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September 20
2011
European Cooperative Society
ITS INTEREST IN CO-OPERATIVE PRACTICE
Sociedad Cooperativa EuropeaSU INTERÉS EN LA PRÁCTICA
COOPERATIVA(inglés)
Sozietate Kooperatibo EuroparraKOOPERATIBEN ERREALITATERAKO
ONURAK (ingelesez)
Working Paper
(Non-professional translation)
As a Working Paper, it doesn´t reflect any institutional position or opinion of EKAI Center.
Las opiniones recogidas en este documento no comprometen en ningún caso a las entidades colaboradoras
Ekai Center
Innovating Public Policy
Garaia Innovation Centre, 20500 Mondragon (Spain)
www.ekaicenter.eu
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European Cooperative Society
ITS INTEREST IN CO-
OPERATIVE PRACTICE
EKAI CenterGaraia Innovation Centre,20500 Mondragon (Spain)
Tel: +34 943 250104e-mail: [email protected]
www.ekaicenter.eu 2
On the European Cooperative Society and its interest in the co-operative
practice:
1. After 8 years since the adoption in 2003 of the Regulation on the
Statute for a European Cooperative Society and once approved the
arrangements for its implementation in the European Union states
(in Spain, through Law 3 / 2011 of 3 March), it is becoming urgent an
analysis that goes beyond the conceptual and symbolic interest of
this new form of company to deepen in the practical advantages that
it could mean for people interested in making use of it, as a
necessary basis to advance -if necessary- in policies adequate to
boost the use of this legal form in the member states of the Union.
2. A first consequence of the implementation of the SCE has been that,
from that moment on, all the Member States of the European Union
do have a co-operative law. This fact, by itself, has been a major
achievement, both symbolic and normative.
3. The SCE has also meant a leap forward in European terminology
harmonization in the co-operative world. Although these facts are
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European Cooperative Society
ITS INTEREST IN CO-
OPERATIVE PRACTICE
EKAI CenterGaraia Innovation Centre,20500 Mondragon (Spain)
Tel: +34 943 250104e-mail: [email protected]
www.ekaicenter.eu 3
not always sufficiently appreciated, it is an important factor for
future cooperative developments in Europe. It is essential that we
begin to understand each other. Having a common vocabulary is also
essential to be able to learn from each other, to understand the legal
practices of other countries, etc.
4. The European Cooperative Society is also the beginning of the
conceptual harmonization of cooperatives in Europe. The
harmonization of legal structures and some basic legal concepts,
such as what is a cooperative law, what is a cooperative, capital,
statutes, results, etc..
5. The SCE has also boosted the improvement of cooperative laws in
different countries, in order to approach to the content of the
Statute. The SCE has already become a challenge for governments,
experts and cooperative associations. In several states specific
analysis have been undertaken on the differences between the
Statute of the SCE and national cooperative laws of the State, trying
to compare advantages and disadvantages between the two of them
and propose –if necessary- the appropriate regulatory
improvements. Some states have started on this research work, and
some of them have already made specific legal changes as a result.
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European Cooperative Society
ITS INTEREST IN CO-
OPERATIVE PRACTICE
EKAI CenterGaraia Innovation Centre,20500 Mondragon (Spain)
Tel: +34 943 250104e-mail: [email protected]
www.ekaicenter.eu 4
6. In EKAI Center we have always maintained a reasonable doubt about
the real probabilities that the European Cooperative Society was
actually applied in a significant way for the purposes which appeared
to be regarded as its main objective of facilitating a legal instrument
to make easier the interstate cooperative societies. The analysis and
assessment of the reality of the implementation of the SCE in the
European Union as a whole seems to prove that indeed this use has
been limited. The basic reason is that the operating interest of the
homogenization of regulations that certain groups of companies get,
for example, through the European Company Statute, has little
interest in inter-cooperative collaboration between States, which isnot based on hierarchical groups but on federative groups, in which
it is unusual to share the management of the internal corporate
structure of each cooperative. The fact that a number of
cooperatives in different states could all submit to the regime of the
European Cooperative Society to manage more easily their
corporate systems is unlikely in co-operative practice.
7. However, there are other important elements that affect the
practical benefits of using the European Cooperative Society. In
particular, there are two different views to take account of in this
regard:
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European Cooperative Society
ITS INTEREST IN CO-
OPERATIVE PRACTICE
EKAI CenterGaraia Innovation Centre,20500 Mondragon (Spain)
Tel: +34 943 250104e-mail: [email protected]
www.ekaicenter.eu 5
a) The undeniable interest that the image effect of using an
“European” form of company has in many cases.
b) The possibility that the SCE is not used only for purposes of
making interstate collaborations easier, but also as a new legal
option for co-operatives which, by themselves, do have interstate
characteristics.
8. According to paragraph 1 of Article 2 of the Statute of the SCE:
"1. An SCE may be formed as follows:
...
- by conversion of a cooperative formed under the law of a Member
State, which has its registered office and head office within the
Community if for at least two years it has had an establishment or
subsidiary governed by the law of another Member State."
9. This means that, in fact, almost all industrial or commercial
cooperative of medium or large size may decide to "convert" into a
European Cooperative Society if they think that it is in their interest.
It is enough for that having a facility -not even a subsidiary is
necessary-, in another State of the European Union.
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European Cooperative Society
ITS INTEREST IN CO-
OPERATIVE PRACTICE
EKAI CenterGaraia Innovation Centre,20500 Mondragon (Spain)
Tel: +34 943 250104e-mail: [email protected]
www.ekaicenter.eu 6
10. Therefore, it is not necessary that the SCE is based on interstate
cooperation between cooperatives in different Member States. This
fact, perhaps not sufficiently underlined, substantially expands the
map of potential users of this Statute.
11. The choice of the Statute of the European Cooperative Society can
be of great interest for those cooperatives interested in the internal
implementation of the two-tier system of corporate governance.
Very especially, of course, in states such as Spain, whose cooperative
legislation does not allow the use of this modality of governance.
12. The choice between a one-tier or a two-tier system of governance of
the cooperative is a key strategic decision. The co-operatives
interested in it should analyze very well the respective advantages
and disadvantages of its application to each particular case.
13. In short, the choice of the two-tier system by an individual
cooperative may have two advantages:
a) To ensure respect for the management field of the General
Manager
b) To ensure the independence of the supervisory body,
preventing the body itself of being controlled by managers and
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European Cooperative Society
ITS INTEREST IN CO-
OPERATIVE PRACTICE
EKAI CenterGaraia Innovation Centre,20500 Mondragon (Spain)
Tel: +34 943 250104e-mail: [email protected]
www.ekaicenter.eu 7
so ensuring the effectiveness of the monitoring and supervisory
functions.
14. Anyway, the cooperative which –through conversion- has the goal of
using the SCE as a tool to access to the two-tier system should
carefully take account of both these potential advantages and the
disadvantages that may arise as a result in terms of participation or
involvement of different interest groups of the Cooperative.
15. In short, it is clear that with the Statute of the European Cooperative
Society, the two-tier system is now a real option for the Spanish co-operatives.
16. A clear differential factor in the operational practice of the European
Cooperative Society with regard to the Spanish cooperative
legislation is the lower level required by the European regulation
concerning the provision of mandatory funds related to profits.
17. In fact, this is the related text of paragraphs 2 and 3 of Article 65 of
the Statute:
"2. ... the statutes shall require the establishment of a legal
reserve funded out of the surplus before any other allocation.
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European Cooperative Society
ITS INTEREST IN CO-
OPERATIVE PRACTICE
EKAI CenterGaraia Innovation Centre,20500 Mondragon (Spain)
Tel: +34 943 250104e-mail: [email protected]
www.ekaicenter.eu 8
Until such time as the legal reserve is equal to the capital referred
to in Article 3(2), the amount allocated to it may not be less than
15% of the surplus for the financial year after deduction of any
losses carried over”.
18. It looks quite clear that the provision of mandatory funds (both
Promotion and Education Fund or the equivalent in the respective
cooperative law –there is not a fund like this in the Statute of the
SCE- and the mandatory reserve funds) is substantially lower in the
SCE than in the Spanish co-operative legislation.
19. This obviously means that there may be a particular operating
interest for some cooperatives to carry out a conversion into SCE
only to benefit from a regime of lower allocation of mandatory
funds.
20. Analyzing the implications of this option for the whole Spanish
Cooperative movement is not part of this report. But it should be
underlined that, for a given individual cooperative, which considers
that doesn´t need to allocate mandatory funds in the level required
by the Spanish law, the decision to convert into a European
Cooperative Society may be of great interest.
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European Cooperative Society
ITS INTEREST IN CO-
OPERATIVE PRACTICE
EKAI CenterGaraia Innovation Centre,20500 Mondragon (Spain)
Tel: +34 943 250104e-mail: [email protected]
www.ekaicenter.eu 9
21. Very likely, the key operational advantage of the option for the
Statute of the European Cooperative Society lies in the “image”
effect of the use of a “European” corporate structure.
22. This "image" effect may be of interest, first of all, in circumstances or
environments where it is understood that the image of the
cooperative society itself in front of members, customers,
environment, etc. can be improved by giving it a “European” status
and name.
23. But, very specially, this “image” effect may be of particular interest
in shaping interstate structures, to the extent that the "European"
image means a neutral approach in the relations between people or
entities that are associated from different states, neutrality which is
not achieved with an entity whose image and name are very directly
related to one of the member states participating in the project.
24. There are some other operational aspects of less interest to
individual cooperatives, including the possibility of opting for an
unlimited liability regime, the use of the registered office of the
Cooperative with certain operational and tax purposes, and so on.
But it seems that these are not very significant comparative
advantages.
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European Cooperative Society
ITS INTEREST IN CO-
OPERATIVE PRACTICE
EKAI CenterGaraia Innovation Centre,20500 Mondragon (Spain)
Tel: +34 943 250104e-mail: [email protected]
www.ekaicenter.eu 10
25. In short, the operational benefits that the choice of the Statute of
the European Cooperative Society may suppose for some co-
operatives appear to lie essentially in the following areas:
a) The possibility of opting for the two-tier system of corporate
governance
b) The significantly lower mandatory allocation of funds
c) Essentially, the "image" effect of making use of an “European”
corporate legal structure and business name.