Published On: Thu, Jan 25th, 2018

The Cooperative Association explained

Under the law of Sint Maarten it is possible to form a co-operative association (coöperatieve  vereniging, or coöperatie) also called a co-operative.

The co-operative is a distinct legal entity, a special kind of association, formed by two or more members (individuals or companies may be a member) to realize a benefit. The incorporation of a co-operative is relatively easy: a notarial deed, signed by the civil law notary and at least two members, is enough. Also in other aspects the legal regime regarding a co-operative is relatively light.

Activities of the co-operative

The law of Sint Maarten offers great flexibility to map out the economic activities of a co-operative. For instance, there are co-operatives that buy products or services for its members (and in some cases for others too), leading to a lower cost per unit. The supermarket chain Super-U is part of a French co-operative. Other co-operatives may be focused on collective marketing and selling of a product or services supplied by its members, leading to a higher revenue or access to new markets for its members. Credit unions, a type of banking, and joint ownership of real estate (for example affordable housing) may also be structured by means of a co-operative.

Members’ rights and duties

The members enter into an agreement with the co-operative to outline their contribution. That may be a financial contribution, but it can also be an obligation to deliver goods or services to the co-operative.

Usually the membership of a co-operative may not be transferred to a third party  without the consent of the board or the other members.

To strengthen the creditworthiness of the co-operative, the articles of association of a co-operative may stipulate that the members of the co-operative are jointly liable for the deficit in case of liquidation of the co-operative, or liable to a fixed amount, even after they have cancelled their membership. On the other end of the spectrum there are co-operatives without any liability of the members for the business of the co-operative.

An advantage of a co-operative, compared to a normal association, is that a co-operative may distribute the profits of the co-operative among its members.

Board of directors of the co-operative

A co-operative is managed by a board of directors (preferably under supervision of a supervisory board). The general meeting of members may give the board instructions.

The board must prepare annual accounts to offer the members insight in the financial situation of the cooperative.

In principle the board is liable for debts of the co-operative. This risk may be covered by taking out an insurance.

Concluding remark

Given the great flexibility of the law regarding co-operatives, it is once more advisable to carefully consider with a legal adviser the internal organization and the relation between the co-operative and its members before starting a co-operative.

Contributors: Jacques Knol & Eric de Vries, Attorneys at Law, HBN Law