DECREE

ON THE ORGANIZATION AND OPERATION OF COOPERATIVE GROUPS

THE GOVERNMENT

Pursuant to the December 25, 2001 Law on Organization of the Government;

Pursuant to the 2005 Civil Code;

At the proposal of the Minister of Agriculture and Rural Development,

DECREES:

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation and subjects of application

1. This Decree provides for the organization and operation of cooperative groups which are formed on the basis of cooperation contracts authenticated by Peoples Committees of communes, wards and townships (below collectively referred to as commune-level Peoples Committees) by three individuals or more who jointly contribute assets and labor to carrying out certain works for mutual benefit and responsibility.

Article 2. Organization and operation principles

Cooperative groups are organized and operate on the following principles:

1. Voluntariness, equality, democracy and mutual benefit;

2. Majority voting;

3. Financial autonomy, self-financing and self-responsibility with assets of the groups and their members.

Article 3. Names and logos of cooperative groups

A cooperative group may select its name and logo in accordance with law which must not be identical to names and logos of other cooperative groups operating in the same commune, ward or township.

Article 4. Formation of cooperative groups

1. Individuals wishing to form a cooperative group shall organize its formation.

2. When forming a cooperative group, the following principal contents must be discussed and agreed upon:

a/ Purpose and operation plan of the cooperative group;

b/ Contents of the cooperation contract;

c/ Name and logo (if any) of the cooperative group;

d/ List of members;

e/ Selection of the head and management board (if necessary);

f/ Other relevant issues.

Article 5. Cooperation contracts

1. A cooperation contract is the written agreement between group members, named as cooperation contract or other, but its contents must comply with Clause 2 of this Article.

2. Major contents of a cooperation contract

a/ Purpose and term of the cooperation contract;

b/ Full names, places of residence and signatures of the head and members;

c/ Contributed assets (if any); modes of sharing yields or profits among members;

d/ Rights, obligations and responsibilities of members, head and management board (if any)

e/ Conditions for joining and leaving the cooperative group;

f/ Conditions for terminating the cooperative group;

g/ Other agreements.

3. The cooperation contracts contents may be modified and supplemented when so agreed by a majority of members.

Article 6. Authentication of cooperation contracts

1. Commune-level Peoples Committees shall authenticate or re-authenticate (by signing for certification and affixing seal) cooperation contracts, or modified or supplemented cooperation contracts, and record them in a book within 5 working days from the date of receiving the contracts whose contents comply with Article 5 of this Decree.

When commune-level Peoples Committees refuse to authenticate cooperation contracts, they shall issue written replies, clearly stating the reason.

2. When cooperative groups are organized and operate on an inter-communal scale, they may choose where to authenticate their cooperation contracts that is convenient to their organization and operation.

Chapter II

GROUP MEMBERS

Article 7. Conditions and procedures for admitting members of cooperative groups

1. Conditions for admitting members:

a/ Individuals who are fully aged 18 or more, have full civil act capacity and voluntarily join and agree with cooperation contract contents may become members of cooperative groups. An individual may become a member of more than one cooperative group;

b/ Cooperation contracts may additionally provide for other criteria for cooperative group members.

2. Procedures for admitting new members:

a/ Individuals send group heads an application which clearly states their wish of joining cooperative groups and commitment to performing the groups cooperation contracts;

b/ The member conference considers, votes and accepts new members with the consent of a majority of members, unless otherwise agreed.

Article 8. Rights of members

Members have the following rights:

1. Members have equal rights in deciding cooperative groups works, regardless of the level of their asset contribution;

2. To enjoy yields or profits gained from cooperative groups activities as agreed upon;

3. To supervise cooperative groups activities;

4. To leave cooperative groups according to agreed conditions;

5. Other rights as agreed in cooperation contracts but not contravening the law.

Article 9. Obligations of members

Members have the following obligations:

1. To cooperate on the principle of equality, mutual benefit, mutual assistance and assurance of the cooperative groups common benefit;

2. To compensate the cooperative group for damage caused by their faults;

3. To perform other obligations as agreed in the cooperation contract but not contravening the law.

Article 10. Rights and obligations of members leaving cooperative groups

1. When leaving cooperative groups, members may request return of their contributed assets, obtain their share in the cooperative groups common assets, except for undivided assets as agreed by a majority of members. When the asset division affects the cooperative groups operation, the assets will be valued in monetary terms for division;

2. When leaving cooperative groups, members shall perform their obligations as agreed upon.

Chapter III

ORGANIZATION AND OPERATION OF COOPERATIVE GROUPS

Article 11. Cooperative group meetings

1. Cooperative groups may decide on their own how many times a year they will hold the general member meeting.

2. Cooperative group heads shall hold extraordinary meetings when:

a/ There arises a problem which requires a group meeting for settlement;

b/ A majority of members or a majority of management board members (if any) request such meeting.

Article 12. Rights of cooperative groups

1. Cooperative groups may select production and business domains that are not prohibited by law, and operate freely regardless of the administrative boundary of the locality where their cooperation contracts are authenticated. When cooperative groups operate in domains requiring a practice permit or a certificate of business condition satisfaction, they must comply with requirements on such permits or certificates as prescribed by law.

2. To conduct direct export or import or set up joint ventures or associate with domestic organizations and individuals or foreign organizations and individuals to expand production and business according to law.

3. To enjoy support policies and participate in the elaboration and implementation of plans, programs and projects in support of collective economy development; plans, programs and projects on socio-economic development, employment generation and hunger alleviation and poverty reduction in their localities.

4. To open their own bank accounts under law and the representative mechanism specified in the cooperation contract.

5. To enter into civil contracts.

6. To decide on the sharing of yields or profits and handling of losses of cooperative groups.

7. Other rights specified in cooperation contracts, but not contravening the law.

Article 13. Civil liabilities of cooperative groups

1. Cooperative groups shall take civil liability for the performance of civil rights and obligations established and implemented by their representatives in the name of cooperative groups.

2. Cooperative groups shall take civil liability with their common assets; when the common assets are not sufficient for fulfilling the groups obligations, members shall take joint responsibility in proportion to their contributed assets.

3. To carry out commitments made to group members, and other organizations and individuals.

4. To perform obligations towards laborers hired by cooperative groups under the labor law.

5. Other obligations as provided for by law.

Article 14. Settlement of disputes

1. Disputes related to the cooperation contract between cooperative group members shall be reconciled within the cooperative group; when reconciliation fails, such disputes shall be settled by the hamlet or village community or commune-level reconciliation team or brought before a court.

2. Disputes between cooperative groups and other organizations or individuals shall be settled according to law.

Article 15. Termination of cooperative groups operation

1. A cooperative group terminates its operation in the following cases:

a/ The term specified in the cooperation contract ends;

b/ The purpose for cooperation is reached;

c/ Members agree to terminate the cooperative groups operation;

d/ The cooperative group terminates its operation according to a decision issued by a competent state agency in cases prescribed by law.

2. Within 7 working days from the date of terminating operation, the cooperative group shall notify in writing such termination to the commune-level Peoples Committee which has certified its cooperation contract.

3. When terminating operation, the cooperative group shall pay its debts; when its common assets are not sufficient for paying the debts, its members private assets shall be used for the debt payment according to Clause 2, Article 13 of this Decree. When the cooperative group still has assets after having paid all debts, these assets shall be divided among members in proportion to their contributed assets, unless otherwise agreed.

Chapter IV

MANAGEMENT OF COOPERATIVE GROUPS

Article 16. Management of cooperative groups

1. The person managing general affairs of a cooperative group is its head. Members shall agree upon criteria for and the method of selecting a cooperative group head.

2. When necessary, a cooperative group may elect a management board. The cooperative group head is the chief of the management board. The number of, criteria for and method of electing the management board shall be agreed upon by cooperative group members.

3. Change of the cooperative group head shall be recorded in the minutes of the cooperative groups meeting and be notified in writing to the commune-level Peoples Committee which has authenticated the cooperation contract.

Article 17. Responsibilities of cooperative group heads and cooperative group management boards

1. The cooperative group head has the following responsibilities:

a/ To represent the cooperative group in establishing civil transactions for the cooperative groups operation purposes;

b/ To organize and manage the cooperative groups activities.

2. Management board members have the following responsibilities:

a/ To assist the cooperative group head in managing the cooperative groups activities;

b/ To perform tasks assigned by the head.

Article 18. Representatives of cooperative groups

1. The representative of a cooperative group in civil transactions is its head. The cooperative group head may authorize management board members or group members to carry out certain works of the group according to law on authorization.

2. Civil transactions that are established and carried out by the cooperative group representative for the cooperative groups cooperation purposes according to the decision of a majority of group members give rise to rights and obligations of cooperative groups.

3. Consequences of civil transactions established by a person who is not authorized to represent the cooperative group shall be handled under Article 145 of the Civil Code.

4. Consequences of civil transactions that are established and carried out by the cooperative group representative beyond his/her authorized power shall be handled under Article 146 of the Civil Code.

Chapter V

ASSETS AND FINANCE OF COOPERATE GROUPS

Article 19. Assets of cooperative groups

1. Assets of a cooperative group are formed from the following sources:

a/ Assets contributed by group members, including objects, currency, valuable papers and rights over property;

b/ Amounts deducted from post-tax yields and profits for capital increase;

c/ Assets jointly created or donated;

d/ Other assets as provided for by law.

The cooperative group shall record and monitor separately assets in kind which are not valued and which are divided into two kinds: assets which are contributed by each member and will be returned to the owners when they leave the cooperative group and assets which are not divided to members when they leave the cooperative group.

2. The cooperative groups assets are managed and used as agreed upon. The disposal of assets being production materials is subject to agreement of all members; for other assets, their disposal is subject to agreement of a majority of members.

3. The cooperative groups assets shall be inventoried and assessed on a regular basis and recorded in the inventory minutes or the cooperative groups record book as agreed upon.

Article 20. Finance and accounting of cooperative groups

Cooperative groups financial issues must be made public and transparent for members information, monitoring and inspection; forms and contents of financial statements shall be discussed and decided by members. Cooperative groups that have common assets and financial activities must have accounting books for recording their assets, capital and business activities according to finance agencies instruction.

Article 21. Sharing of yields and profits and handling of losses

1. Cooperative groups yields and profits shall be shared among their members and used for capital accumulation as agreed upon.

Cooperation contracts must specify the sharing of yields and profits earned from cooperative groups activities after tax obligations (if any) are fulfilled.

2. When incurring losses, members shall agree upon making contributions to offset losses if cooperative groups capital accumulations in previous years are not adequate to cover such losses.

Cooperation contracts must specify the handling of losses and risks.

Chapter VI

IMPLEMENTATION PROVISIONS

Article 22. Implementation effect

This Decree takes effect 15 days after its publication in CONG BAO.

Article 23. Implementation responsibilities

1. The Ministry of Planning and Investment shall monitor and guide the implementation of this Decree.

2. Ministers, heads of ministerial-level agencies, heads of government-attached agencies, and presidents of provincial/municipal Peoples Committees shall implement this Decree.