The cooperative society in Bulgaria
The cooperative society is a form of an association of small and medium-sized businesses that are providers of products and services. According to Article 1 of the Cooperative Society Code, (Закон за кооперациите), the cooperative society is an association of natural persons that warrants a commercial activity in favour of their economical, social and cultural interests by mutual support and cooperation.
The cooperative society is a corporate legal entity in which natural persons may participate. The capital as well as the number of the partners is variable. Although cooperative are not trading companies, they are recognised with commercial characteristics. The minimum number of members amounts to 7 persons.
The following forms of cooperative societies are known in Bulgaria: the consumer’s cooperative society, the cooperative manufacturing company, the specialised cooperative society and the commercial utility class. A special form of cooperative societies is the housing association which does not have commercial characteristics.
The cooperative society is found by its registration in the commercial register. The founders may only be legally competent natural persons; though after its establishment also 16 year old persons may become members of the cooperative society. The following objective conditions must be fulfilled:
- the execution of the general meeting where the following resolutions must be passed: the founding resolution, the statutes (Articles of Incorporation), the selection of the bodies of the cooperative society;
- the registration in the commercial register.
If the cooperative society is not founded, all members of the cooperative society are liable for the actions that have been done on behalf of the cooperative society. The cooperative society is liable towards third parties with its assets; members of the cooperative society are liable with their actual contribution.
According to Article 29 of the Cooperative Society Code, the assets of the cooperative society consist of:
- property rights and other rights in rem;
- rights on intellectual property objects;
- company shares;
- other rights and obligations.
The assets derive from the contributions of the members of the cooperative society. There are two kinds of contributions – entry contributions and participation contributions. The participation contribution gives the participation capital having a variable value and not acting as guarantee. Aside of the investment of capital, the cooperative society is obligated to establish a guarantee funds of at least 20 % of the capital and an investment funds of at least 10 % of the capital. The entry contributions are not subject to be returned and are defined in the statutes of the cooperative society. The opposite applies for additional contributions.
The members of the cooperative society are entitled to enter and leave the cooperative society freely. The membership may either be created by the consent through the statutes of the cooperative society or on request and the consent of the general meeting. The membership may be ended by voluntary withdrawal, the decease of one of the members of the cooperative society, the dissolution of the cooperative society or the exclusion of the respective member.
The rights and obligations of the members of a cooperative society are contained in Article 9 and 10 of the Cooperative Society Code.
The bodies of the cooperative society, their competence and functioning are determined in part 3 of the Cooperative Society Code. Bodies of the cooperative society are: the general meeting/the meeting of the representatives, the board of directors and the supervisory board. Article 15 (6) of the Cooperative Society Code prescribes a “remaining competence” of the general meeting meaning a competence regarding the fields that have not been assigned to another body.
The board of directors is responsible for the performance of the resolutions made by the general meeting, the management of the transactions of the cooperative society and the cooperative management. Besides it is entitled to conclude certain businesses. The chairman of the cooperative society – simultaneously chairman of the board of directors – represents the cooperative society, warrants the performance of the resolutions made by other bodies and manages the ongoing business.
The supervisory board bears responsibility regarding the supervision of the business operations and reports to the general meeting.
The following prohibitions and guarantees apply to the members of cooperative society bodies:
- The chairman and the members of the board of directors must pay a monetary guarantee of at least 3 month’s salaries;
- The prohibition of competition applies;
- The chairman and the members of the board of directors may not take a post in the management of other trading companies unless the cooperative society allowed it.
The law provides 4 forms of transformation regarding cooperative societies being subject to specific conditions. A merger is only possible if there is an arrangement between the respective bodies of the cooperative society and if it has been accepted by the general meeting. The separation as well as the division requires the resolution of the general meeting with qualified majority.
The conditions for the dissolution of cooperative societies are as follows:
- The resolution of the general meeting;
- A court decision if the business activity of the cooperative society is illegal;
- With the expiry of the time limit for which the cooperative society has been established;
- With the opening of insolvency proceedings on the assets of the cooperative society.