Starting a Cooperative in Finland

Use of the assets of the cooperative

Content

Surplus (COA chapter 16, Sections 5 & 6)

The stipulation of the rules regulating the surplus distribution is one of the most important. The economical yield from the cooperative’s operations, i.e., the surplus according to the income statement, can only be distributed to the members if this is permitted in the rules. In the absence of rules on the criteria of distribution, the surplus will be divided proportionally to the number of services of the cooperative used by its members.

The criteria for the surplus distribution can be stipulated quite freely in the rules. The surplus can be stipulated to be distributed according to the proportion of used cooperative services, the amount of capital placed in the cooperative, or any other distribution method. The rules can allow different parallel ways of distribution and their order of application.

The next model includes the two most common criteria for surplus distribution. The first one is very general as an expression, “return of the surplus proportionally to the use of the services”. Its practical implementation must be considered carefully in, e.g., worker-cooperatives with diversified lines of business.

§ The surplus

The surplus can be distributed to members as a return of surplus proportionally to the use of the cooperative’s services, proportionally to the shares, or as interest from the amount paid for the shares, or in any other way suggested by the board of directors.

The general meeting of the cooperative will decide about the surplus. It can not decide to distribute more than the board of directors has suggested or accepted as distributable.

Refunding of the share (COA chapter 17)

When a member leaves the cooperative or terminates a share not tied to the membership, the cooperative returns the amount marked as share capital paid with the subscription price. The amount to be refunded can also be stipulated in the rules or the decision concerning the subscription price.

The rules can freely stipulate the amount of share to be refunded. As to the subscription price, the cooperative can refund less or more than was paid for the share. The refunding of the share requires that the cooperative has distributable non-restricted equity at the end of the financial year during which the membership ended, or the share was terminated.

Day of refund:
According to the Cooperatives Act, the amount refunded from the share is paid one year after the end of the financial year during which the membership ended, or the share was terminated. The rules can stipulate a longer or a shorter period of refund. The period or refund is always at least six months from the end of the financial year.

If the rules stipulate that the payment is refunded later than one year after the end of the financial year, there has to be a stipulation about the shareholder’s rights between the share termination and the share refund.

If no derogation is made from the refund in accordance with the Cooperatives Act, there is no need to incorporate a stipulation about the share refund.

§ Share refund

After the end of membership or after the revocation of a share, the member is entitled to the refund of the amount marked as share capital in the way and under the conditions stipulated in the Cooperatives Act, chapter 17, sections 1 and 2.