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Your power to winCreation of agricultural cooperatives
One of the forms of conducting business in rural areas can be agricultural cooperatives.
An agricultural cooperative is a legal entity formed by agricultural producers who voluntarily unite based on membership to carry out joint activities related to the production, processing, storage, distribution, and sale of agricultural products, as well as the supply of production means and material-technical resources to its members and the provision of certain services.
Thus, agricultural cooperation can become an effective mechanism for ensuring the competitiveness of small agricultural producers. By joining forces and pooling resources, small farms and individual household farms can compete more effectively against large agroholdings.
In many cases, it is too costly for individual farms to implement certain activities independently. Cooperatives provide the opportunity to unite for joint operations, which yields better results than if the same number of farmers worked separately. Moreover, a key advantage of agricultural cooperatives is that they are managed by their own members—farmers themselves.
Thus, the formation of agricultural cooperatives can help attract investors, create additional jobs, and improve the living standards of cooperative members.
It is important to note that establishing an agricultural cooperative requires several legal steps that demand specialized knowledge and experience—something most farmers do not possess. These steps include forming an initiative group of founders, holding a constituent assembly, drafting statutory documents, and registering the cooperative as a legal entity. Therefore, at the stage of establishing an agricultural cooperative, it is essential to seek assistance from experienced legal professionals.
The WinnerLex Law Firm brings together top attorneys and legal experts who provide comprehensive legal support for agricultural producers and processing enterprises across various sectors of the agribusiness industry. Our lawyers understand the specific legal regulations governing the agricultural sector, allowing us to offer the most effective solutions to your legal issues.
Providing written consultations on the provisions of current legislation related to the creation of agricultural cooperatives;
Drafting statutory and other corporate documents necessary for the establishment and registration of agricultural cooperatives;
Assisting with the state registration procedure of agricultural cooperatives;
Developing internal operational regulations for agricultural service cooperatives;
Tax planning for agricultural cooperative activities;
External legal subscription services for agricultural cooperatives (legal outsourcing).
The decision to establish an agricultural cooperative is made at its founding meeting. The decision of the founding meeting is formalized by a protocol, drawn up in accordance with legal requirements, and signed by the chairman and the secretary of the meeting.
The statute of an agricultural cooperative must contain the following information:
- the name of the cooperative, its type, and location;
- the purpose of establishing the cooperative and an exhaustive list of its activities;
- the composition of its founders;
- conditions and procedures for joining the cooperative, as well as exiting or being excluded from it;
- rights and obligations of the members and associated members of the cooperative;
- the procedure for amending the cooperative’s statute;
- the procedure for determining the amount and payment of contributions and shares by cooperative members, and the responsibility for failure to fulfill obligations regarding payments;
- forms of participation of cooperative members in its activities;
- the procedure for the formation, composition, and competence of the cooperative's management and control bodies, as well as the procedure for decision-making, including issues that require unanimous or qualified majority votes from cooperative members participating in the general meeting;
- the procedure for the formation, use, and disposal of the cooperative’s property;
- the procedure for distributing its income and covering losses;
- the procedure for accounting and reporting in the cooperative;
- the procedure for reorganizing and liquidating the cooperative, and addressing related property matters;
- the procedure for convening general meetings;
- conditions and procedures for the return of shares.
Agricultural service cooperatives serve their members—producers of agricultural products—without the aim of generating profit and are non-profit organizations.
The non-profit nature of agricultural service cooperatives is determined by the following set of features:
- the cooperative provides services only to its members;
- the members of the cooperative are liable for the obligations they have undertaken to the cooperative regarding their participation in its business activities;
- the services are provided in order to reduce the costs and/or increase the income of the cooperative’s members.
Agricultural service cooperatives do not own agricultural products that are produced, grown, fattened, caught, or harvested (procured) by their members—producers of agricultural products. The owners of agricultural products that are procured, processed, supplied, and sold by the cooperative are its members. An agricultural service cooperative may own property separate from the property of its members.
It should be remembered that one of the advantages of an agricultural service cooperative is the possibility of receiving certain state financial support.
Financial support is provided to agricultural service cooperatives:
- in dairy and meat farming, which include at least 20 members, including one or more farming enterprises, and other individuals each of whom owns or uses agricultural land, provided they have animals identified and registered according to the law;
- in fruit and berry and vegetable growing, as well as the collection and processing of beekeeping products, wild berries, mushrooms, and plants, with at least 7 members, including one or more farming enterprises, and other individuals each of whom owns or uses no more than 100 hectares of agricultural land.
The procedure for using funds allocated in the state budget for providing financial support to the development of farming enterprises is defined by a relevant resolution of the Cabinet of Ministers of Ukraine.
Agricultural cooperatives are divided into production cooperatives and service cooperatives. A production agricultural cooperative is a cooperative formed by individuals who are agricultural producers. These individuals unite to carry out joint production or other economic activities based on their mandatory labor participation, with the goal of generating profit. A service agricultural cooperative is a cooperative formed by individuals and legal entities engaged in agricultural production. It is established to provide services aimed at reducing costs and increasing the income of its members while carrying out agricultural activities, as well as to protect their economic interests.
The procedure for the creation and state registration of agricultural cooperatives is governed by the Law of Ukraine "On State Registration of Legal Entities, Entrepreneurs, and Public Associations," with specific provisions outlined in the Laws of Ukraine "On Cooperation" and "On Agricultural Cooperation."
Agricultural service cooperatives that provide services exclusively to their members—producers of agricultural products, without the aim of generating profit—can have the status of non-profit organizations, provided that they simultaneously:
- are formed and registered in accordance with the law regulating the activities of the respective non-profit organization;
- have founding documents that prohibit the distribution of income (profits) or any part of it among members or employees (except for payment of labor and the single social contribution), members of the management bodies, and other related persons;
- have founding documents that stipulate the transfer of assets to one or more non-profit agricultural cooperatives or their inclusion in the budget revenue in the event of the cooperative's termination;
To obtain the status of a non-profit organization, the agricultural cooperative must be included in the Register of Non-Profit Institutions and Organizations.