A cooperative
is a voluntary association of its members in which every member participates directly. By doing business together, cooperative members enhance and protect their economic and other professional interests pursuant to the principle of mutual assistance for the purpose of making their own and joint profit in compliance with the law and rules of the cooperative. A cooperative is a legal entity registered in a court registry and the scope of cooperative business operations may include any operation which is not prohibited by the law.

Fundamental features of such economic associations are as follows:
they are based on persons who constitute a company, i.e. what matters here is members of the company and one joins the company considering the personal characteristic of its members

  • among members, there is a strong bond between interests which are desired to be realized by participation in the company and effects of the company activities reflect directly on its members
  • personal engagement and contribution to the company operations are expected from the company members (this contribution does not have to refer to money, items nor rights but it can encompass work, services or any asset, particularly immediate participation in the company management)
  • members are liable for cooperative liabilities to the extent of their stakes in the cooperative
  • membership rights, if not otherwise agreed, are in the principle regulated depending on a member and not pursuant to the capital possibly donated to the company
  • without consent of other members, a stake in the company cannot be, in the principle, assigned to some other person
  • members enjoy broad autonomy when it comes regulation of relations within the company

Taking account of the aforementioned and in order to get the most precise description of the term of cooperative, here are some characteristics that are closely related to a cooperative itself and that make it different from other forms of economic associations:

  • a cooperative can be founded by at least seven natural persons or legal entities possessing capacity for doing business
  • the scope of business of a cooperative may involve any operation or activity which is not prohibited by the law
  • a cooperative is managed by its members
  • new members of a cooperative have the same rights and liabilities as its founders and they are regulated by the cooperative rules
  • a cooperative member deposits their member’s stake in the minimum amount of 1,000.00 HRK
  • members’ equity can appear as money, items and rights calculated into their pecuniary value

A cooperative member
is a person who partly or completely does business within a cooperative, i.e. a person who, through a cooperative, sells their products or services, purchases products or uses services necessary forperforming their business operations or in some other way directly participates in accomplishment of the goals due to which the cooperative was founded. The capacity of a cooperative member is acquired by participation in the cooperative establishment or later by joining the cooperative. A cooperative member is obliged to do business by means of the cooperative and not only by taking part in the business outcome. Other, they act contrary to the cooperative principles. New cooperative members have the same rights and liabilities as its original founders. The scope of exercise of these rights depends on the duration of the capacity of a coop member, the volume and quality of business deals between cooperative members and the cooperative and on other facts, pursuant to which the quality of a cooperative relation can be assessed. The capacity of a cooperative member cannot be obtained only based on the member’s (stake) equity but one needs to realize the interests, due to which the cooperative was founded in the first place. The law differentiates between a member’s (stake) equity and a member’s share in the cooperative. A
member’s (stake) equity can appear as money, items and rights, and in the principle, a larger member’s (stake) equity does not imply greater rights in terms of cooperative management. Members’ stakes are different and depend on the scope of realization of cooperative business deals in cumulative application during a cooperative relation or in other words, as the result of the volume and quality of cooperative business deals and separation into expanded cooperative operations or a cooperative asset increase. Cooperative assets are constituted of members’ (stakes) equities and assets acquired by cooperative business. The profit belongs to cooperative members and is distributed in compliance with the agreement on cooperative establishment and relating rules. The profit calculated in the annual statement shall serve as a basis for covering losses from previous periods. After the coverage, the cooperative single out and register the following:

  • at least 30% for cooperative development
  • at least 5% for mandatory reserves as long as these reserves reach the total amount of members’ (stakes) equities.

This is the part where a cooperative member, when leaving the cooperative, is granted the right, according to the agreement with other cooperative members, to get paid the part of the assets acquired by means of their share in the acquisition.

Regulations relevant for understanding of the relations within a cooperative

The basic legal ground for regulation of the relations within a cooperative refers to the new Cooperative Act (Official Gazette no. 34/11) which governs cooperative establishment and management, cooperative bodies, assets and business deals, termination and association into cooperative federations etc. Furthermore, what is important in this context is the Company Act and regulations governing civil obligations in a partnership. These regulations are applied if the Cooperative Act does not prescribe some relation or if the Cooperative Act makes reference to application of the Company Act.

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