The co-operative company: a return to the source

In the current Company Code, the co-operative company has as specific characteristic a variable number of partners and a variable capital. The co-operative company is incorporated either with limited liability (CVBA/SCRL) or with unlimited liability (CVOA/SCRI).

In its previous version, the draft bill on the new Belgian code of companies and associations provided for the complete abolition of the co-operative company.

It has now been maintained but solely for the benefit of “real” co-operatives.

1. The CVOA/SCRI disappears and becomes the co-operative company (CV/SC)

Considering that, on the one hand, the statutory regime of the co-operative company with limited liability was similar to that of the private company with limited liability (BVBA/SPRL) (which will become the limited liability company) (BV/SRL) and on the other hand that the legal regime of the co-operative company with unlimited liability was similar to that of the general partnership (VOF/SNC), the new code provided for the complete abolition of the co-operative company with compensation for variable capital in the new limited liability company (BV/SRL).

Under the current draft bill, the co-operative company with limited liability (CVOA/SCRI) disappears. Since solely one form remains, the co-operative company with limited liability simply becomes the co-operative company (CV/SC). According to the draft bill, the legal regime of the new co-operative company is equated with the regime that applies to the new limited liability company (BV/SRL), except for the few exceptions that are explicitly stated.

An additional caracteristic of the CV/SC is the option to join or exit as a shareholder without amending the articles of association, or the possibility to exclude a shareholder. This flexible entry or exit scheme is considered as an essential element of the CV/SC.

Regarding the flexibility of the legal regime of the new limited liability company (BV/SRL), the co-operative company is no longer the company par excellence for legal flexibility, especially for liberal professions. The flexibility that makes the co-operative company (CV/SC) attractive today is made possible in the new limited liability company (BV/SRL). The "improper" co-operatives should therefore no longer take this form and become BV/SRLs.

2. Return to the source

Under the new code, the co-operative company (CV/SC) regains its original identity, namely to conduct a business on the basis of co-operative ideas. The draft bill defines the co-operative company as the company whose main purpose is to meet the needs of its shareholders and to develop their economic and social activities, including by concluding agreements with its shareholders on the delivery of goods, the provision of services or the execution of works in the context of the activity that the co-operative company exercises or has exercised. The co-operative company may also aim to meet the needs of its shareholders and/or promote their economic and/or social activities through a participation in one or more other companies.

The drafters of the new code were strongly inspired by the co-operative principles of the International Cooperative Alliance (ICA), which is recognized and accepted internationally. According to these principles, the co-operative model corresponds to the following characteristics:

1. Voluntary and open membership;
2. Democratic member control;
3. Economic member participation;
4. Autonomy and independence;
5. Education, training and information;
6. Cooperation among co-operatives;
7. Concern for community.

To avoid that the legal form of co-operative company is used by companies that do not comply with the characteristics of the co-operative company as referred to in the new code, an adapted sanction will be provided, in particular the dissolution by the court at the request of the public prosecutor or of any interested party. This sanction may apply both to companies set up as co-operative companies without complying with legal requirements, and to co-operatives that do comply with these requirements upon incorporation but which do not comply with them in the course of their existence.

3. How to be recognised as a co-operative company

The importance of the co-operative company will essentially lie within the possibility of having it recognised as a “real” co-operative company, as a social enterprise or both, in application of the Law of 20 July 1955 establishing a National Co-operation Council and its implementing decrees.

Currently, co-operative companies that comply with the Royal Decree establishing the conditions for the recognition of national groups of co-operative companies and co-operative companies of 8 January 1962 can be regarded as recognized co-operatives, which also has a number of legal consequences (at tax level). This possibility of continuing its social life as a recognized co-operative company is now also included in the draft bill, to make a clear distinction between the simple co-operative company and the one that also fulfills the recognition criteria. As a result, all recognized co-operatives automatically qualify for the legal form of a co-operative company (CV/SC), but not all existing co-operative companies meet the recognition criteria.

Co-operative companies can also be recognized as a social enterprise, when certain criteria are fulfilled, and thus enjoy the associated benefits. This possibility is open to current companies with a social purpose, the majority of which are co-operative companies. The current Company Code lists the conditions that a company must meet in order to define itself as a company with a social purpose. Since there is no control on whether a company complies with the legal conditions to adhere to the qualification "social purpose", this system today, however, relies to a mere self-control. For this reason, it is opted within the draft bill for recognition within the legal form of the co-operative company, by the National Cooperation Council, the Social Entrepreneurship and the Agricultural Entity, whereby a government authority checks whether a certain company deserves the label "social enterprise".

4. Conclusion

Co-operative companies will come in these following forms:

a) Simple co-operative company;
b) Recognized co-operative company;
c) Simple co-operative company recognized as a social enterprise;
d) Recognized co-operative company recognized a social enterprise.