Like in a limited company, the cooperative member is not liable for the cooperative’s debts during its operations if this has not been specifically stipulated in the rules. These kinds of stipulations in the rules merit thorough considering. The obligation of the members to pay in case of bankruptcy or liquidation of the cooperative (the obligation of supplementary payments) is such an important derogation from the general rule that there has to be a due cause.
Extraordinary payment (COA, Chapter 13)
The cooperative member is not liable in any way for the cooperative’s debts, nor can the member be forced to participate in the cooperative’s investments with their money. However, it can be stipulated in the rules that the cooperative’s general meeting may decide to levy an extraordinary payment from its members for a specific need, determined in the rules, during the operations of the cooperative. In this case, the rules must also contain the basis for this obligation to pay and the maximum limit of any payment acceptable for a member during the financial year. Usually, this extraordinary payment is not refunded, but the rules can also stipulate that it has to be refunded.
The decision to levy an extraordinary payment is a resolution of the general meeting with a simple minority unless the rules stipulate a higher majority for such a resolution.
When considering an extraordinary payment stipulation, it is useful to think of the possible future needs that would justify extraordinary payments from the members. Do not include such a stipulation in the rules if the cooperative has no intention to levy these payments from its members.
With a simple majority, the cooperative’s general meeting can decide to levy an extraordinary payment during the cooperative operations to improve its solvency, pay its debts, or finance its investments. The extraordinary payment can be levied as a loan or as a final payment non-refundable to the member, according to the general meeting’s decision or the board of directors, empowered by the former. The extraordinary payment is levied from the member in accordance with the principle of equality, proportionally either to the number of shares or to the number of cooperatives’ services used by each member during the financial year ended, or applying both of these criteria, according to the decision concerning the extraordinary payment. During each financial year, a member can be ordered to lend funds in one or more installments in the amount of up to …………… times the amount of the member’s amount of shares / € X. If the extraordinary payment is levied as a loan from the member, the installments levied are paid back to the members one year at the earliest and in ten years at the latest after the end of the financial year during which each installment has been levied from the members. If the membership end before this date, the loan is refunded simultaneously as the member’s contribution. The loan is refundable in accordance with the same conditions as the part refundable of a share.
Obligation of extraordinary payment (COA chapter 14)
The member’s personal liability for the cooperative’s debts is limited to the amount of money placed in the cooperative as equity capital. This principle is identical to limited companies. The rules of the cooperative can stipulate that its members are liable for its debts in case the own funds of the cooperative in bankruptcy or insolvency will not suffice to pay its debts (obligation of extraordinary payment). The obligation of extraordinary payment is a significant derogation from the rule according to which members are not liable for the cooperative’s debts.
If the stipulation for the obligation of extraordinary payment is included in the rules, the rules must also stipulate how the liability is shared between members, whether the obligation of extraordinary payment is limitless or limited, and, in the last case, what is the limited amount.
The board of directors of the cooperative has to ensure that anybody applying for membership has been clearly informed of the eventual obligation of extraordinary payment. This should be made so that it will be possible to demonstrate later that the member has been informed of this obligation.
Because the members’ obligation of extraordinary payments is a rare exception and there is no reason for the cooperative to deviate from liability for debts identical to limited companies, the model rules do not contain a model stipulation for such an obligation.