We provide legal and consulting services for the registration of cooperative in Ukraine. The formation of cooperative can be a good solution as a form of association between people and/or companies.
We provide the following legal services:
- registration of a cooperative;
- preparation of the constituent documents of the cooperative;
- reorganization of the cooperative;
- liquidation of the cooperative;
- disputes resolution between members of a cooperative (including the forced exclusion of a member of cooperative, challenging decisions of governing bodies, etc.).
We register the following types of cooperatives, including:
- energy or utility cooperatives;
- housing cooperative;
- garage cooperative;
- agricultural service and production cooperatives;
- purchasing and trading cooperative;
- production (so-called worker’s cooperative);
- service cooperative;
- harvesting cooperative.
What is a cooperative in Ukraine?
A co-operative is a self-management legal entity that had been founded voluntarily by individuals and/or legal entities (companies) and united on the basis of membership to conduct joint economic and other activities in order to achieve their (member’s) economic, consumer, social, and other needs. A cooperative is an association of citizens and/or companies with a common goal of production and/or consumption and/or assistance.
Depending on the objectives and nature of activities, the coops are classified as the following types: production, service, and consumption. The status of cooperatives is regulated by the Civil Code of Ukraine, the Laws of Ukraine “On Cooperation” and “On Agricultural Cooperation” (only production and service cooperatives in the field of agriculture or farming).
The cooperative is liable for its obligations with all the property. And that is the main difference between cooperative and llc in Ukraine. The procedure for compensation for losses caused by cooperation is determined by the charter or so-called articles of association. The members of the cooperative are responsible for the obligations of the cooperative within the limits of the contributed funds or property unless other is determined by the charter of the cooperative or the law. Consider that the cooperative is not responsible for the obligations of its members. The cooperative is created by the founders, who automatically become members of the cooperative. The founders of the cooperation are registered in the register of legal entities of Ukraine. All the others are considered to be members of the cooperative and the fact that confirm participation in such association is confirmed by internal documents.
The main goals of cooperation are:
- raising the standard of living of members of a cooperative, protecting their property interests and social rights;
- creation of a system of economic and social self-help of the people and businesses;
- the attraction of goods, works, services, additional labor resources into production, increase of labor and social activity of the people;
- creation and development of the infrastructure necessary for the implementation of the economic and other activities of co-op in order to increase the material well-being of their members and meet the needs for goods and services;
- promotion of sustainable development and establishing the foundations for the democratic development of society.
A co-operative is considered to be a legal entity from the date of state registration. Coop may have a bank account, stamp, symbols, acquire ownership rights to securities, real estate, and other property, etc. A cooperative in Ukraine cannot be used as a housing cooperative. That is because there is a different law in Ukraine that regulates the association of the owners of a multi-residential building and it is called OSBB.
Founders and members of a cooperative can be citizens of Ukraine, foreigners, and stateless persons (who have reached the age of 16), as well as legal entities under the laws of Ukraine and foreign countries who can participate in the activities of cooperatives through their representatives. Members are required to pay an access fee and part in the amount determined by the charter of the cooperative. A cooperative must keep records of its members and issue a membership certificate to each of them. Admission of new members to the cooperative is carried out on the basis of an application, and a subsequent decision of the general meeting of members (at least 50% of the vote is required for adoption) and payment of the entrance fee and share.
The statutory documents of a cooperative may establish the possibility, rights, and obligations of associate membership. An associate member is a person who has made a share contribution in full and enjoys the right of an advisory vote in a cooperative. When a cooperative is liquidated, an associate member has a preferential right to pay a share, compared to ordinary members.
Energy Cooperative in Ukraine
An energy cooperative is an association of citizens and/or companies for the purpose of joint consumption and/or production and/or storage of the energy. This model has been working for a long time in many developed countries in the world. Examples of the use of energy cooperation can be a mass, ranging from the joint procurement of firewood and ending with the joint production of biogas. The energy cooperative in Ukraine is not clearly defined by law. Therefore, such an association can be defined as the production, consumer, or service one. In the last time in Ukraine, cooperatives often began to be used to conclude contracts for the supply of electric energy with Oblenergo. This is often used in small villages and allows you to bypass the bureaucratic procedures associated with connecting each house to the transmission grid.
What are the main bodies of cooperative in Ukraine?
The supreme governing body of the cooperative is the general meeting of members. A scheduled general meeting of members is held at least once a year. Each member of the cooperative has one vote that cannot be transferred to other members. The supreme management body has the right to make decisions on all issues of the cooperative.
The decision of the general meeting of the cooperative to approve a new edition or amend the charter, join a cooperative association or withdraw from it and reorganize or liquidate the cooperative if adopted by at least 75 percent of the members of the cooperative attending the general meeting of the cooperative. On other issues, decisions are made by a simple majority of the votes of members (authorized) of the cooperative present at the general meeting.
“The board of directors” is the collective executive body of the cooperative. The board involves the Chairman of the Board and members of the Board. In cooperatives with less than ten members, only the chairman of the cooperative is elected.
The responsibilities of the board:
- running the cooperative in the period between the general meetings of members of the cooperative, ensuring the implementation of their decisions;
- representation in front of state and local authorities, other legal entities and individuals;
- making transactions and activities on behalf of the cooperative;
- other actions on behalf of the cooperative to the extent provided by the cooperative’s charter and/or the law.
The Board may have other rights and/or duties by a decision of the supreme based on the charter of the cooperative. The Board is elected by the General Assembly for a period determined by the charter, but not more than five years. The Board may hire (on the basis of an agreement) an executive director for the operational management of the cooperative’s actions. The executive director may not be a member of the cooperative.
The controlling body of the cooperative is the Supervisory Board. The law does not establish the obligation to form a supervisory board in a cooperative. The supervisory board is elected from among the members of the cooperative in the amount of 3-5 people. Members of the supervisory board work on a voluntary basis and do not receive wages or other remuneration.
Property and funds of cooperatives in Ukraine
As a legal entity, cooperative in Ukraine can own, purchase, sell, and manage any property unless other is ruled by the law. The property of a cooperative may consist of:
- entry, membership, and special payments made by the members;
- property voluntarily transferred to the cooperative by the member (s);
- the profit obtained on the business activities;
- funds received (including in the form of dividends) from enterprises, institutions, organizations created by the cooperative;
- donations, charitable contributions, grants, gratuitous technical and financial (including turning) assistance from legal entities and individuals, including foreign ones;
- other income and/or property that is not prohibited by law.
To ensure the success and stability of coop’ activities, the following funds shall be formed:
- mutual fund – paid by the members as the contribution (including additional);
- indivisible – formed at the expense of entrance fees and deductions from the income of the cooperative and can not be distributed among members, except in cases established by law; the procedure for crediting part of the income to the indivisible fund is determined by the charter of the cooperative;
- reserve – formed from the income, the redistribution of the indivisible fund, donations, irrevocable financial assistance, and other sources that are not prohibited by law; is created in order to cover possible costs, damages;
- special fund – is formed at the expense of earmarked contributions of members and other statutory receipts; created to ensure the statutory activities, and is used by the decision of the governing bodies of the cooperative.
The share of each member is formed by a one-time fee or within a certain period. The size of the share depends on the amount actually paid. In the event of withdrawal from the membership of the cooperative, such a person has the right to receive its total share in kind, financial means, or securities. A share may be inherited (individuals) or transferred to successors (legal entities).
The distribution of cooperation’s profits in Ukraine
Cooperative payments are a kind of dividends and are part of the income distributed by the results of the fiscal year among members of the cooperative in proportion to their participation in the economic activity of the cooperative in the manner, based on the decision of the cooperative’s highest governing body. Payments on parts are the payment of the cooperative’s income to the member of the co-operative.
Cooperative payments and payments on shares do not relate to wages and therefore are taxed as passive income. The cooperative acts as a tax agent when making payments to its members and is obliged to withhold and to transfer individual profit tax to the budget.
Cooperative’s taxes in Ukraine
Everything is very simple. If your cooperative is created for the purpose of consumer or service cooperation, then such an association may be registered as a non-profit organization. Accordingly, cooperatives may be exempt from paying corporate income tax. For this, the constituent documents of such a cooperative must comply with the requirements of the relevant articles of the Tax Code of Ukraine. In principle, garage, garden, garden-dacha, other consumer and service cooperatives may be included in the register of non-profit organizations. At the same time, please note that in this case, share, membership, and target contributions from members of the cooperative will not be considered as profit either. And this is correct, because members, transferring funds to the account of the association that serves such persons (or their property) actually pay themselves. This is the rare case when the legislation of Ukraine is really doable and acts in the interests of its citizens.
Production cooperatives are business companies that are established for the purpose of making a profit and cannot be included in the register of non-profit organizations.
Housing cooperatives by the time of the completion of construction and commissioning of a residential building are not eligible for non-profit status. That is, at the design, construction, and construction stages of an apartment building, the activities of a housing and construction cooperative are subject to taxation.
A cooperative that carries out activities for profit (production, services, or trade) has the right to register as a single taxpayer (the simplified tax system) and/or value-added taxpayer (VAT).
Rights of cooperative members to the property
A member of a housing construction, cottage construction, garage construction, housing, cottage, garage, or other relevant cooperative has the right to possess, use, and (with the consent of the cooperative) dispose of the apartment, cottage, garage, other building, structure or room of the cooperative if he did not buy this property.
Dissolution, liquidation, and reorganization of cooperative in Ukraine
The reorganization (merger, accession, division, separation, transformation) of a cooperative is carried out by the decision of the general meeting of members of the cooperative in the manner specified by the legislation and the charter of the cooperative. Considering that coop is a legal entity so the procedure for co-operative dissolution is the same as business closure in Ukraine. In the event of a reorganization, the rights and obligations of the cooperative are transferred to its successors.
A cooperative of any type (production, consumer, service) can be reorganized into any form of business entity (limited liability company, joint-stock company, private enterprise, etc.)
Cooperative can be dissolved based on:
- the decision of the supreme body of the cooperative and 75%+ of votes are required to approve such a decision;
- Court decision (only in cases if the activity of the cooperative was illegal); consider that this is a very rare procedure in Ukraine.
The liquidation of a cooperative has a number of features:
The property of the cooperative remaining after satisfying the claims of the cooperative’s creditors, making payments to the members of the cooperative of units and payments on the shares, cooperative payments, remuneration, settlements with the cooperative association of which it is a member, is distributed among the members of the cooperative in the manner specified by the charter.
The property of the indivisible fund is not subject to division between its members and is transferred by decision of the liquidation commission of another (other) cooperative organization (cooperative organizations) or credited to the budget revenue.
If a cooperative was included in the register of non-profit institutions and organizations, then in liquidating such a cooperative, absolutely all immovable, movable property and funds remaining after satisfying creditors’ claims must be transferred to another cooperative. The same rules and regulations are established for all non-profit organizations in Ukraine. The division of the property of a non-profit organization among owners, members, or participants in the liquidation of such an organization is prohibited.