Communication from the Commission to the Council and the European Parliament, the European Economic and Social Committee and the Committee of Regions on the promotion of co-operative societies in Europe
Date: 2004-02-23
Institutions: European Commission
Subjects: EU Member State, European cooperative, business policy, cooperative

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 23.2.2004 
COM(2004) 18 final 

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE 
EUROPEAN PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF REGIONS 

On the promotion of co-operative societies in Europe 

EN 

   EN 

 
 
 
  
 
TABLE OF CONTENTS 

1. 

1.1. 

1.2. 

2. 

Introduction .................................................................................................................. 4 

Background .................................................................................................................. 4 

Objectives of the Communication................................................................................ 4 

Promoting the entreprise type of cooperatives and Ensuring an Accurate 
Understanding of the Sector......................................................................................... 6 

2.1. 

Highlighting the importance of the Cooperative Entrepreneurship ............................. 6 

2.1.1.  Actions ensuring the understanding of cooperatives importance in economy............. 6 

2.1.2.  New Member States and awareness of the role of cooperatives.................................. 7 

2.1.3. 

Improving statistical data ............................................................................................. 7 

2.2. 

Actions for the promotion of cooperatives................................................................... 8 

2.2.1.  Education and Training ................................................................................................ 8 

2.2.2.  Business Support Services ........................................................................................... 8 

2.2.3.  Access to Finance......................................................................................................... 9 

2.2.4.  Working with Co-operatives’ Representative Organisations....................................... 9 

2.3. 

Specific areas of enterprise policy where cooperatives play an important role......... 10 

2.3.1.  The role of Workers’ Cooperatives in Enterprise Transfers ...................................... 10 

2.3.2.  Social Enterprises and New Co-operative Legal Forms ............................................ 10 

3. 

3.1. 

3.2. 

Providing a Suitable Regulatory Environment .......................................................... 11 

Implementation of the European Co-operative Statute.............................................. 11 

Coherence between national laws .............................................................................. 11 

3.2.1.  National rules governing SCE.................................................................................... 11 

3.2.2.  Cooperation between national authorities and Commission services ........................ 12 

3.2.3.  Drafting model laws................................................................................................... 12 

3.2.4.  The use of the ICA cooperative principles................................................................. 12 

3.2.5.  Avoiding “premature” dissolutions of successful cooperatives; discouraging 

predatory asset stripping or “de-mutualisations” ....................................................... 13 

3.2.6.  Appropriate tax treatment and other “benefits” ......................................................... 13 

3.2.7.  Competition rules applying to cooperatives............................................................... 14 

3.3. 

Review of the Regulation........................................................................................... 14 

4. 

The Contribution of Co-operatives to Community Objectives .................................. 15 

2 

 
 
  
 
4.1. 

4.2. 

4.3. 

5. 

Agriculture policy and enlargement........................................................................... 15 

Rural and regional development ................................................................................ 16 

Job creation by cooperatives of the “Social Economy” sector .................................. 16 

Conclusion.................................................................................................................. 17 

3 

 
 
  
 
1. 

INTRODUCTION 

1.1. 

Background  

In the European Union (EU) there are at least 300,000 co-operatives, providing 2.3 
million jobs. They exist in all Member States and accession or candidate countries. 
At  the  same  time  they  influence  the  every  day  life  of  more  than  140  millions  of 
citizens who are members in co-operatives1. 

Co-operatives today thrive in competitive markets and although they do not seek to 
maximize  profits  on  capital  they  have  achieved  significant  market  shares  in  areas 
where capitalised companies are very strong such as banking, insurance, food retail, 
pharmacy  and  agriculture.  They  are  growing  fast  in  the  sectors  of  health  care, 
services to business, education and housing. 

Co-operatives  operate  in  the  interests  of  their  members,  who  are  at  the  same  time 
users,  and  they  are  not  managed  in  the  interests  of  outside  investors.  Profits  are 
received  by  members  in  proportion  to  their  businesses  with  the  co-operative,  and 
reserves  and  assets  are  commonly  held,  non-distributable  and  dedicated  to  the 
common  interests  of  members.  Because  personal  links  among  members  are  in 
principle strong and important, new membership is subject to approval while voting 
rights  are  not  necessarily  proportional  to  shareholdings  (one  man  one  vote). 
Resignation entitles the member to repayment of his part and implies reduction of the 
capital.  

All co-operatives act in the economic interests of their members, while some of them 
in addition devote activities to achieving social, or environmental objectives in their 
members’ and in a wider community interest. 

1.2. 

Objectives of the Communication 

The  debate  about  the  role  of  cooperatives  has  gained  a  renewed  interest  after  the 
adoption by the Council in July 2003 of the Regulation for a Statute for a European 
Co-operative Society2, hereinafter SCE and the Directive on workers involvement in 
the decision making process of the SCE. 

The  Commission  believes  that  the  potential  of  cooperatives  has  not  been  fully 
utilized  and  that  their  image  should  be  improved  at  national  and  European  levels. 
Particular  attention  should  also  be  paid  to  the  new  Member  States  and  candidate 
countries,  where  despite  extensive  reforms  the  instrument  of  co-operatives  is  not 
fully exploited. 

The adoption of the SCE Statute implies that Member States will be obliged to adopt 
measures in order to implement the Regulation and the Directive. The Commission 
believes  that  this  is  a  good  opportunity  for  national  authorities  and  stakeholders  to 

1  

2 

“Statistics and information on European co-operatives”, by International Co-operative Alliance, Geneva 
1998, published with the assistance of the Commission of EU; http:/www.ica.coop/europe 
Council Regulation (EC) N° 1435/2003 of 22nd July 2003 on the Statute for a European Co-operative 
Society, and Council Directive 2003/72/EC of 22nd July 2003 supplementing the Statute with regard to 
the involvement of employees; O.J. N° L207 of 18/8/03. 

4 

 
 
  
 
                                                 
embark  on  initiatives  which  aim  at  improving  cooperatives’  legislation  and  at 
creating a more favourable environment for their establishment.  

Another  issue  which  has  drawn  the  Commission’s  attention  is  the  increasingly 
important  and  positive  role  of  cooperatives  as  vehicles  for  the  implementation  of 
many  Community  objectives  in  fields  like  employment  policy,  social  integration, 
regional and rural development, agriculture, etc. The Commission believes that this 
trend  should  be  maintained  and  that  the  presence  of  co-operatives  in  various 
Community programmes and policies should be further exploited and promoted.  

A  renewed  interest  in  the  issue  of  cooperatives  can  be  observed  also  at  the 
international level. The main important development in this respect is the adoption of 
Recommendation  on  the  Promotion  of  Cooperatives  by  the  International  Labour 
Office,  in  2002  (see  infra  footnote  19),  which  was  officially  approved  by  that  time 
the Governments of all Member States of the EU as well as by the Governments of 
all accession and candidate countries. 

Because  of  this  renewed  interest  in  the  issue  of  cooperatives,  in  2002  the 
Commission  undertook  a  wide  public  consultation  of  co-operative  businesses  in 
Europe3. The responses represented the views of virtually all sectors of co-operative 
activity, with a particularly strong response from accession and candidate countries4. 
Whilst  the  analysis  and  conclusions  of  the  consultation  document  received  wide 
support, many constructive comments and suggestions were made.  

The  present  Communication  reflects  the  outcome  of  this  extensive  consultation 
process. It tries to concentrate to three main issues which have been pointed out in 
the responses and establishes what Member States, and co-operatives themselves can 
do  to  exploit  that  cooperatives’  business  potential.  For  the  same  three  issues  the 
Communication  enumerates  a  series  of  concrete  actions  to  be  undertaken  by  the 
Commission in order to attain the objectives.  

The main issues of the Communication are  

•  The promotion of the greater use of cooperatives across Europe by improving the 

visibility, characteristics and understanding of the sector  

•  The further improvement of the cooperative legislation in Europe 

•  The  maintenance  and  improvement  of  cooperatives’  place  and  contribution  to 

community objectives.  

3 

4 

The consultation document “Co-operatives in Enterprise Europe” can be found at: 
http://europa.eu.int/comm/enterprise/entrepreneurship/coop/consultation/index.htm . 
46  responses  were  received:  7  from  European  Associations,  17  from  representative  organisations  in 
Member States, and 5 from co-operative enterprises, which altogether cover the majority of the sector in 
Europe. In addition 4 from public authorities, 9 from Candidate Countries (including a joint opinion of 
48 organisations in 10 countries), 2 from international (global) organisations and 2 from experts. The 
original  submissions  and  summaries  (in  English  and  French)  can  be  found  on  the  above-mentioned 
web-site. 

5 

 
 
  
 
                                                 
2. 

PROMOTING  THE  ENTREPRISE  TYPE  OF  COOPERATIVES  AND  ENSURING  AN 
ACCURATE UNDERSTANDING OF THE SECTOR  

2.1. 

Highlighting the importance of the Cooperative Entrepreneurship  

2.1.1.  Actions ensuring the understanding of cooperatives importance in economy 

Promoting  a  wider  dissemination  of  the  importance  of  cooperatives  as  enterprises 
reveals the need to explain the areas in which they have a strong role to play.  

•  The cooperatives may be a means for building or increasing economic power of 
Small and Medium-sized Enterprises (SMEs) in the market. The Cooperative is a 
form of company which allows SMEs to acquire some advantages of size, such as 
scale  economies,  access  to  markets  (including  participation  in  larger  public 
tenders), purchasing power, marketing power, management-development, training 
and research capacity. Co-operatives offer an appropriate vehicle for enterprises to 
undertake joint activities and share risks, whilst retaining their independence. Co-
operatives  also  enable  vertical  integration  of  product  chains.  This  can  be 
beneficial for small enterprises that are in a weak position in the supply chain and 
wish  to  gain  for  themselves  the  revenue  from  added  value  of  their  products  or 
services. However most non-co-operative enterprises remain unaware that the co-
operative form might be an appropriate vehicle for such common activities. 

•  The cooperative is a means for providing high quality services. Services represent 
70 % of output and 69 % of jobs in the EU. More than 75% of all new businesses 
created  in  Europe  are  in  the  services  sectors.  Service  enterprises  must  provide 
increasingly  high  quality  and  tailored  services  to  their  users.  A  co-operative 
structure can allow to the users of its services, since they are at the same time its 
members,  the  power  to  influence  the  business  that  serves  them,  ensuring  that  it 
responds directly to their needs. Co-operatives are often able to provide services 
to groups that would otherwise not be able to access them because their supply is 
not  attractive  to  profit  driven  companies.  This  is  the  case  of  the  “proximity 
services”  such  as  health  and  welfare,  sectors  where  co-operatives  are  growing 
most rapidly5. 

•  The  cooperatives  help  to  the  building  a  knowledge-based  society.  A  lot  of 
cooperatives (e.g. workers’ cooperatives), are enterprises where members as users 
have a real influence over management decisions. The participatory management 
structure of co-operative enterprises generates the intangible assets of knowledge 
and  skills.  In  this  sense  co-operatives  act  as  schools  of  entrepreneurship  and 
management  for  those  who  might  not  otherwise  have  access  to  positions  of 
responsibility. 

In order to ensure that co-operatives continue to make an important contribution to 
economic  dynamism  and  growth  in  the  ways  suggested  above  it  will  be  important 
that  Member  States’  authorities,  as  well  as  national,  regional  or  local  level 

5 

A 2002 EUROSTAT study of co-operatives in 7 Member States from 1995-8 demonstrates that they are 
growing  particularly  rapidly  in  education,  health  and  social  work  and  other  community,  social  and 
personal service activities (NACE Sections M, N & O). 

6 

 
 
  
 
                                                 
organisations develop or intensify their efforts in ensuring a better understanding of 
the sector.  

Action  1.  The  Commission  will  examine,  according  to  the  procedure  based  on  the 
Multi-annual Programme for Enterprise and Entrepreneurship6 and other Community 
programmes, possibilities to support initiatives from stakeholders’ organisations and 
Member  States.  These  actions  should  aim  at  raising  awareness,  amongst  public 
authorities and private economic operators, for the potential of the cooperative form 
as  a  means  of  establishing  a  business  or  a  grouping  of  small  enterprises.  These 
initiatives  may  comprise  organisation  of  conferences,  drafting  of  explanatory 
booklets, thematic research studies, creating day events, developing networks etc. 

Given  the  different  state  of  development  of  the  cooperative  businesses  in  different 
countries  (see  point  3.2.1.  infra)  there  is  a  potential  for  an  intensified  exchange  of 
information and experiences.  

Action  2.  The  Commission  will  examine  the  possibility  of  organising  a  structured 
exchange  of  information  and  experiences  as  well  as  the  identification  of  good 
practices  in  the  area  of  doing  business  through  cooperatives.  It  will  also  examine 
with  Member  States  and  stakeholders  the  feasibility  of  preparing  a  benchmarking 
exercise of national policies and practices in the area. 

2.1.2.  New Member States and awareness of the role of cooperatives  

So far there have been only little initiatives in this regard and there is a widespread 
lack  of  information  on  the  potential  and  possibilities  of  cooperatives.  The  message 
should  therefore  be  passed  in  the  acceding  countries  to  individuals  and  small 
entrepreneurs that establishing a co-operative can be an attractive option to start-up, 
for  people  whose  capital,  experience  or  confidence  is  limited.  By  pooling  their 
resources  and  experience  they  can  share  the  responsibilities  and  risks  that  might 
make working on a self-employed basis unviable.  

Co-operatives  have  faced  particular  problems  in  the  former  planned  economies  of 
central Europe. Although they were often the most free form of enterprise permitted 
under central planning, they have since suffered from their identification with the old 
system.  In  this  respect  the  potential  of  new  co-operative  initiatives  to  assist  the 
balanced development of the economies and societies of the new Member States and 
candidate  countries  must  also  be  emphasised.  The  Commission  in  the  context  of 
Action 1 and Action 2 will examine how to best promote initiatives in new Member 
States aiming at awareness raising and transfer of information and experience across 
Europe.  

2.1.3. 

Improving statistical data  

Another problem which contributes to the incomplete understanding of the potential 
of the co-operative enterprise is the poor data concerning its quantitative importance 
and trends in its development. 

6 

Council Decision (2000/819/EC) of 20 December 2000 on a multiannual programme for enterprise and 
entrepreneurship, and in particular for small and medium-sized enterprises (SMEs) (2001-2005) OJ L 
333/84, 29.12.2000 

7 

 
 
  
 
                                                 
Action  3.  The  Commission  will  examine  the  possibilities  of  developing  the  use  of 
“satellite accounting techniques” for the collection and analysis of statistical data on 
cooperatives and having them applied by national statistical institutes. 

2.2. 

Actions for the promotion of cooperatives.  

2.2.1.  Education and Training 

Curricula  for  management  training  tend  to  be  based  on  the  predominant  business 
model  i.e.  the  companies  limited  by  shares.  It  is  therefore  hardly  surprising  that 
young entrepreneurs rarely consider the “co-operative option”, even when it might be 
the most appropriate for their activities. 

Several  examples  exist  however  of  specific  modules  for  co-operative  management 
training7  (including  distance  learning)  and  even  of  dedicated  university  courses  for 
co-operative entrepreneurs. Unfortunately, most such initiatives remain isolated and 
these could be usefully networked across Europe. 

The  Community  education,  training,  e-learning  and  lifelong  learning  programmes 
have particular potential to assist co-operatives, as has been shown by their valuable 
participation  in  such  programmes  as  Erasmus/Socrates,  Leonardo  da  Vinci  I  &  II, 
and  their  predecessor  programmes  since  the  mid  1980s.  The  Commission  invites 
Member States and national educational institutes and stakeholders organisations to 
develop  awareness  of  the  co-operative  form  via  the  curricula  of  business  studies 
courses at secondary and university levels and promote the development of relevant 
management skills. 

Action 4. The Commission will take the necessary steps to ensure that programmes 
for  education,  training,  lifelong  learning  and  e-learning  should  facilitate  the 
participation  of  co-operatives,  particularly  those  programmes  that  encourage  trans-
national  projects  and  trans-national  specialist  networks,  and  that  lead  to  the 
development of best practice in innovative areas. 

2.2.2.  Business Support Services 

The particular nature of co-operative business also calls for tailored business support 
services. Such counselling can be an invaluable accompaniment to, and condition of, 
loan  financing.  The  networking  at  European  level  of  agencies  offering  specialised 
advice  to  cooperatives  would  enable  beneficial  exchanges  of  experience.  However, 
where  demand  for  these  services  is  not  sufficient  to  justify  specialised  agencies,  a 
referral  system  may  be  more  appropriate.  Chambers  of  commerce  and  employers’ 
federations should also be aware of the needs of co-operative businesses in order for 
them  to  provide  relevant  services.  The  Commission  invites  Member  States  and 
stakeholders’  organisations  to  examine  and  ensure  the  provision  of  support  and 
advisory services to co-operative enterprises 

7 

See  International  Labour  Office  « Training  Methodology  for  Co-operative  Management »  in 
http://www.ilo.org/coop. 

8 

 
 
  
 
                                                 
Action  5.  The  Commission  will  examine  the  possibility  of  identifying  and 
disseminating  good  practices  in  the  area  of  business  support  services  for  co-
operatives, following previous work on SMEs and very small enterprises8. 

2.2.3.  Access to Finance 

Co-operatives  have  no,  or  limited  access  to  equity  markets  and  are  therefore 
dependent on their own capital, or credit financing9. This is mainly due to the general 
lack of knowledge of the characteristics of the cooperative form of enterprise by both 
the  credit  institutions  and  the  regulatory  authorities.  In  this  context  and  in  the 
framework  of  Action  1  and  Action  2  the  Commission  wishes  to  play  an  important 
role in facilitating exchanges of experience amongst both co-operative organisations 
and  national  administrations  on  good  and  innovative  practices  in  financing  co-
operatives. In addition, in the context of Action 9 and Action 10 it is also important 
to examine how best the accounting standards and other relevant rules may take into 
consideration  the  cooperative  specificities  related  to  the  structure  of  capital  and 
evaluation of assets.  

However,  as  far  as  the  public  financing  is  concerned,  the  Commission  invites 
Member States to ensure that enterprise-financing initiatives are also accessible and 
appropriate  for  co-operatives.  Similarly,  in  view  of  the  specific  needs  of  co-
operatives  the  Commission  on  its  turn  will  examine  if  it  is  pertinent  to  include  a 
specific reference in the European Investment Fund10.  

As  their  “sisters”  in  EU  many  co-operatives  in  acceding  countries  suffer  from 
particular  difficulties  in  raising  credit  or  equity  capital.  Several  co-operative 
organisations  have  called  for  a  specific  pre-accession  programme  for  co-operative 
enterprises;  however  the  Commission  considers  that  the  most  effective  means  of 
providing support is through existing instruments. 

Action  6.  The  Commission  will  assess  the  possibility  of  including  a  specific 
reference  to  co-operative  enterprises  in  the  financial  instruments  managed  by  the 
European  Investment  Fund  which  currently  form  part  of  the  “Multi-Annual 
Programme  for  Enterprise  and  Entrepreneurship  and  in  particular  for  small  and 
medium-sized  enterprises”.  Care  will  also  be  taken  to  ensure  that  co-operatives 
continue  to  be  eligible  in  other  Community  programmes  and  that  they  have  full 
access to information about these programmes. 

2.2.4.  Working with Co-operatives’ Representative Organisations  

Co-operatives  are  well  represented  at  European  level  through  their  national  or 
sectoral federations and their co-ordinating bodies. The Commission will continue to 

8 

9 

10 

See  http://europa.eu.int/comm/enterprise/entrepreneurship/support_measures/reports_studies.htm  and 
http://europa.eu.int/comm/enterprise/entrepreneurship/craft/craft-studies/craft-supportserv.htm#support-
services-reports 
Several  co-operative  movements  have  sought  to  support  growing  co-operatives  by  establishing 
investment 
http://www.esfin-
in 
ides.com/pages/Contact/ContactRubrique.htm  and  Coop  Action 
the  UK  http://www.co-
operativeaction.coop/: In Italy this process has been facilitated by Law N° 59 of 31/1/92 which enables 
co-operatives to commit 3% of their taxable annual profits (supplemented by the assets of liquidated co-
operatives) to mutual benefit funds for the promotion of co-operatives, see Coop Action:  
http://www.europa/comm/enterprise/entrepreneurship/financing/index.htm 

ESFIN/IDES 

example 

France 

funds 

(for 

in 

9 

 
 
  
 
                                                 
maintain  frequent  contacts  with  representative  organisations  of  co-operatives11 
concerning all policies and issues of relevance (see also action Action9). 

2.3. 

Specific areas of enterprise policy where cooperatives play an important role 

2.3.1.  The role of Workers’ Cooperatives in Enterprise Transfers  

Approximately one-third of enterprises in Europe will transfer ownership in the next 
10  years  and  increasingly  such  transfers  are  taking  place  outside  the  family  of  the 
current  owner.  Employees  have  a  particular  interest  in  the  sustainability  of  their 
enterprises and often have a good understanding of the business in which they work. 
However  they  often  lack  the  appropriate  financial  means  and  support  to  take  over 
and manage an enterprise. Careful and gradual preparation of transfers to employees 
organised in the form of a workers’ co-operatives, can improve survival rates12. 

In this context it is worthwhile to note the recent Commission’s Communication of 
July 2002 on a “Framework for the promotion of financial participation of employees 
in  the  capital  or  profits  of  their  company”13.  One  form  of  such  schemes  is  to 
associate  employees  in  enterprise  results,  on  a  collective  basis,  and  to  accumulate 
assets into workers’ co-operative, which will serve as a possible source of financing 
an employee buy-out. The Commission invites Member States to consider incentives 
to encourage such schemes enabling employee buy-out. 

2.3.2. 

Social Enterprises and New Co-operative Legal Forms 

The  effectiveness  of  co-operative  forms  in  integrating  social  objectives  has  led 
certain Member States to adopt specific legal forms to facilitate such activities. These 
have experienced considerable success and generated interest in other Member States 
facing similar problems14. These forms of cooperatives face particular problems as to 
the financing of their activities. 

Action  7.  The  Commission  will  study  policies,  good  practices  and  regulations 
concerning  social  cooperative  enterprises  in  Europe  and  will  report  to  the 
Community Institutions. 

11 

12 

13 

14 

The  most  important  are  the  ICA  Europe  -International  Cooperative  Alliance  and  the  CCACE  Co-
ordinating Committee of European Co-operative Associations. 
A Commission Recommendation of 1994 (N° 94/1060/EC of 7-12-1994 OJ L 385 of 31-12-1994 p.14) 
called on Member States to promote the transfer of enterprises to their employees by reducing taxation 
on capital gains realised on the transfer of shares to employees, by waiving registration fees, or through 
tax  advantages  or  deferral.  Follow-ups  to  this  Recommendation  in  1998  and  2002  noted  the  lack  of 
progress by Member States in this area.  
COM(2002) 
http://europa.eu.int/comm/employment_social/soc-dial/labour/index_en.htm 
7,700  social  co-operatives  were  established  in  Italy  within  10  years  of  Law  381  of  1991,  employing 
210,000  of  which  22,600  were  disadvantaged.  These  mix  voluntary  and  paid  work,  and  integrate 
excluded groups into the economy. In 2001 the French government introduced the new legal form of a 
Société  Coopérative  d’Intérêt  Collectif  (SCIC)  and  in  the  UK  a  proposal  was  recently  made  for  a 
Community  Interest  Company  (http://www.dti.gov.uk/cics/).  In  several  accession  and  candidate 
countries  co-operatives  of  the  disabled  (which  resemble  integration  coops  in  Italy)  have  provided 
quality jobs and medical support for the disabled since the early 20th Century. 

05.07.2002 

final 

364 

see 

of 

in  

10 

 
 
  
 
                                                 
3. 

PROVIDING A SUITABLE REGULATORY ENVIRONMENT 

3.1. 

Implementation of the European Co-operative Statute 

The  adoption  of  the  Statute  for  a  European  Co-operative  Society,  or  “SCE”,  will 
allow co-operatives to operate throughout the EU with a single legal personality and 
set of rules, in the same way as the Statute for a European Company (SE) will do for 
public companies limited by shares. 

The Regulation provides that Member states have 3 years in which to implement and 
transpose the Statute into national laws, i.e. until the 18 august 2006.  

In the course of the consultation process it has been said that the SCE is a necessary 
instrument  for  co-operatives  to  freely  operate  across  Europe.  It  should  therefore  be 
implemented  as  soon  as  the  date  foreseen  above.  To  this  end  the  Commission  will 
examine in the context of Action 1 how best to co-ordinate an information campaign 
to  make  potential  users  aware  of  the  SCE  instrument.  The  main  targets  will  be 
business  advisors  and  support  services,  accountants,  and  chambers  of  commerce. 
Publications will be distributed via EuroInfo Centres in Member States. In addition 
the Commission will take the necessary steps for the prompt implementation of the 
Regulation  in  order  also  to  diminish  eventual  infringement  procedures  against 
Member states. In this context: 

Action  8  The  Commission  intends  to  convene  a  series  of  meetings  with  Member 
States’  officials  responsible  for  implementation  of  the  Regulation  and  Directive  on 
the SCE in order to discuss all matters for which national action is necessary or for 
which national law applies. 

3.2. 

Coherence between national laws 

3.2.1.  National rules governing SCE 

All Member States permit the creation and operation of co-operatives. However, in 
certain  Member  States  it  is  not  possible  for  co-operatives  to  operate  in  certain 
sectors. In addition, the legal forms and traditions of co-operatives in Member States 
are  highly  varied.  The  different  approaches  to  legislation  governing  co-operatives 
can  be  categorised  into  three  types:  (1)  countries  where  there  is  one  general  co-
operative law, (2) countries where co-operative legislation is divided according to the 
sector and social purpose of the co-operative, and (3) countries where there is no co-
operative law and where the co-operative nature of a company is solely derived from 
its  internal  statutes  or  rules.  This  heterogeneity  may  result  in  obstacles  to  efficient 
operation  of  co-operatives  on  a  cross-border  or  European  level  as  the  rights  and 
obligations  of  members,  directors  and  third  parties  become  unclear.  This  problem 
will  become  more  apparent  when  certain  provisions  of  national  laws  are  applied  to 
European  Co-operative  Societies  according  to  their  Member  State  of  registration. 
Therefore, in the context of Action 8, the Commission will also seek to see with co-
operative  organisations  and  national  authorities  cases  where  the  differences  in 
national laws can create problems to the effective application of the ECS Statute and 
propose commonly accepted solutions. Such an exercise is able to lead to an indirect 
approximation of national laws.  

11 

 
 
  
 
3.2.2.  Cooperation between national authorities and Commission services 

Improvements  in  co-operative  legislation  can  be  also  achieved  by  facilitating 
contacts  between  the  national  regulators  and  providing  opportunities  for  common 
analysis  of  good  or  innovative  practice15.  This  process  should  include  candidate 
states,  some  of  which  have  already  requested  assistance  in  reforming  their  co-
operative  laws,  and  in  which  co-operatives  are  subject  to  even  greater  levels  of 
misunderstanding by regulators. 

Action  9.  The  Commission  will  work  actively  with  public  authorities  and  co-
operative  organisations,  especially 
to  ensure 
improvements of co-operative legislation; to that end the Commission also insists on 
all Member States’ duty to inform each other and the Commission when drafting and 
before adopting new legislation in the area.  

the  new  Member  States, 

in 

3.2.3.  Drafting model laws 

Notwithstanding the differences in laws, as mentioned above, the Commission does 
not  intend  to  make  proposals  for  the  harmonisation  of  national  co-operative 
legislation16.  Several  co-operative  organisations  mainly  established  in  the  EU  have 
stated  that  national  legislation  does  not  constitute  a  significant  constraint  on  their 
activities within their own countries. The High Level Group of European Company 
Law  Experts17  mandated  by  the  Commission  has  argued  that  co-operative 
organisations  should  take  the  initiative  to  develop  model  co-operative  laws  as  a 
means  of  encouraging  gradual  approximation  of  national  laws  governing  co-
operatives. 

Action  10.  The  Commission  welcomes  initiatives  from  national  and  European 
organisations to draft “model” laws, and is willing to assist in the drafting.  

3.2.4.  The use of the ICA cooperative principles 

Although laws governing cooperatives are diverse in approach and based on different 
traditions, they generally respect the co-operative definition, values and principles set 
out in the “Statement on the Co-operative Identity” adopted by the International Co-
operative Alliance (ICA) in 1995 and recently endorsed by a resolution of the U.N.18 
and fully incorporated into a Recommendation of the I.L.O.19. Consequently national 

15 

16 

17 

18 

19 

the 

following 

The comparative table of Member States’ and candidate countries’ co-operative legislation is available 
on 
website:http://www.europa/comm/enterprise/entrepreneurship/coop/social-
cmaf_agenda/social-cmaf-cooperatives.htm 
Commission  Communication  of  21/5/2003:  “Modernising  Company  Law  and  Enhancing  Corporate 
Governance  in  the  European  Union  –  A  Plan  to  Move  Ahead”  -  Chapter  3.7"  Enhancing  the 
transparency of national legal forms of enterprise" see next footnote for reference. 
Final Report of the High Level Group of Company Law Experts on a Modern Regulatory Framework 
for Company Law in Europe (4/11/ 2002); see in 
http://europa.eu.int/comm/internal_market/en/company/company/modern/index.htm 
See U.N. resolution 56/114 adopted at the 88th Plenary meeting of the U.N. General Assembly on 19th 
December 2001 and the Report of the Secretary General 2001/68 dated 14th May 2001. 
Recommendation 193 on the promotion of Cooperatives adopted at the 90th Session of the International 
Labour  Conference  on  20th  June  2002.  Apart  from  the  definition  and  values  the  Recommendation 
contains the following principles: the voluntary and open membership, the democratic member control, 
the member economic participation, the autonomy and independence of the cooperative, the education, 

12 

 
 
  
 
                                                 
 
legislators should be based on the co-operative definition, values and principles when 
drafting new laws governing co-operatives. In this context however Member States 
are  required  also  to  be  sufficiently  flexible  in  order  to  enable  co-operatives  to 
compete  effectively  in  their  markets  and  on  equal  terms  with  other  forms  of 
enterprise. Co-operatives do not need preferential treatment, but a legislation creating 
a  more  level  playing  field,  in  the  sense  that  they  are  allowed  to  act  free  from 
restrictions  and  obligations,  which  are  based  on  various  national  policy  objectives, 
and to which are not however subject the other forms of companies with which they 
compete  in  a  modern  market  economy.  Well-drafted  legislation  can  also  help  to 
overcome some of the restrictions inherent in the co-operative form, such as lack of 
access to investment capital. For example co-operatives might be permitted to issue 
non-user investor shares which are tradable and interest bearing, on the condition that 
the  participation  of  such  non-user  shareholders  be  limited  to  ensure  that  the  co-
operative  nature  of  the  companies  is  not  jeopardised.  The  Commission  invites 
Member  States  to  be  guided,  when  drafting  national  regulations  governing  co-
operatives,  by  the  “definition,  values  and  co-operative  principles”  of  the  above 
mentioned Recommendation but also to be sufficiently flexible in order to meet the 
modern needs of cooperatives (see also Action 9 and Action 10). 

3.2.5.  Avoiding  “premature”  dissolutions  of  successful  cooperatives;  discouraging 

predatory asset stripping or “de-mutualisations” 

The  Commission  encourages  Member  States  to  ensure  that  the  assets  of  co-
operatives upon dissolution or conversion should be distributed according to the co-
operative  principle  of  “disinterested  distribution”;  that  is  to  say  either  to  other  co-
operatives, where members can participate, or to co-operative organisations pursuing 
similar or general interest objectives. Such assets are often built up over generations, 
and  remain  collectively  owned  and  are  “locked-in”  to  the  objectives  of  those  co-
operatives. However, it should be possible to provide for the assets of a co-operative 
to be distributed to its members upon dissolution, in well examined cases. Member 
States  are  encouraged  to  provide  sufficient  protection  to  co-operative  assets  by 
ensuring  that  in  case  of  take-over  bids  and  of  the  consequent  conversion  of  a 
cooperative  to  the  form  of  a  public  company  limited  by  shares  the  wishes  of 
members  and  the  objectives  of  the  co-operative  are  respected  (see  Action  9  and 
Action 10). 

3.2.6.  Appropriate tax treatment and other “benefits” 

Some  Member  States  (such  as  Belgium,  Italy  and  Portugal)  consider  that  the 
restrictions  inherent  in  the  specific  nature  of  co-operative  capital  merit  specific  tax 
treatment: for example, the fact that co-operatives’ shares are not listed, and therefore 
not  widely  available  for  purchase,  results  almost  in  the  impossibility  to  realise  a 
capital  gain;  the  fact  that  shares  are  repaid  at  their  par  value  (they  have  no 
speculative  value)  and  any  yield  (dividend)  is  normally  limited  may  dissuade  new 
memberships. In addition it is to be mentioned that co-operatives are often subject to 
strict requirements in respect of allocations to reserves. Specific tax treatment may be 
welcomed, but in all aspects of the regulation of co-operatives, the principle should 
be  observed  that  any  protection  or  benefits  afforded  to  a  particular  type  of  entity 
should  be  proportionate  to  any  legal  constraints,  social  added  value  or  limitations 

training and information rights of members, the duty of co-operation among co-operatives, and concern 
for the community (for e-address see footnote 7) 

13 

 
 
  
 
                                                                                                                                                         
inherent in that form and should not lead to unfair competition. In addition any other 
granted “advantages” should not permit the undesirable use of the co-operative form 
by  non  bona  fide  co-operatives  as  a  means  of  escaping  appropriate  disclosure  and 
corporate  governance  requirements.  The  Commission  invites  Member  States  when 
considering  appropriate  and  proportionate  tax  treatment  for  equity  capital  and 
reserves  of  co-operatives,  to  take  good  care  that  such  provisions  do  not  create 
anticompetitive situations (see also Action 9 and Action 10.) 

3.2.7.  Competition rules applying to cooperatives.  

The  consultation  process  on  co-operatives  revealed  some  confusion  and  concern 
regarding the application of competition rules to co-operatives.  

Co-operatives that carry out economic activities are considered as “undertakings” in 
the sense of Articles 81, 82 and 86 to 88 of the European Community Treaty (EC). 
They  are  therefore  subject  in  full  to  European  competition  and  state  aid  rules,  and 
also  to  the  various  exemptions,  thresholds  and  de  minimis  rules.  There  are  no 
grounds  for  special  treatment  of  co-operatives  in  the  general  competition  rules; 
however certain aspects of their legal form and structure should be taken into account 
on a case-by-case basis, as previous decisions and rulings have demonstrated. 

Most  cases  have  involved  co-operatives  of  legal  entities  (rather  than  those  of 
physical  persons).  Such  a  co-operative  is  both  an  association  of  undertakings,  and 
(where  it  has  an  economic  activity)  an  undertaking  in  its  own  right.  Both  the  co-
operative  and  its  members  are  therefore  subject  to  competition  rules.  Furthermore, 
competition  rules  apply  not  only  to  the  agreements  between  undertakings  (e.g.:  the 
creation of a co-operative and its founding statutes), but also to the decisions made 
by  the  co-operative’s  internal  bodies.  Therefore,  whereas  organisation  as  a  co-
operative may not necessarily conflict with Article 81 EC, its subsequent behaviour 
or  rules  might  be  considered  restrictive  of  competition.  The  Commission  invites 
stakeholders’  organisations  and  business  support  services  to  ensure  a  wide 
dissemination of the competition rules which may be of relevance to the cooperatives 
in Europe. 

3.3. 

Review of the Regulation 

Article  79  of  the  SCE  Regulation  provides  that:  “Five  years  at  the  latest  after  the 
entry into force of this Regulation, the Commission shall forward to the Council and 
the  European  Parliament  a  report  on  the  application  of  the  Regulation  and 
proposals  for  amendments,  where  appropriate.”  This  article  defines  some  of  the 
issues  that  the  report  should  address  (location  of  head  office  and  registered  office, 
de-merger of an SCE, legal remedies in case of fraud) etc.  
In  addition  to  that,  the  High  Level  Group  of  European  Company  Law  Experts20 
stated that “There are important questions deserving analysis in the future application 
of  the  SCE  Regulation….It  will  be  interesting  to  see  how  the  SCE  relates  to  the 
national  forms  of  co-operatives.  Will  the  SCE  indeed  be  used  for  trans-national 
restructurings and joint ventures? If so, this may enhance the competitiveness of co-
operatives”.  

20 

Report  of  the  High  Level  Group  op.citChapter  VIII  “Co-operatives  and  Other  Forms  of  Enterprise”, 
p.121. 

14 

 
 
  
 
                                                 
In  an  effort  to  synthesize  the  above  recommendations  one  could  say  that  the  most 
important element to be evaluated is the freedom given to Member States’ to regulate 
a series of questions according to the national traditions. Because it is expected that 
the  Regulation  has  an  indirect  and  gradual  harmonising  effect,  as  it  becomes  a 
reference for future legislation, particularly in the new and candidate countries, (see 
also point 3.2.1. of the Communication) the Commission believes that it is even more 
important  that  the  regulation  in  the  future  provides  simpler  and  stronger  rules,  and 
that references back to national laws are minimised. 

Action  11.  In  the  context  of  the  review  work  the  Commission  will  pay  particular 
attention  to  potential  simplification  of  the  regulation  by  suggesting  the  adoption  of 
common Europe-wide rules where possible.  

4. 

THE CONTRIBUTION OF CO-OPERATIVES TO COMMUNITY OBJECTIVES 

The multiple benefits of co-operatives to Europe’s economy make them an integral 
element  in  achieving  the  Lisbon  objectives;  in  fact  co-operatives  are  an  excellent 
example  of  company  type  which  can  simultaneously  address  entrepreneurial  and 
social  objectives  in  a  mutually  reinforcing  way.  In  addition  to  the  entrepreneurship 
policy,  co-operatives  play  an  important  role  in  the  agricultural  economy,  for  the 
development  of  regions  with  economic  difficulties,  while  their  structure  is  ideal  to 
enhance  employment  and  social  cohesion.  Promoting  a  wider  dissemination  of  the 
role  and  potential  of  co-operatives  is  therefore  not  only  important  in  respect  to  the 
immediate  benefits  for  co-operatives  themselves  but  also  because  of  its  links  with 
important  policy  and  objectives  as  explained  in  the  next  paragraphs.  There  is 
therefore  a  clear  need  for  efforts  at  Community  level  to  make  sure  that  the  role  of 
cooperatives is fully taken into account through relevant Community programmes. 

4.1. 

Agriculture policy and enlargement  

Cooperatives  have  played  and  continue  to  play  a  very  important  role  in  the 
agriculture sector in the whole Europe. Support has already being provided through 
rural  development  measures  financed  by the  EAGGF  for  establishing  organisations 
to  provide  various  services  to  farmers  on  a  collective  basis  (e.g.:  machinery  rings, 
farm relief and management services). Co-operatives are a highly appropriate vehicle 
for such services and are eligible for these measures.  

In  the  new  Member  States,  the  negative  connotation  of  the  term  cooperative  is  a 
problem  for  modern  cooperative  development.  In  the  collective  imagery,  it  is  still 
mainly associated with the lack of freedom of farming due to central regulations. In 
all  the  acceding  countries,  land  had  been  privatised  marking  the  creation  of 
thousands  of  small  and  medium  farms  and  processing  enterprises.  This  fragmented 
structure does not allow firms to reap benefits from economies of scale, while small 
businesses have no the necessary capital to invest in the new technology necessary to 
fulfil the newly introduced stricter sanitary and phytosanitary rules. Lack of capital 
and inappropriate or conflicting legislation are still problems for many farm and food 
enterprises. The establishment of co-operatives by small farms working in the same 
or  related  sectors  can  enable  them  to  achieve  the  critical  mass  required  for  larger 
investment  projects,  whilst  providing  banks  and  investors  with  suitable  guarantees. 
The  European  Unions'  programmes,  PHARE,  ISPA  eased,  to  certain  extend,  the 
access  to  capital,  while  in  recognition  of  the  importance  of  collective  approaches, 
both  the  pre-accession  instrument  SAPARD,  and  the  Accession  Treaty  provide 

15 

 
 
  
 
specific aids for agricultural producer groups, which may again take the form of co-
operatives.  

The  Commission  believes  that  the  form  of  agricultural  cooperatives  may  be  an 
important vehicle towards further development of the agricultural sector in the new 
countries.  Apart  from  the  adoption  of  supportive  legislation,  the  Commission  may 
examine with the new Member States other factors for success like: solid cooperative 
business activities, good management, cooperation between cooperatives and, above 
all, involving young people in the development and management of cooperatives. In 
addition, a link between income support policies and training and capacity-building 
might  be  pursued.  A  high  skilled  and  young  generation  of  farmers  would  mean  a 
major  willingness  to  innovate  or  take  risks  either  on  the  agricultural  cooperative 
business or through farm diversification. 

A final consideration concerns the fact that service providers are often absent in rural 
areas  in  the  new  Member  States.  The  promotion  of  marketing  and  purchasing 
cooperatives  may  tackle  this  lacuna,  while  new  opportunities  are  offered  to 
cooperatives  in  the  area  of  provision  of  non-agricultural  services,  previously 
provided  by  government,  like  health  care,  child  and  elderly  care,  and  “social 
cooperatives” with various community interest objectives.  

A.12.  The  Commission  in  addition  to  actions  Action  1  and  Action  2  will  seek  to 
ensure that the particular contribution of co-operatives to agricultural development in 
through  relevant  Community 
the  new  Member  States 
programmes.  

is  further  exploited 

4.2. 

Rural and regional development 

As member-based organisations co-operatives are rooted in local communities; they 
contribute  to  maintaining  local  jobs  and  providing  local  services  in  a  context  of 
economic  globalisation.  The  users  of  a  co-operatives’  services,  be  they  producers, 
consumers or workers, tend to be geographically stable. Such strong local roots can 
be an effective counter to the desertification of rural areas and assist the development 
of  poorer  regions  and  localities.  Member  States  are  invited  to  take  seriously  into 
consideration  the  beneficial  role  of  local  cooperatives  in  regions,  remote  areas  and 
poor urban places, when they design a supportive policy for areas which are lagging 
behind economically.  

4.3. 

Job creation by cooperatives of the “Social Economy” sector 

The  performance  of  a  co-operative  is  not  predominantly  measured  by  the  level  of 
return on capital invested, but on the service it provides to its members. The ability 
of co-operatives to operate on a break-even or cost-plus basis allows many of them to 
be  created  and  run  by  persons  who  would  not  otherwise  have  access  to  the  labour 
market.  They  can  therefore  effectively  integrate  excluded  groups  into  work  and 
society, giving them also entrepreneurial experience and management responsibility. 
By  providing  entrepreneurial  solutions  to  meeting  unsatisfied  economic  and  social 
needs,  particularly  where  public  or  private  initiative  is  lacking,  co-operatives  can 
create  jobs  and  encourage  sustainable  and  solidarity-based  growth  without  seeking 
for net profit to be distributed to the members (social economy); in this way they add 
to  the  flexibility  of  labour  markets.  Cooperatives  are  therefore  often  considered  as 
part of the “social economy” along with other forms of people-based enterprises such 
as  mutual  societies,  associations  and  foundations.  Many  public  authorities  have 

16 

 
 
  
 
identified the “social economy” co-operative form as an effective way of promoting 
balanced and solidarity-based growth21. The Commission will seek in the context of 
Action  7  to  ensure  that  the  particular  contribution  of  cooperatives  to  create  jobs 
continues  to  be  recognised  and  is  further  exploited  through  relevant  Community 
policies and programmes, like the EQUAL Programme, which is supporting a variety 
of “social economy” co-operative projects under its entrepreneurship pillar. 

5. 

CONCLUSION 

Cooperatives  have  a  strong  tradition  dating  back  to  the  industrial  revolution; 
however,  they  should  not  be  seen  as  a  relic  of  the  19th  Century.  Today  the 
Commission recognises the rich variety of enterprise forms in the EU is an important 
element  for  the  EU  economy.  They  are  modern  and  dynamic  enterprises  with  high 
potential. Cooperatives account for 83% of Dutch agricultural production, 50% of the 
French and 37% of the Cyprus banking services, 35% of the Finnish food retail, 21% 
of Spanish health care and 60% of Swedish forestry. The Commission will therefore 
support  the  effective  promotion  and  development  of  co-operative  enterprise  in  the 
European Union and candidate countries. Nevertheless, development of co-operative 
enterprise remains predominantly in the realm of competence of the Member States. 
Achieving  the  goals  set  out  in  this  document  will  therefore  require  also  the  active 
involvement of Member States and candidate countries. 

The actions outlined in this Communication cover the period 2004-2008. At the end 
of  this  period,  the  progress  made  in  relation  to  the  objectives  set  out  in  this 
Communication  will  be  assessed,  closely  associating  all  the  stakeholders  in  this 
issue. On the basis of this evaluation a decision on appropriate future initiatives will 
be taken. 

21 

Council Decision n° 2002/177/EC of 18 February 2002 on guidelines for Member States' employment 
policies  for  the  year  2002.  OJL  60,  of  1-3-2002,  p  60.  Guideline  11  of  the  European  Employment 
Strategy  (2002)  states  that  “Member  States  will  promote  measures  to  enhance  the  competitive 
development and the capacity of the social economy to create more jobs and to enhance their quality, 
especially  the  provision  of  goods  and  services  linked  to  needs  not  yet  satisfied  by  the  market,  and 
examine, with the aim of reducing, any obstacles to such measures  

17