A cooperative is a pool of businesses and/or persons who want to cooperate economically to attain similar goals, but still retain their independence. Through cooperation, some areas of business can be better dealt with and attain an economic advantage. Purchase or sales cooperatives, which pool their efforts, fetch better prices and reduce their dependence on suppliers.
Credit cooperatives ensure the provision of affordable financial services. Cooperatives allow for joint investments in working capital, which would not pay off for the individual investor. Housing cooperatives provide affordable living space. Citizens and local communities organise local services (e.g. energy supply) along cooperative lines.
Historically, cooperatives have evolved out of the necessity for self-help and democratic self-government. Around the globe, some 900 million people today are members of cooperatives.
Relevance for artists
The corporate form of a cooperative appears to be less suitable in realising specific artistic projects. However, its potential in the field of art lies in organising similar needs and interests. Artists may, for instance, found a cooperative for the joint procurement of material and operating equipment, the joint sale of their services or to outsource activities from their own business, as it can ease delivery or be done more cheaply when pooled together.
Examples from other business fields; doctors under the state health scheme from a region do their billing and settlement via a cooperative, chartered accountants organise their central data processing on a cooperative basis.
To found a cooperative, a minimum of two members is needed. The requirements are written statutes, a positive business plan and becoming a member of an auditing association. The auditing association is a higher-level body of cooperatives to regularly audit their business operations. The foundation of a cooperative does not entail capital duty. A cooperative does not have a fixed stated capital, the share capital varies depending on the number of members. The minimum at formation is EUR 2.
A cooperative has legal capacity and is formed on registration in the companies register.
The circle of members is open, i.e. you can join a cooperative at any time by subscribing to its shares, and leave it by selling these shares. The managing board decides on the admission of members.
The supreme body of a cooperative is the members general assembly. The right to vote is laid down in the statutes; either one vote per person, or pro-rated according to the shares. Members of the managing board are at the same time members of the cooperative (principle of self-government). Under certain conditions, the Law on Cooperatives (Genossenschaftsgesetz) provides for setting up a supervisory board which supervises the management.
Members are liable to the extent of their shares and are obliged to make supplementary payments as laid down in the statutes.
The mandate of a cooperative is not to maximise its profits, but to promote its members in economic, but also social and cultural matters. This is why the relationship of the members vis-à-vis the cooperative is always a twofold one. They are at the same time investors and clients, suppliers and buyers, employers and employees (production cooperative), etc. Unlike with corporations, business relations between shareholders (members) and their company (cooperative) are not only allowed, but also desired in keeping with its mandate in promoting its members.
The audit of a cooperative does not only examine correctness and legality (mandatory every two years, annually for larger cooperatives) as in the end-of-year financial audit of a corporation, but also verifies the efficiency and effectiveness of management and provides reassurance to the decision-makers.
Advantages of a cooperative
A cooperative combines the elements of an association with that of a corporation: democratic decision-making internally, economic operations externally.
With open membership, members may leave and be admitted at any time by consent of the managing board. With corporations, the accession or resignation of members requires an amendment of the Articles of Association in notarised form.
Mandate to promote the members instead of maximising profits. The members cooperate but remain economically independent.
Owing to the limitation of liability and institutional audit, the cooperative is one of the safest company forms. The audit association advises the cooperative as of its formation and even allows for management by an unsalaried managing board.
Disadvantages of a cooperative
The administrative burden of a cooperative is not suited for every company.