Cooperatives

Cooperatives (협동조합/協同組合), or co-öperative ("co-öp") refer to autonomous associations of persons who voluntarily cooperate for their mutual, social, economic, and cultural benefit.

Cooperatives include non-profit community organizations and businesses that are owned and managed by the people who use its services (a consumer cooperative) or by the people who work there (a worker cooperative) or by the people who live there (a housing cooperative), hybrids such as worker cooperatives that are also consumer cooperatives or credit unions, multi-stakeholder cooperatives such as those that bring together civil society and local actors to deliver community needs, and second and third tier cooperatives whose members are other cooperatives.

Key words
cooperative, social cooperative, no-profit association, consumer, producer

Background
The United Nations has declared 2012 to be the International Year of Cooperatives (IYC).

Under the relevant laws in Korea, "cooperatives" shall mean business associations of persons who voluntarily cooperate for the procurement, production, selling, provision, etc. of goods or services, thus enhancing the status of association members and contributing to the regional community. Of this kind of cooperatives, "social cooperatives" shall mean non-profit cooperatives which carry out business relating to the enhancement of the rights and interests, welfare of community inhabitants, or provide social services or job opportunities to the underprivileged.

As the Framework Act on Cooperatives (협동조합기본법/協同組合基本法) was legislated on January 26, 2012 (Act No. 11211) and came into force on December 1, 2012, consumers as well as municipalities are increasingly interested in establishing and operating various cooperatives.

Legal nature
A cooperative is a legal entity owned and democratically controlled by its members. Members often have a close association with the enterprise as producers or consumers of its products or services, or as its employees.

In some countries, e.g. Finland and Sweden, there are specific forms of incorporation for cooperatives. Cooperatives may take the form of companies limited by shares or by guarantee, partnerships or unincorporated associations. In the UK they may also use the industrial and provident society structure. In the USA, cooperatives are often organized as non-capital stock corporations under state-specific cooperative laws. However, they may also be unincorporated associations or business corporations such as limited liability companies or partnerships; such forms are useful when the members want to allow:
 * 1) some members to have a greater share of the control, or
 * 2) some investors to have a return on their capital that exceeds fixed interest, neither of which may be allowed under local laws for cooperatives. Cooperatives often share their earnings with the membership as dividends, which are divided among the members according to their participation in the enterprise, such as patronage, instead of according to the value of their capital shareholdings (as is done by a joint stock company).

Identity
Cooperatives are typically based on the cooperative values of "self-help, self-responsibility, democracy and equality, equity and solidarity" and the seven cooperative principles:
 * 1) Voluntary and open membership
 * 2) Democratic member control
 * 3) Economic participation by members
 * 4) Autonomy and independence
 * 5) Education, training and information
 * 6) Cooperation among cooperatives
 * 7) Concern for community

Cooperatives are dedicated to the values of openness, social responsibility and caring for others.

Such legal entities have a range of social characteristics. Membership is open, meaning that anyone who satisfies certain non-discriminatory conditions may join. Economic benefits are distributed proportionally to each member's level of participation in the cooperative, for instance, by a dividend on sales or purchases, rather than according to capital invested. Cooperatives may be classified as either worker, consumer, producer, purchasing or housing cooperatives. They are distinguished from other forms of incorporation in that profit-making or economic stability are balanced by the interests of the community. Coops can sometimes be identified on the Internet through the use of the .coop suffix of internet addresses. Organizations using .coop domain names must adhere to the basic co-op values.

Statutory ground
Until 2012, Korea had seen eight types of cooperatives. In 2012, the above-mentioned Framework Act on Cooperatives was added as a framework act:
 * 1) Agricultural Cooperatives Act (농업협동조합법)
 * 2) Small and Medium-sized Enterprise Cooperatives Act (중소기업협동조합법)
 * 3) Fisheries Cooperatives Act (수산업협동조합법)
 * 4) Tobacco Producers Cooperatives Act (엽연초생산협동조합법)
 * 5) Crdit Cooperatives Act (신용협동조합법)
 * 6) Forestry Cooperatives Act (산립조합법)
 * 7) Consumer Cooperatives Act (소비자생활협동조합법)

Framework Act on Cooperatives
This Act is to provide for the framework to establish and operate cooperatives and to promote the cooperative activities in an independent, self-supporting and self-regulating manner, thus contributing to the social integration and balanced growth of nation's economy. Article 1.

Legislative Intent
Nowaday cooperatives are regarded as an alternative to promote a new economy and society, but excluded from the application of existing eight individual laws on cooperatives including the Agricultural Cooperatives Act. Then producer or consumer cooperatives rather than the company subject to the Commercial Act could be established and operated in accordance with a special law.

Further, a social cooperative association may be established to provide social services and job opportunities to the underprivileged, and to conduct other community activities.

Main Points of the Act
Main points of the Act are explained by:

a. A cooperative is allowed to be established as a business organization to enhance the rights and interests of its members and to contribute to the communities in the economic, social, cultural and other areas. A cooperative and federation of cooperatives are a legal entity, respectively, while a non-profit social cooperative and federation of social cooperatives are non-profit legal entitities. Articles 2, 4 and 5.

b. Cooperatives shall actively carry out education and training programs and provide information services, and exert themselves to further mutual cooperation with other cooperatives. Articles 7 and 8.

c. Cooperatives are prohibited from supporting or opposing a specific political party, or intervening in the election of a specific candidate. Article 9.

d. The Minister of Planning and Finance shall coordinate policies on cooperatives after consultation with the heads of relevant central administrative agencies, establish the basic plan thereof, make public the result of survey of status quo of cooperatives every three year, and report it to the competent standing committee of the National Assembly. Article 11.

e. The first Saturday of July each year shall be named as the Day of Cooperatives, one week prior to the said day the Week of Cooperatives. The State and local governments shall exert themselves to observe the Day of Cooperatives by conducting appropriate events or business fit for the purpose of the said day. Article 12.

f. The Monopoly Regulation and Fair Trade Act shall not be applicable to the activities of cooperatives which fall within the scope set forth in the Presidential Decree; provided, however, that unfair transactions and other activities in a certain area which improperly restrict competition shall not apply. Article 13 (3).

g. Any one who intends to establish a cooperative shall report to the Mayor or Provincial Governor, and in case of a social cooperative, the approval of the Minister of Planning and Strategy is required. Articles 15 and 85.

h. The admission of, and exit from, the cooperative is freely guaranteed. Any member of the cooperaive shall have one voting right and one elective franchise regardless of invested equities. Upon exit or expulsion from the cooperative, he/she is entitled to claims for his/her share in equity. The general meeting, representatives, board of directors, officers, auditor and other necessary items shall be provided by by-laws. Articles 21 through 44, 89 and 90.

i. Any business operation necessary to attain the purpose of the cooperative, except finance and insurance, shall be provided in the articles of incorporation in a self-regulatory manner. Article 45.

j. More than 10 percent of surplus of the cooperative (in case of the social cooperative, 30 percent) shall be accumulated as a legal reserve. After such accumulation of reserves, dividends may be distributed subject to each achievement and equity payment (in case of the social cooperative, it is not allowed). Articles 50, 51, 97 and 98.

k. The requirements and procedure of merger, split and dissolution and liquidation process shall be provided. The remaining property shall be disposed of subject to the articles of incorporation. Articles 56 through 59.

l. The establishment of a cooperative and its branch, its movement, reorganization, merger, dissolution and liquidation and other important items shall be registered. Articles 61 through 69.

m. A federation of cooperatives (협동조합연합회) may be organized subject to the report to the Minister of Planning and Finance. The voting right and elective franchise shall be graded by the number of members and participatory portion in the operations of the federation of cooperatives. Articles 71, 72, 75, 76, 79, 80 and 82 through 84.

n. The social cooperative may lend small amount to its members within the scope of two thirds of the aggregate paid-in capital. The mutual aid may be implemented within the aggregate paid-in capital. Article 94.