than on the first day of publication. The administrator of the Register of Legal Entities must publish the decision on the conversion of the cooperative society in accordance with the procedure laid down by legal acts.
6. Conversion shall be deemed completed upon registration of the founding documents of the legal person continuing operation after the conversion in the Register of Legal Entities.
Article 21. Liquidation of a Cooperative Society
1. A cooperative society shall be liquidated:
3) when the number of members of the cooperative society decreases below the minimum allowed by this Law unless the members of the cooperative society decide to reorganise or convert the cooperative society within six month after such decrease;
4) by a decision of a court or a meeting of creditors to liquidate the bankrupt cooperative society;
5) by a decision of a court when the establishment of the cooperative society is declared invalid as provided for in the Civil Code;
6) by a decision of the administrator of the Register of Legal Entities as provided for in the Civil Code;
2. The procedure for the liquidation of a cooperative society shall be provided for in the Civil Code and this Law. Where the basis for liquidation of the cooperative society is a decision of the administrator of the Register of Legal Entities, the cooperative society shall be liquidated according to the provisions of the Civil Code regulating the liquidation of a legal person on the initiative of the administrator of the Register of Legal Entities.
3. A person who has adopted a decision on the liquidation of a cooperative society shall appoint a liquidator, except where the decision on the liquidation of the cooperative society has been adopted by the administrator of the Register of Legal Entities. The liquidator must have the required qualifications. Several liquidators may be appointed. When several liquidators are appointed, a liquidation commission shall be set up and one of the liquidators shall be appointed the chair of the liquidation commission.
4. After the appointment of the liquidator (liquidation commission), the bodies of a cooperative society, except for the meeting of members, shall lose their powers, the remit of the meeting of members of the cooperative society concerning conclusion of transactions, as well as the rights and duties of the management and controlling bodies shall be transferred to the liquidator (liquidation commission).
5. The liquidator (liquidation commission) shall:
1) submit to the Register of Legal Entities the documents necessary to register the modified register data;
2) publish a notice of liquidation in accordance with the procedure laid down in paragraph 7 of this Article;
3) represent the cooperative society being liquidated in court, in relations with state institutions, agencies and other legal and natural persons;
5) under the transactions of the cooperative society, complete the discharge of obligations, including the amounts unpaid to the budget of the State Social Insurance Fund, also the amounts calculated by the tax administrator’s officers and other state institutions, including penalties and late payment interest, not later than within six months from the publication of a notice of liquidation, and enter into new transactions which do not conflict with the laws regulating the operation of the cooperative society being liquidated, report to the meeting of members of the cooperative society within the time limits set by it;
6) within six months from the publication of a notice of liquidation, accept and satisfy creditors’ claims, recover debts;
7) in case of disputed obligations, allocate an appropriate amount from the assets of the cooperative society for the discharge thereof and pay it to the deposit account of a notary’s office;
8) after the lapse of six months from the publication of a notice of liquidation, distribute the remaining assets among the members of the cooperative society in accordance with the procedure prescribed by the Bylaws having regard to the amount of a member’s share. In the event of disputes among the members of the cooperative society over the distribution of the remaining assets, the liquidator (liquidation commission) shall suspend the distribution of the assets. Disputes among the members and disputes between the members and the liquidator shall be settled in court;
6. The liquidator (liquidation commission) failing to perform his duties or performing them inappropriately must compensate to the cooperative society for any damage inflicted through the liquidator’s (liquidation commission’s) fault, unless otherwise provided for in the Bylaws of the cooperative society. The liquidation commission shall be jointly and severally responsible to the cooperative society and third parties for the losses incurred through the liquidation commission’s fault.
7. A notice of liquidation of a cooperative society shall be published two times, with a 30-day interval between the publications; it shall also be notified to each member and creditor of the cooperative society against his signature or by registered mail. A notice of liquidation of a cooperative society shall be given to the Register of Legal Entities not later than on the first day of the first publication.
8. A cooperative society being liquidated may enter only into the transactions which are related to the termination of the operation of the cooperative society or which are provided for in a decision to liquidate the cooperative society.
Article 22. Establishment and Activities of Unions of Cooperative Societies
1. Cooperative societies may form unions for the purpose of fulfilment of the objectives provided for in their Bylaws. Other legal persons (companies, societies, associations, etc.) may also be members of the unions, provided that their membership is in conformity with the objectives of the unions of cooperative societies. A union of cooperative societies must consist of two or more cooperative societies.
2. Unions of cooperative societies shall be established, be managed, operate, be reorganised and be liquidated in accordance with the same procedure as cooperative societies.
3. Unions of cooperative societies shall operate in accordance with their Bylaws. The Bylaws shall be adopted by the congresses, conferences or meetings of their delegates. A union shall be deemed established when it is registered according to the procedure stipulated in this Law.