Government launches White Paper on the regulation of cooperatives

Public consultation on legal amendments regulating cooperatives launched

By: maltatoday.com

Jul 19 2024
7
3643 Views

Government launches White Pap

Government has launched a White Paper on a Bill regulating cooperatives.

The Bill seeks to regulate cooperatives, with government stating it is aimed at helping them deal with modern challenges, while opening them up to the “global, dynamic and innovative markets of today”.

“Rooted in principles of mutual aid, democratic governance, and community empowerment, these member-owned enterprises span diverse sectors such as agriculture, fisheries and services,” the government said. “The cooperative movement is characterized by its commitment to sustainable development and social responsibility, addressing the unique needs of its members while contributing to the broader economic stability of the country. Through collective action and shared ownership, Maltese cooperatives not only enhance local productivity but also reinforce social cohesion and resilience, making them an important component of Malta's socio-economic landscape.”

Proposed changes to cooperative legislation include several key updates aimed at improving the attractiveness and functionality of cooperatives. One suggested amendment is to reduce the minimum number of members required to start a cooperative from five to three, as outlined in Article 22(2)(a).

This change aims to encourage more businesses to consider the cooperative model by lowering the initial membership threshold.

Another proposed change addresses the redemption value of a member's share or interest. Under current legislation, the redemption amount is based on the nominal value of the asset when a member leaves the society. The new proposal recommends determining the redemption amount based on the market value of the equity, rather than its nominal value, to make cooperatives more appealing to potential members by ensuring fairer compensation.

Additionally, the legislation proposes setting a minimum share capital requirement for cooperative members. Presently, Article 23 allows five members to contribute any amount without a set minimum for issued and paid-up share capital. The new law would mandate a minimum contribution of €300 per member, with the amount based on factors such as the business plan, enterprise viability, industry nature, and capital expenditure needs. This change aims to ensure sufficient initial funding for cooperatives.

The definition of the "Apex organisation" was also set to be expanded. The current definition allows only one organisation to be designated as the Apex, which excludes others.

The proposed modification would create an umbrella organisation named "Apex National Association," encompassing multiple recognised associations that meet specific criteria.

Furthermore, the amendments propose allocating 30% of funds collected by the Apex National Association to community and social initiatives, and 20% to finance Board operations, diverging from the current allocation solely for research and education. Enhanced regulation of recognised organisations, including provisions for deregistration and liquidation of inactive societies, is also a key aspect of the new legislation.

Those who wish to participate in the public consultation can do so here.