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Įstatymas paskelbtas: Žin

Įstatymas paskelbtas: Žin REPUBLIC OF LITHUANIA LAW ON CO-OPERATIVE SOCIETIES (CO-OPERATIVES) 1 June 1993 – No I-164 (As last amended on 21 September 2010 – No XI-1021) Vilnius CHAPTER ONE GENERAL PRO

VISIONS The State of Lithuania shall support the co-operative movement, recognise as the main purpose of co-operative societies (co-operatives) (hereinafter referred to as “co-operative societies”) the provision of services to members thereof, promote the activities of co-operative societies, enshrine independence thereof in law. Article

  1. Purpose of the Law This Law shall regulate the establishment and activities of co-operative societies and associations thereof, the rights and duties of members, management and control, formation of capital, distribution of profit, transformation and liquidation of co-operative societies. Article
  2. Definitions
  3. Co-operation shall mean mobilisation of activities and resources laid down in law and aimed at achieving the common goals of members. Co-operative societies may be established for this purpose.
  4. Co-operative society shall mean an enterprise established by natural and/or legal persons established in the Republic of Lithuania, the legal persons established in another Member State of the European Union or a state of the European Economic Area or other organisations and branches thereof (hereinafter referred to as a “legal person”) in accordance with the procedure laid down by laws for the purpose of meeting economic, social and cultural needs of its members. Its members shall contribute funds for capital formation, share the risk and profit according to the turnover of members’ goods and services with this society and take an active part in the management of the co-operative society.
  5. Document acknowledging the contributed member’s share shall mean a document confirming a person’s participation in the formation of a co-operative society’s capital, as well as the obligations of the co-operative society to a member of the co-operative society as specified by this Law. The Law on Securities shall not apply to members’ shares of a co-operative society.
  6. Member’s contribution shall mean a person’s monetary or non-monetary property contribution to a co-operative society.
  7. Turnover of goods and services of a member of a co-operative society with the co-operative society (hereinafter referred to as the “turnover”) shall mean the value of economic operations and economic events, in money’s worth, performed during the financial year by a member of a co-operative society with the co-operative society.
  8. Payments in proportion to turnover shall mean the payments to members of a co-operative society made from profit in proportion to turnover of goods and services of the members of the co-operative society with the co-operative society.
  9. Dividend shall mean a portion of profit paid to members of a co-operative society which is in proportion to the value of share held by each member. Article
  10. Status of a Co-operative Society
  11. A co-operative society shall be a legal person of limited civil liability.
  12. The assets of a co-operative society shall be separated from the assets of its members. A co-operative society shall be liable for its obligations only to the extent of its assets A member of a co-operative society shall be liable for the obligations of the co-operative society to the extent of member’s contribution subject to payment for member’s share.
  13. A co-operative society shall have at least five members.
  14. A co-operative society shall have its own name. The name of the co-operative society must contain the words “kooperatinė bendrovė” (co-operative society) or “kooperatyvas” (co-operative).
  15. Repealed as of 2 October
  16. Article 3

(1). Agricultural Co-operative Society (Co-operative) 1. An agricultural co-operative society (co-operative) shall mean a co-operative society (co-operative) which has been recognised as an agricultural co-operative society (co-operative) in accordance with the established procedure. A co-operative society (co-operative) registered in accordance with the procedure laid down by laws and other legal acts may be recognised as an agricultural co-operative society (co-operative), provided it conforms to one of the following recognition criteria: 1) over 70 per cent of its members are the natural and/or legal persons whose income from agricultural activities makes up 50 per cent or more of total income, and the value of whose member’s shares accounts for over 70 per cent of total value of member’s shares of the co-operative society (co-operative); 2) it comprises more than 20 members and over 70 per cent of its members are the natural and/or legal persons which have registered, in accordance with the established procedure, an agricultural holding with the Agriculture and Rural Business Register of the Republic of Lithuania, and the value of whose member’s shares accounts for over 70 per cent of the total value of member’s shares of the co-operative society (co-operative); 3) the value of member’s shares of members, that is, the co-operative societies (co-operatives) recognised as agricultural co-operative societies (co-operatives), accounts for over 70 per cent of the value of member’s shares of its members. 2. In order to be recognised as an agricultural co-operative society (co-operative)l, a co-operative society (co-operative) shall submit to the Agricultural Information and Rural Business Centre the following documents: 1) a copy of the co-operative society’s (co-operative’
  1. s)registration certificate; 2) a list of the natural and/or legal persons which are members of the co-operative society (co-operative) conforming to the selected recognition criterion and which have been entered in the register of members of the co-operative society (co-operative) as well as a list of the natural and/or legal persons which are members of the co-operative society (co-operative) not conforming to the selected recognition criterion and which have been entered in the register of members of the co-operative society (co-operative). The lists shall indicate the number on the list, the name, surname and personal code of a member who is a natural person or the name and code of a member which is a legal person, as well as the size of a member’s share (value in money’s worth); 3) a certificate of the form specified by the Minister of Agriculture of the Republic of Lithuania as drawn up by each member of the co-operative society (co-operative) which is a natural or legal person entered on the list of the members conforming to the selected recognition criterion and submitted to the co-operative society (co-operative) evidencing that the share of profit earned by this natural or legal person from agricultural activities in the previous year accounts for 50 per cent and more of total income thereof, where the list is compiled by selecting as the recognition criterion the recognition criterion referred to in subparagraph 1 of paragraph 1 of this Article; 4) a certificate of the form specified by the Minister of Agriculture of the Republic of Lithuania evidencing that the co-operative society (co-operative) conforms to the requirements set forth by this Law. This certificate shall be drawn up by the co-operative society (co-operative). 3. A co-operative society (co-operative) shall not be recognised as an agricultural co-operative society (co-operative) where: 1) it does not meet the requirements set forth in this Law; 2) it has tax arrears to the state budget of the Republic of Lithuania, municipal budgets or the funds, the taxes paid whereto are administered by State Tax Inspectorate (except for the cases of deferral of the payment of taxes, interest, fines in accordance with the procedure established by legal acts of the Republic of Lithuania or a tax dispute is held in relation to these taxes, interest, fines), has arrears to the budget of the State Social Insurance Fund; 3) not all the documents referred to in paragraph 2 of this Article have been submitted or erroneous data has been submitted. 4. Recognition of a co-operative society (co-operative) as an agricultural co-operative society (co-operative) may be revoked where the co-operative society (co-operative) submits erroneous or false data. 5. An institution authorised by the Government shall recognise co-operative societies (co-operatives) as agricultural co-operative societies (co-operatives) in compliance with the conclusion presented in a recommendation of the State undertaking Agricultural Information and Rural Business Centre concerning recognition and shall authorise State undertaking Agricultural Information and Rural Business Centre to issue a certificate. A local state tax inspectorate and local offices of the State Social Insurance Fund shall, at the request of the State undertaking Agricultural Information and Rural Business Centre, provide the information referred to in subparagraph 2 of paragraph 3 of this Article. Recognition shall be awarded and the certificate shall be issued for a period of two calendar years. Upon the expiry of the term of recognition, a co-operative society (co-operative) may seek renewal of recognition as an agricultural co-operative society (co-operative). 6. The procedure for recognising co-operative societies (co-operatives) as agricultural co-operative societies (co-operatives) shall be laid down by an institution authorised by the Government. CHAPTER TWO ESTABLISHMENT OF CO-OPERATIVE SOCIETIES AND RIGHTS THEREOF Article 4. Founders and Memorandum of Association 1. The founders of a co-operative society must be at least five natural and/or legal persons. 2. Each founder of a co-operative society must become a member thereof. 3. Founders of a co-operative society shall conclude a memorandum of association of a co-operative society, draft articles of association of the co-operative society and convene the statutory meeting. The memorandum of association shall be a public document. 4. The memorandum of association of a co-operative society shall indicate: 1) the name, surname, personal number and place of residence of the founder who is a natural person; the name, code and registered office as well as the name and surname of the authorised representative of the founder which is a legal person; 2) the rights and duties of the founders when establishing the co-operative society and liability for defaulting on the obligations related to the establishment; 3) the name and registered office of the co-operative society being established; 4) the persons (the founders, also other persons) authorised to represent the co-operative society being established and their rights and duties; 5) rates of membership fees, the minimum and maximum amounts of member’s shares; 6) each founder’s obligation to pay a membership fee prior to the statutory meeting and to pay member’s contribution, which is not less than the minimum member’ share; 7) the procedure for, terms and conditions as well as time limits of the payment of a membership fee and member’s contribution, late payment interest for a failure to timely pay the membership fee and member’s contribution; 8) the procedure for convening the statutory meeting and voting at it, as well as participants of such meeting; 9) compensation of the costs of establishment and remuneration for establishment; 10) the procedure for reimbursing the initial membership fee paid and the share contributions made, where the co-operative society is not established; 11) the procedure for settling of disputes between the founders; 12) the date and venue of conclusion of the memorandum. 5. The memorandum of association of a co-operative society must be signed by all founders: natural persons and/or the persons authorised by legal persons. The authenticity of the signatures of the natural persons who have signed the memorandum of association of a co-operative society shall not be notarised. 6. The memorandum of association of a co-operative society drawn up and signed in accordance with the procedure laid down in this Article shall grant the right to open a savings account of the co-operative society being established with a bank or another credit institution. Article 5. Articles of Association 1. The founding documents of a co-operative society shall comprise articles of association and a memorandum of association. 2. The articles of association of a co-operative society shall be a document governing the conduct of the co-operative society’s business. 3. The articles of association of a co-operative society must indicate: 1) the name of the co-operative society; 2) the procedure for changing the registered office of the co-operative society; 3) the purposes of activities of the co-operative society; 4) the duration of activities of the co-operative society, where the activities are of limited duration; 5) the amount of the initial membership fee, the minimum and maximum sizes of members’ shares, the procedure for paying the initial membership fee and member’s contribution, additional members’ contributions, assessment of the non-monetary member’s contribution; 6) conditions of membership in the co-operative society, the rights and duties of members of the co-operative society, the procedure for disposing of the member’s share; 7) management and controlling bodies of the co-operative society, their competence, the procedure of their election and dismissal, the requirements for a board member, the chairperson of the board, the head of the administration, a member of the controllers’ commission (controller); 8) the conditions of and procedure for admission to members of the co-operative society, withdrawal or expulsion from members of the co-operative society, the procedure for registration of the co-operative society members in the register of the co-operative society members; 9) the procedure for convening meetings of members of the co-operative society and the procedure of voting at the meetings; 10) the procedure for registering and performing operations of the turnover of goods and services of the co-operative society and members thereof, the procedure for drawing up and approving annual financial statements of the co-operative society; 11) the procedure for distributing and approving profit (loss); 12) the procedure for borrowing funds from its own members; 13) the conditions of and procedure for using the assets and services rendered by the co-operative society. 4. The powers of and the procedure for convening the meeting of members of a co-operative society, the procedure for appointing and dismissing from office the head of the administration and the powers thereof need not be indicated in the articles of association of the co-operative society, unless they differ from those laid down by this Law and the articles of association expressly state so. The articles of association of the co-operative society may also contain other provisions which are not contrary to laws of the Republic of Lithuania. 5. The articles of association of a co-operative society must be signed by all the founders who are natural persons and/or the persons authorised by legal persons before the statutory meeting. The authenticity of the signature of a natural person who has signed the articles of association of the co-operative society shall not be notarised. Article 6. Registration 1. A co-operative society must be registered in the Register of Legal Entities in accordance with the procedure laid down by laws. Upon registration of a co-operative society which is being established, it shall be considered established and acquire the rights of a legal person. 2. The statutory meeting shall be convened and voting shall be conducted thereat in accordance with the procedure defined in the memorandum of association. The statutory meeting may be convened if the founders have paid all initial membership fees specified in the memorandum of association and made all members’ contributions. The articles of association of a co-operative society must be approved at the statutory meeting. The moment of approval of the articles of association of the co-operative society at the statutory meeting shall be considered to be the moment of conclusion of such articles of association. Requests to register the co-operative society may be made only following the statutory meeting at which the articles of association of the co-operative society have been approved and of its management organs have been elected. 3. Upon registration of a co-operative society, the founders as well as other persons who have been authorised to represent the co-operative society which is being established must, within ten days, transfer the founding documents and the formed management bodies must accept such documents by drawing up a statement of transfer and acceptance. Article 7. Rights of a Co-operative Society 1. A co-operative society shall have the right: 1) to engage in the activities complying with laws and the purposes laid down in the articles of association of the co-operative society; 2) to have accounts with banks of the Republic of Lithuania and banks of other states; 3) to manage, use and dispose of the assets belonging thereto by the right of ownership in accordance with the procedure laid down by laws; 4) to form unions of co-operative societies, as well as other organisations in accordance with the procedure established by other laws; 5) to enter into transactions, assume property obligations; 6) to fix prices, rates and tariffs for its products, work and services; 7) to borrow funds under an agreement from its members according to the procedure laid down in the articles of association of the co-operative society; 8) to determine its organisational structure, establish branches and representative offices, as well as be the founder of other enterprises and organisations. 2. A co-operative society may also have other rights which do not contradict laws and other legal acts. 3. Disputes between a co-operative society and its members as well as and third parties shall be considered according to the procedure established by laws. CHAPTER THREE MEMBERS OF A CO-OPERATIVE SOCIETY Article 8. Members 1. Members of a co-operative society may be natural and/or legal persons. 2. A person who wishes to become a member of a co-operative society must file an application. The application shall be considered, and a person shall become a member of the co-operative society under the terms and conditions and in accordance with the procedure prescribed by the articles of association of the co-operative society, provided that he has paid the initial membership fee and the sum of his member’s contribution is not less than the minimum amount of a member’s share. If a person is not admitted to the co-operative society, the initial membership fee and member’s contribution which have been paid shall be refunded in accordance with the procedure and within the time limits specified in the articles of association, but not later than within three months from the adoption of the decision. 3. Members of a co-operative society shall be registered in the register of members of the co-operative society in accordance with the procedure prescribed in the articles of association of this co-operative society. 4. The register of members of a co-operative society shall indicate: 1) the name, surname, personal number and place of residence of a natural person, or the name, code and registered office of a legal person; 2) date of admission of the person to members of the co-operative society; 3) the amount of the member’s share (a description of the member’s share and monetary expression of its value), as well as each increase in the amount of the member’s share; 4) the date of termination of membership in the co-operative society. 5. At a meeting of the members of a co-operative society, a member of the co-operative society which is a legal person shall be represented by the body to whose competence such representation is assigned, or a person authorised by it. Article 9. Grounds for Termination of Membership A person’s membership in a co-operative society shall terminate: 1) upon his withdrawal from members of the co-operative society; 2) upon his expulsion from members of the co-operative society; 3) when he transfers his member’s share to another person; 4) upon the death of the member who is a natural person; 5) upon the winding up of a member of the co-operative society which is a legal person or upon the reorganisation thereof; 6) upon liquidation of the co-operative company. Article 10. Procedure for Termination of Membership and Settlement Following the Termination 1. The procedure for a person’s withdrawing from a co-operative society shall be established in the articles of association of the co-operative society. 2. A member may be expelled from a co-operative society in accordance with the procedure established in the articles of association by a decision of the meeting of the members of the co-operative society, if he fails to fulfil the duties of a member, violates the articles of association of the co-operative society, decisions of the meeting of the members, the laws of the Republic of Lithuania related to the activities of co-operative societies, causes damage to the co-operative society. Where a member expelled from the co-operative society does not agree with such a decision, he shall have the right to refer to court within three months from the day when he learnt or ought to have learnt about adoption of the decision. 3. Membership of a person who has transferred his member’s share shall terminate upon adoption of a decision by the meeting of members of the co-operative society regarding the admission of the person who has acquired the transferred member’s share to members of the co-operative society. 4. A co-operative society must settle with the person whose membership in the co-operative society terminated due to his withdrawal, expulsion or transferring of a member’s share to another person not later than within a year from the day of its members’ meeting at which a financial statement and appropriation of profit (loss) of the financial year in which the membership of such person terminates are approved. 5. A co-operative society must return to the person whose membership terminated due to his withdrawal, expulsion or transferring of a member’s share to another person his member’s contribution made for the member’s share, provided that such share has not been transferred to another person, refund a portion of the assets assigned, by decisions of members’ meetings, to the member before the beginning of the financial year in which membership in the co-operative society terminated, in cash at market prices, pay the payment and dividend proportionate to the turnover, if a decision on payment thereof for that year has been adopted by the members’ meeting. Non-monetary member’s contributions, if the person wishes so, shall be returned in kind, except for the cases when this is impossible or would cause disproportionate damage to the co-operative society or to the person whose membership in the co-operative society has terminated. The initial membership fee shall not be refunded. 6. The heirs of a deceased natural person – a member of a co-operative society, successors to the rights of a liquidated or reorganised legal person – a member of a co-operative society, where they are not members of the co-operative society and do not become members of this co-operative society in accordance with the procedure prescribed by its articles of association within a year from the acquisition of these rights, shall be refunded the member’s contribution specified in paragraph 5 of this Article and made for member’s share, shall be returned a portion of the assets assigned to the member and shall be paid the payment and dividend proportionate to the turnover in accordance with the procedure and under the terms and conditions laid down in this Article. Article 11. Rights and Duties of a Member of a Co-operative Society 1. A member of a co-operative society shall have the right: 1) to participate in a meeting of members of the co-operative society, elect members of management and controlling bodies and be elected thereto; 2) to have one vote during the voting regardless of the amount of the member’s share. The articles of association of a co-operative society more than a half of members whereof are co-operative societies may specify that the number of votes of a member shall be established according to the member’s participation in the activities of the co-operative society (turnover), with the exception of capital investment (member’s contributions) and lay down a procedure for such calculation of votes – each member may be allocated not more than five votes, in any case not more than 30 per cent of all votes. The principle of voting according to participation in the activities of the co-operative society as specified in the articles of association of the co-operative society shall not apply, and each member of the co-operative society shall have one vote irrespective of the size of the member’s share where the number of the members of the co-operative society which are co-operative societies becomes equal to or less a half of all members. A member of the co-operative society shall have the right, in accordance with the procedure laid down in the articles of association, to transfer his voting right to another member of the co-operative society (a representative of members) or to a third party or to appoint a proxy to represent him at the meeting of members. The articles of association of the co-operative society must specify the maximum number of members which the proxy may represent. 3) to dispose of the member’s share in accordance with the procedure prescribed by this Law and other laws as well as articles of association; 4) to receive a payment proportionate to the turnover; 5) to receive a dividend; 6) to make use of the assets and services of the co-operative society in accordance with the procedure and under the terms and conditions laid down in the articles of association; 7) to receive a portion of assets (its equivalent in money’s worth) of the co-operative society in liquidation in accordance with the procedure established in the articles of association; 8) to obtain information about the activities and assets of the co-operative society; 9) to be a member of several co-operative societies, unless the articles of association of these co-operative societies provide otherwise; 10) to lend funds to the co-operative society under an agreement in accordance with the procedure laid down by its articles of association; 11) to withdraw from the co-operative society and receive the member’s contribution made for the member’s share and referred to in paragraph 5 of Article 10 of this Law, payment for the portion of the assets assigned to the member, a payment and dividend proportionate to the turnover. 2. A member of a co-operative society must adhere to the articles of association, implement decisions of the bodies of the co-operative society, carry out turnover with the co-operative society, have care of the assets of the co-operative society, and promote the increase thereof. 3. Other rights and duties of a member of a co-operative society shall be established in the articles of association of the co-operative society. CHAPTER FOUR CAPITAL OF A CO-OPERATIVE SOCIETY AND APPROPRIATION OF PROFIT Article 12. Composition of Capital 1. The capital of a co-operative society shall consist of the equity and loan capital. The equity shall be formed from the initial membership fees and members’ contributions of members of the co-operative society, deductions from the profit of this society, other income not prohibited by law. The equity of the co-operative society, with the exception of the members’ contributions made for members’ shares, may be indivisible or assigned (the whole or a part of
  2. it)to the members of the society. The loan capital shall consist of loans and other borrowed funds. 2. The equity shall be comprised of the fixed and reserve capital. The fixed capital shall be used for business activities of a co-operative society and for the acquisition of assets. By a decision of the meeting of members, the reserve capital shall be used for covering extraordinary expenditure and losses, and a part of the reserve capital exceeding 1/10 of the equity may be used for other purposes by a decision of the meeting of members. 3. Deductions to the reserve capital shall be mandatory for co-operative societies until the reserve capital makes up 1/10 of the equity value. The amount of mandatory deductions to the reserve capital must make up not less than 5 per cent of the net profit. Article 13. Member’s Share of a Member of a Co-operative Society 1. The size of a member’s share of a member of a co-operative society shall be equal to the value of the member’s contributions made by the member 2. The minimum and maximum sizes of the member’s share, the procedure for paying the member’s share and additional member’s contributions, liability for violations of this procedure as well as the procedure for evaluating non-monetary member’s contribution (items, results of intellectual activities, as well as other tangibles and intangibles) must be established in the articles of association. 3. Agricultural land and property the right to dispose whereof is restricted in respect of the person who makes the member’s contribution, also the property to which a co-operative society may not acquire the right of ownership may not serve as a member’s contribution. 4. A member’s contribution made by a member of a co-operative society for the member’s share shall be registered in accounting documents, and the member of the co-operative society shall, in accordance with the procedure laid down by the articles of association, be issued a document acknowledging the contributed member’s share. It shall indicate the following: 1) the name of the co-operative society; 2) the name, surname, personal number of the holder of the member’s share who is a natural person, or the name and code of a legal person; 3) the value of members’ contributions. 5. Members of a o-operative society shall have the right to transfer member’s share to other persons in accordance with the procedure laid down by the articles of association. A member of a co-operative society shall have the right of priority in acquiring the member’s share being transferred under the same conditions. A member of a co-operative society must, in accordance with the procedure laid down by the articles of association, give a written notice to other members of the co-operative society and the management organ of the intention to transfer a member’s share. Where none of members of the co-operative society who were notified of a member’s share being transferred acquires the said member’s share within a month, the member who transfers the member’s share shall acquire the right to transfer it to a third party, where the third party intending to acquire the member’s share applies, in accordance with the procedure laid down by the articles of association of the co-operative society, to the co-operative society for admission to members of the co-operative society, and the meeting of members of the co-operative society adopts a decision on admission thereof to members of the co-operative society in accordance with the procedure laid down by the articles of association of the co-operative society. The decision shall come into force as of the moment of transfer of the member’s share. Admission of the person intending to acquire the member’s share to members of the co-operative society shall not be subject to the provision of paragraph 2 of Article 8 of this Law concerning payment of the amount of the member’s contribution not less than the minimum size of the member’s share. A member of a co-operative society shall dispose of the member’s share in accordance with the procedure prescribed by this Law and other laws as well as articles of association. Article 14. Appropriation of the Net Profit 1. The appropriation of the net profit earned by a co-operative society during a financial year must be approved not later than within four months of the close of the financial year. 2. Net profit shall be appropriated in the following sequence: 1) for supplementing the reserve capital; 2) for making the payments proportionate to the turnover; 3) for paying dividends. 3. The unappropriated profit shall be used according to the procedure established in the articles of association. 4. Up to 10 per cent of the net profit shall be appropriated for the payment of dividends. 5. The maximum amount of dividend shall be established in the articles of association of a co-operative society. CHAPTER FIVE MANAGEMENT AND CONTROL OF A CO-OPERATIVE SOCIETY Article 15. Bodies of a Co-operative Society 1. The bodies of a co-operative society shall be the meeting of members, the board and the head of the administration. 2. In a co-operative society whose membership exceeds 100, the meeting of members may be replaced by the meeting of representatives of members of the co-operative society. The meeting of representatives of members of the co-operative society shall have the powers of the meeting of members established by this Law. At the meeting of representatives of members of the co-operative society, each representative shall have one vote The procedure for and conditions of the election and dismissal of elected representatives of members of the co-operative society must be specified in the articles of association of the co-operative society. Audit shall be mandatory for a co-operative society whose articles of association provide for the substitution of the meeting of members with the meeting of representatives of the members. 3. The articles of association of a co-operative society whose membership does not exceed 50 may establish that the board shall not be formed and that its functions shall be performed by the head of the administration. Article 16. Meeting of Members of a Co-operative Society 1. The meeting of members of a co-operative society shall: 1) take decisions concerning the admission or expulsion of members of the co-operative society, termination of membership upon transferring a member’s share to another person. A meeting of members may instruct the board to take these decisions, except those regarding the expulsion of a member; 2) approve and amend the articles of association of the co-operative society; 3) elect, remove members of the board and chairperson thereof or, where the board is not formed, elect, remove the head of the administration; also elect, remove members of the controllers’ commission and chairperson (controller) thereof or, if the controllers’ commission is not formed, approve a firm of auditors; 4) evaluate the work of the board, and where the board is not formed in the co-operative society, the work of the head of the administration and the controllers’ commission (controller), also the conclusion of the controllers’ commission (controller) or a firm of auditors with regard to the financial statement of the co-operative society; 5) approve annual financial statements, adopt a resolution on the appropriation of profit and covering of losses; 6) approve a programme of activities of the co-operative society; 7) take a decision on the joining of unions by a co-operative society, withdrawal therefrom, establishment of branches and representative offices, other enterprises and organisations, termination of their activities, as well as other organisational issues; 8) approve the rules of procedure of the board, the head of the administration and the controllers’ commission (controller); 9) approve the procedure of remuneration for the work of members of the board and chairperson thereof, and where the board is not formed – the head of the administration, as well as the controllers’ commission (controller); 10) adopt a decision on acquisition, transfer, lease or pledge of fixed assets of the co-operative society, taking and granting of long-term loans, offering of surety or guarantee for the discharge of obligations of third parties, where the amount of transactions does not exceed 1/10 of the equity capital of the co-operative society; 11) adopt a decision to reorganise, transform or liquidate the co-operative society. 2. The meeting of members of a co-operative society may have other rights and powers provided for in the articles of association of the co-operative society. 3. The meeting of members of a co-operative society shall be convened by the board of the co-operative society, and where the board is not formed or the board does not convene the meeting in the specified cases and within the specified time limits – by the head of administration or at least ¼ of members of the co-operative society. 4. Regular meetings of members of a co-operative society shall be convened by the board (where the board is not formed – by the head of administration) on an annual basis, but not later than within four months after the close of the financial year. 5. Extraordinary meetings of members shall be convened by the board (where the board is not formed – by the head of the administration) or on the initiative of not less than 1/4 of the members of a co-operative society. 6. The articles of association shall lay down a procedure for drawing up the agenda of a members’ meeting and notifying the members of the meeting. 7. The meeting of members of a co-operative society may adopt decisions if it is attended by at least a half of the members of the co-operative society. If the meeting is not attended by the specified number of the members of the co-operative society, a repeat meeting concerning the same issues on the agenda must be convened. Decisions may be adopted at the repeat meeting if it is attended by at least 1/3 of the members of the co-operative society members. Where the repeat meeting is not attended by the specified number of the members of the co-operative society, one more meeting shall be convened. It shall adopt decisions regardless of the number of the members of the co-operative society attending. 8. Decisions of the meeting of members of a co-operative society shall be adopted by the majority of votes of the members of the co-operative society registered in the list of participants of the meeting, with the exception of the cases indicated in subparagraphs 2 and 11 of paragraph 1 of this Article and in the cases of expulsion of the members. In these cases, decisions shall be adopted by the majority of votes of least 2/3 of members of the co-operative society registered in the list of participants of the meeting. 9. Voting at the meeting of members of a co-operative society shall be by open ballot, except in the cases where voting by secret ballot is prescribed by this Law, the articles of association of the co-operative society or when this is requested by at least 1/10 of the members of the co-operative society registered in the list of participants of the meeting. Members of the board of a co-operative society and its chairperson, and in the case when the board is not formed – the head of the administration, as well as members of the controllers’ commission and its chairperson (controller) shall be elected by secret ballot. 10. Decisions concerning the acquisition, transfer or lease of a portion of fixed assets which exceeds 1/10 of the value of the equity of the co-operative society shall require a decision of the meeting of members adopted by a majority vote, and decisions concerning guarantee or surety of the obligations of other economic entities, or mortgage of the property, or taking and granting of long-term loans, when the amount of such a transaction exceeds 1/10 of the co-operative society’s equity, shall require a decision of the meeting of members adopted by not less than 2/3 majority vote. The total value of such transactions made without a decision of the meeting of members over the financial year may not exceed 1/10 of the value of the equity of the co-operative society. 11. Minutes of the meeting of members of a co-operative society shall, not later than within five working days, be signed by the secretary, chairperson of the meeting and a member of the co-operative society authorised by the meeting. 12. A list of members of a co-operative society who arrived and registered before the beginning of the meeting shall be attached to the minutes of the meeting of members. Article 17. Board and Head of the Administration of a Co-operative Society 1. The board shall be the collegial management body of a co-operative society. The activities of the board shall be directed by its chairperson. The number of members of the board shall be fixed in the articles of association, but it may not be less than three. 2. The members of the board and chairperson thereof shall be elected by the meeting of members of a co-operative society for a term not exceeding four years. A member of the board, the chairperson of the board may be removed from office or the entire board may be dissolved or may resign before expiry of the term of office in accordance with the procedure laid down by the articles of association. 3. The working procedure of the board, duties and powers of the board members and its chairperson shall be specified by the rules of procedure of the board (the head of the administration) approved by the meeting of members of a co-operative society. 4. The board shall adopt decisions at the sitting which shall be valid if attended by at least 2/3 of all the members of the board. The decisions shall be adopted by a simple majority vote. The procedure for convening sittings of the board and the working procedure thereof shall be established in the rules of procedure of the board. The board shall invite to each sitting the head of the administration, unless he is a member of the board. 5. Irrespective of the fact whether the board is formed or not, a co-operative society must have the head of the administration. 6. The head of the administration shall be elected and dismissed by the board, and if the board is not formed – by the meeting of the members of a co-operative society. An employment contract with the head of the administration shall be signed by the chairperson of the board, and where the board is not formed – by a person authorised by the meeting of the members of a co-operative society. 7. A member of the board, the chairperson thereof, a member of a co-operative society as well as another legally capable natural person may be the head of the administration. Requirements for the head of the administration shall be set in the articles of association. A member of the controllers’ commission, the chairperson thereof (controller) may not be the head of the administration. 8. The head of the administration shall be a single-member management body who directs the administration. The head of the administration shall organise and carry out the economic and financial activities of a co-operative society, represent the co-operative society in relations with third parties, in court, arbitral tribunal, conclude transactions, hire and dismiss employees, conclude employment contracts with them, submit to the board material pertaining to his own work, drafts of programmes of activities of the co-operative society, revenue and expenditure estimates, financial statements and appropriation of profit (loss), carry out other actions assigned to him in the articles of association of the co-operative society. The working procedure of the administration shall be laid down in the rules of procedure of the administration. 9. The head of the administration shall participate in sittings of the board in a deliberative capacity, unless he is a member of the board. 10. Members of the board and the chairperson of the board, the head of the administration must compensate a co-operative society for the losses incurred by decisions of the board or the head of the administration made in violation of the articles of association of the co-operative society or the laws related to activities of co-operative societies. The resignation or removal from office of a member of the board and the chairperson of the board or the head of the administration shall not release them from the obligation to compensate for the losses incurred through their fault. 11. Members of the board of a co-operative society shall jointly and severally compensate for the damage incurred to the co-operative society. The individual members of the board who voted against when adopting unlawful decisions harmful for the co-operative society (this must be recorded in the minutes) shall be released from compensation for the damage. Article 18. Control of Activities 1. The economic and financial activities of a co-operative society shall be controlled by the controllers’ commission (controller). The members of the controllers’ commission and the chairperson thereof (controller) shall be elected by the meeting of members of the co-operative society for a term not exceeding four years. The articles of association of the co-operative society may provide that its economic and financial activities shall be controlled by an audit firm approved by the meeting of members of the co-operative society. 2. A member of the board of a co-operative society, the chairperson thereof, the head of the administration, as well as a person related to the member of the above mentioned management organs by blood, marriage or partnership may not be members of the controllers’ commission or chairperson thereof (controller). Other requirements for a member of the controllers’ commission (controller) shall be established in the articles of association of the co-operative society. 3. The controllers’ commission (controller) or an audit firm shall: 1) check the economic and financial activities of a co-operative society; 2) report all violations established in the activities of the co-operative society to the meeting of members of the co-operative society, the board and the head of the administration; 3) at the close of the financial year, present to the meeting of members an opinion on the annual financial statements of the co-operative society. 4. The meeting of members of a co-operative society, the board (if it is not formed – the head of the administration), the controllers’ commission (controller) may invite experts to take part in the checks. 5. The working procedure of the controllers’ commission (controller) shall be laid down in the rules of procedure thereof.. 6. State institutions shall have the right to inspect the activities of a co-operative society in accordance with the procedure prescribed by law. CHAPTER SIX TERMINATION AND TRANSFORMATION OF A CO-OPERATIVE SOCIETY Article 19. Reorganisation of a Co-operative Society 1. Reorganisation means termination of a co-operative society as a legal person without going into liquidation. 2. Co-operative society may be reorganised in the following ways: 1) by merger; 2) by division. 3. The possible modes of merging co-operative societies shall be merger by acquisition and merger by formation of a new co-operative society: 1) merger by acquisition shall be joining of one or several co-operative societies to another co-operative society whereto all rights and duties of the co-operative society under reorganisation are passed; 2) merger by formation of a new co-operative society shall mean combining two or more co-operative societies to form a newly created co-operative society whereto all rights and duties of the reorganised co-operative societies are passed. 4. The possible modes of dividing co-operative societies shall be division by acquisition, division by formation of a new co-operative society: 1) division by acquisition shall mean parcelling out the rights and duties of a co-operative society under reorganisation to other co-operative societies which continue their business; 2) division by formation of a new co-operative society shall mean founding of two or more co-operative societies on the basis of one co-operative society under reorganisation, whereto the rights and duties of the co-operative society under reorganisation are passed in certain portions. 5. The management bodies of the co-operative societies which are being reorganised must draft reorganisation conditions. They shall indicate: 1) the name, registered office, code of each co-operative society under reorganisation, the VAT payer’s code, the register wherein data on these co-operative societies are accumulated and stored; 2) the mode of reorganisation, the co-operative societies which terminate their activities and the co-operative societies which continue activities after reorganisation; 3) the procedure for, the conditions and time limits of becoming of a member of a co-operative society under reorganisation a member of a co-operative society which continues activities after the reorganisation, as well as payments to the members of the co-operative society; 4) the moment from which the rights and duties of the co-operative society which terminates its activities are passed to a co-operative society which continues activities after the reorganisation;; 5) additional rights granted to the management and controlling bodies of the co-operative societies under reorganisation as well as to experts during the period of reorganisation; 6) the terms and conditions upon meeting of which the reorganisation may be completed. 6. The articles of association of the co-operative society which will operate after the reorganisation must be drafted together with the terms of reorganisation. 7. The management bodies of each co-operative society being reorganised must draft written reports. Such reports must indicate the purposes of reorganisation, explain the conditions of reorganisation, continuity of the activities of the co-operative society, as well as specify the time limits and economic grounds of reorganisation, if this is requested by the members of the co-operative society which takes part in the reorganisation, holding not less than 1/20 votes. 8. The terms of reorganisation of a co-operative society must be evaluated by the independent experts of proper qualification. Each co-operative society taking part in the reorganisation shall assign an expert. 9. Drafting of the terms of reorganisation must be published three times, with at least 30-day intervals between the publications, or it must be published once, notifying all the creditors of the co-operative society thereof in writing. The notice must specify: the name, registered office, code of each co-operative society under reorganisation, the VAT payer’s code, the register wherein data on this co-operative society are accumulated and stored, mode of reorganisation, the moment of a co-operative society which terminates its activities and a co-operative society which continues the activities after the reorganisation from which the rights and duties of the co-operative society which terminates the activities are passed to the co-operative society which continues the activities after the reorganisation, the venue whereat and the time from when it is possible to familiarise with the terms of reorganisation, the founding documents of the co-operative societies which continue activities after the reorganisation and/or the co-operative societies which are established anew, or drafts thereof, and the reports prepared by the management organs of all the co-operative societies taking part in the reorganisation, evaluations of the experts and financial statements for the last three financial years. 10. A decision on reorganisation of a co-operative society must be adopted by the majority of votes of least 2/3 of members of the co-operative society registered in the list of participants of the meeting. The decision on reorganisation of the co-operative society may be adopted only after the lapse of 30 days from the publication of the terms of reorganisation. The decision on the reorganisation of the co-operative society must approve the terms of reorganisation and amend the articles of association or adopt new articles of association. 11. A documentary proof of a decision on reorganisation of a co-operative society must be submitted to the manager of the Register of Legal Entities not later than on the first day of publication. The manager of the Register of Legal Entities must publish the decision on the reorganisation of the co-operative society in accordance with the procedure laid down by legal acts. 12. Reorganisation shall be deemed completed when all the new co-operative societies formed after the reorganisation are registered or the amended articles of association of the co-operative societies continuing after the reorganisation are registered in the Register of Legal Entities. 13. The first meeting of the members of a co-operative society formed through reorganisation must elect the management and controlling bodies of the co-operative society. 14. A co-operative society under liquidation may not be reorganised. Article 20. Transformation of a Co-operative Society 1. A co-operative society shall be transformed in accordance with the procedure laid down by the Civil Code and this Law. All rights and duties of a co-operative society which is being transformed shall be transferred to a legal person continuing after the transformation. 2. A decision to transform a co-operative society as well as a documentary proof of establishment of a legal person continuing after the transformation shall be adopted by the meeting of members if not less than 2/3 of members of the co-operative society who registered in the list of participants of the meeting vote for it. 3. Transformation of a co-operative society must be published three times in accordance with the procedure established in the articles of association with at least 30-day intervals between the publications, or it must be published once, not later than 30 days prior to the adoption of a decision on transformation, and all the creditors of the co-operative society shall be notified thereof in writing. The notice shall indicate: 1) the name of the co-operative society; 2) the registered office of the co-operative society; 3) the code of the co-operative society; 4) the register wherein data on the co-operative society being transformed are accumulated and stored; 5) the legal form of a legal person into which the co-operative society is being transformed; 6) the procedure for, the terms and time limits of a member of the co-operative society being transformed becoming a stakeholder in a legal person continuing its activities after the transformation; 7) the moment from which the rights and duties of the co-operative society being transformed are passed to a legal person which continues activities after the transformation; 8) the place and time from when it is possible to familiarise with the terms of transformation (if drawn up), documents of a legal person continuing after the transformation and the annual financial statements of the co-operative society being transformed for the last three financial years. 4. A documentary proof of a decision on transformation of a co-operative society must be submitted to the manager of the Register of Legal Entities not later than on the first day of publication. The manager of the Register of Legal Entities must publish the decision on the transformation of the co-operative society in accordance with the procedure laid down by legal acts. 5. Transformation shall be considered completed upon the registration of the founding documents of a legal person continuing after the transformation in the Register of Legal Entities. 6. The founding documents shall become invalid if they are not submitted to the manager of the Register of Legal Entities within six months from adoption of a decision on transformation of a co-operative society. Article 21. Liquidation of a Co-operative Society 1. A co-operative society shall be liquidated: 1) by a decision of the meeting of members; 2) upon the expiry of the time period set for the activities in the articles of association; 3) when the number of members of the co-operative society falls below the minimum number permitted by this Law, unless the members of the co-operative society agree to reorganise or transform the co-operative society within six months after such reduction; 4) by a decision of a court or the meeting of creditors to liquidate the bankrupt co-operative society; 5) by a court decision invalidating the establishment of the co-operative society as stipulated in the Civil Code; 6) by a court decision at the initiative of the manager of the Register of Legal Entities as stipulated in the Civil Code; 7) by a court decision recognising the activities of the co-operative society as not conforming to the requirements of the Civil Code, and imposing a measure of liquidation. 2. The procedure for liquidating a co-operative society shall be regulated by the Civil Code and this Law. 3. A person which adopts a decision on the liquidation of a co-operative society shall appoint the liquidator. The liquidator must be a person having the required qualifications. Several liquidators may be appointed. If several liquidators are appointed, a liquidation commission shall be set up and one of the liquidators shall be appointed the chairperson of the liquidation commission. 4. After the appointment of the liquidator (liquidation commission), the bodies of a co-operative society, except for the members’ meeting, shall lose their powers, the competence of the meeting of members of the co-operative society concerning conclusion of transactions, as well as the rights and duties of the management and controlling bodies shall be transferred to the liquidators (liquidation commission). 5. The liquidator (liquidation commission) shall: 1) submit to the Register of Legal Entities the documents necessary to register the modified register data; 2) publish a notice of liquidation in accordance with the procedure laid down in paragraph 7 of this Article; 3) represent the co-operative society under liquidation at state institutions, agencies and in relations with other legal and natural persons; 4) during the liquidation period, draw up the balance sheets of the co-operative society; 5) under the contracts of the co-operative society, complete the discharge of obligations, including the amounts unpaid to the budget of the state social insurance fund, also the amounts calculated by the tax administrator’s officers and other state institutions, including penalties and default interest, not later than within six months from the day of publication of a notice of liquidation, and enter into new contracts which do not conflict with the laws regulating the activities of the co-operative society in liquidation, report to the meeting of members of the co-operative society within the time limits set by it; 6) within six months from the publication of a notice of liquidation, accept and satisfy creditors’ claims, recover debts; 7) in case of disputed obligations, allot an appropriate amount from the assets of the co-operative society for the discharge thereof and pay it to the deposit account of the notary’s office; 8) after the lapse of six months from the publication of a notice of liquidation, distribute the remaining assets among the members of the co-operative society in accordance with the procedure prescribed by the articles of association having regard to the amount of the member’s share. In the event of disputes between the members of the co-operative society over the distribution of the remaining assets, the liquidator (liquidation commission) shall suspend the distribution of the assets. Disputes among the members and disputes between the members and the liquidator shall be settled in court; 9) submit the documents necessary for the removal of the liquidated co-operative society from the Register of Legal Entities to the manager of the Register of Legal Entities. 6. The liquidator (liquidation commission) failing to perform his duties or performing them inappropriately must compensate to the co-operative society for any damage inflicted through the liquidator’s (liquidation commission’
  3. s)fault, unless otherwise provided for in the articles of association of the co-operative society. The liquidation commission shall be jointly and severally responsible to the co-operative society and third parties for the losses incurred through the liquidation commission’s fault. 7. A notice of liquidation of a co-operative society shall be published two times, with a 30-day interval between the publications; it shall also be notified to each member and creditor of the co-operative society against his signature or by registered mail. A notice of liquidation of a co-operative society shall be given to the Register of Legal Entities not later than on the first day of publication. 8. A co-operative society in liquidation may enter only into the transactions which are related to the termination of the activities of the co-operative society, or which are provided for in the decision to liquidate the co-operative society. 9. The documents of a liquidated co-operative society shall be stored in accordance with the procedure laid down by laws and other legal acts. CHAPTER SEVEN ASSOCIATIONS OF CO-OPERATIVE SOCIETIES Article 22. Establishment and Activities of Associations of Co-operative Societies 1. Co-operative societies may form associations for the purpose of fulfilment of the objectives provided for in their articles of association. Other legal persons (companies, societies, associations, etc.) may also be members of the associations, provided that their membership is in conformity with the objectives of the associations of co-operative societies. An association of co-operative societies must consist of two or more co-operative societies. 2. Associations of co-operative societies shall operate, be established, managed, reorganised and liquidated in accordance with the same procedure as co-operative societies. 3. Associations of co-operative societies shall function in accordance with their articles of association. The articles of association shall be adopted by the congresses, conferences or meetings of their delegates. An association shall be deemed established when it is registered according to the procedure stipulated in this Law. 4. Co-operative societies and associations thereof may take part in the activities of international co-operative organisations and develop other international activities.

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