New law on European cooperative came into force

On Friday August 18th a new law on the introduction of a European cooperative legal form and on the modification of the existing cooperative legislation was put into effect. “There will be quite a lot of changes to existing cooperatives as well as for those to be set up in future, and the cooperative legal form will become more attractive”, said Mrs. Brigitte Zypries, Federal minister of justice.

The new law will introduce modifications to the cooperative system to an extent not seen for more than 30 years. These will relate to the following areas:

  • The setting up of cooperatives will be facilitated with in particular small cooperatives being relieved of bureaucratic procedures. For example the minimum founding member number is reduced from seven to three. Cooperatives with up to 20 members can do without a supervisory board. A particular important aspect with regard to the many small cooperatives with a balance sheet total up to one million Euros or a turnover of up to two million Euros is the fact that these companies are relieved of the necessity to have year-end financial statements examined. Furthermore the legal form of a cooperative can also be chosen for social or cultural purposes
  • Some elements of corporate governance issues which are currently discussed in the field of stock corporation law will also be applicable to the field of cooperatives. This includes e.g. a strengthening of the position of the supervisory board, the improvement of information flows to members as well as modifications on auditing issues
  • Capital raising and capital preservation will be facilitated by allowing investment in kind, introducing possible minimum capital requirements or by admitting members for merely financial reasons
  • Finally the cooperative legislation will also be modernized from a linguistic point of view. For instance the expression “comrade” will be replaced by “cooperative member”

“What is important is the fact that many of the changes introduced are not compulsory, but each cooperative may decide freely whether to admit e.g. investing members or introduce a minimum capital requirement. It is these new choices that contribute to the increased attractiveness of the cooperative legal form. I hope that in future people, when setting up a company, choose the legal form of a cooperative more often again”, continued Mrs. Zypries.

Furthermore the law also contains new regulations with regard to the introduction of a new supranational legal form called European cooperative. This new legal form is to facilitate cross-border activities of cooperatives within the EU. “The new legal form of the European cooperative creates kind of competition to conventional German cooperatives, but at the same time the modernization of the German cooperative legislation prepares them well for that competition”, said Mrs. Zypries. The text of the new law is available online in PDF format. GERMAN