The new Law on Cooperatives set to take effect on July 1 this year, includes regulations on the establishment, management, reorganization, dissolution, bankruptcy, and related activities of cooperative groups, cooperatives, and unions of cooperatives. It also introduces state policies to promote the development of cooperatives.
The new Law on Cooperatives (the Law), set to take effect on July 1 this year, includes regulations on the establishment, management, reorganization, dissolution, bankruptcy and related activities of cooperative groups, cooperatives and unions of cooperatives (below collectively referred to as cooperatives). It introduces state policies to promote the development of cooperatives.
Replacing its 2012 predecessor, the 115-article Law aims to create a favorable and open legal corridor for cooperatives to participate in the national economy and international integration.
The State’s guarantee for cooperatives and their members
Under Article 5 of the Law, the State recognizes and protects the ownership of assets, capital, income, and lawful rights and interests of cooperatives and their members. Compulsory purchase or requisition of assets of cooperatives by the State must comply with the law on compulsory purchase and acquisition of assets.
The State guarantees a fair business investment environment between cooperatives and enterprises and other economic organizations.
The State also secures the right to autonomy and accountability of cooperatives in their organization, operation, production and business activities and does not interfere with their lawful activities.
State policies on the development of cooperatives
One of the new points in the Law is that it has supplemented state policies on development cooperatives.
The Law devotes a separate chapter, Chapter II, to providing this content.
The Chapter specifies principles of the provision of support and conditions for being entitled to policies, such as having expanded membership or developed their indivisible common funds or indivisible assets, etc.
As required by the Law, only cooperative groups with registration certificates are entitled to support. For great support amounts, audit reports of cooperatives will serve as a basis for assessment before provision of support in order to prevent providing support to ineligible subjects or prevent subjects from seeking profit from the State’s support.
The Law also introduces various policies on human resource development, information and consultancy; land policy; tax, fee and charge; capital access and insurance; application of science and technology, innovation and digital transformation; market access and research; investment in infrastructure and equipment development; financial consultancy and risk assessment support; and provision of support for agricultural activities.
Funds for implementation of policies will be provided by the state budget; tax, fee, charge, land rental and land use levy exemption and reduction amounts and amounts remittable to the state budget, preferential loans and funds lawfully mobilized from or donated by domestic and foreign individuals and organizations.
The Chapter also adds provisions on cooperative development support funds.
Classification of cooperatives
As per Article 16 of the Law, cooperatives are classified into micro, small-sized, medium-sized and large-sized ones based on the number of their official members and either of the two criteria, i.e., revenue or total capital.
Micro, small-sized, medium-sized and large-sized cooperatives may also be determined by field of operation.
Members of cooperatives and unions of cooperatives
The Law expands memberships of cooperatives and unions of cooperatives. Specifically, members of cooperatives include official members, associate members with capital contributions and associate members without capital contributions. Members of unions of cooperatives include official members being cooperatives, associate members with capital contributions and associate members without capital contributions being Vietnamese legal persons.
Articles 30 and 34 of the Law set conditions for foreign-invested economic organizations and individual foreign investors to become members of cooperatives and unions of cooperatives, conditions on the number of members, and conditions on maximum capital contribution in cooperatives and unions of cooperatives.
When joining cooperatives or unions of cooperatives as official members or associate members with capital contributions, individual foreign investors or foreign-invested economic organizations must satisfy market access conditions applicable to foreign investors specified by the investment law and relevant laws and national defense and security assurance conditions specified by the investment law.
Cooperatives or unions of cooperatives that have official members or associate members with capital contributions being foreign-invested economic organizations or individual foreign investors must satisfy the market access conditions applicable to foreign investors specified by the investment law and relevant laws.
Official members being foreign-invested economic organizations and individual foreign investors of a cooperative and official members being foreign-invested economic organizations of a union of cooperatives must account for less than 35 percent of the total official members of such cooperative or union of cooperatives.
Transitional provisions
Cooperatives and unions of cooperatives that are established before July 1 this year and are organized and operate not in contravention of the Law may continue to operate without having to make re-registration. In case the charter of a cooperative or union of cooperatives is in compliance with the Law, it must be revised within 18 months from July 1 this year.
Cooperative groups that are established before the effective date of the Law and are subject to registration under Article 107.2 of the Law will have to make registration in accordance with the Law within 18 months from July 1 this year.
From September 1, 2023, cooperatives and unions of cooperatives will have to terminate internal credit activities as required by the 2012 Cooperative Law. For internal credit contracts signed before September 1, 2023, the contracting parties may continue to exercise their rights and perform their obligations under such contracts but may not extend them.
From September 1, 2023, cooperatives that have established enterprises, contributed capital to or purchased shares from enterprises, and the enterprises established by or receiving capital/selling shares from/to these cooperatives may not increase their capital contribution ratios or shares. Within 24 months from such date, they will have to apply Articles 81 and 82 of the Law.
As noted, the State’s policies on cooperatives and unions of cooperatives promulgated in accordance with the 2012 Cooperative Law may continue to be implemented until they expire or any superseding or annulling documents are issued.
It is important to note that in case other laws have specific provisions on the establishment, management, reorganization, dissolution, bankruptcy, and related activities of cooperative groups, cooperatives and unions of cooperatives, such laws will prevail.
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