The cooperative

A cooperative is a specific type of association. Unlike a regular association, the cooperative is permitted to pay its members a share of its profits. In some circumstances, a cooperative is therefore a viable alternative to the private limited company (BV) or public limited company (NV) as a choice of business structure.

 

The primary purpose of a cooperative is to provide for the ‘material needs’ of its members. The cooperative enters into agreements with its members with a view to facilitating the practice of a trade or profession by those members.

 

The requirements governing a cooperative’s Constitution allow much room for discretion with regard to the establishment of links between members’ input, control and profit entitlements. The cooperative is therefore particularly suited to structuring complex collaboration between parties with similar objectives.

 

The cooperative structure is widely used in the agricultural sector. One notable example is Royal FrieslandCampina, the world’s largest dairy cooperative, although there are also many smaller cooperatives made up of individual farmers.

 

Members’ liability

The cooperative differs from a regular association in that its members are, in principle, liable for any deficit should the cooperative be dissolved. It is, however, possible to stipulate alternative arrangements within the cooperative’s Constitution. The cooperative must indicate the degree of liability of its members by means of an abbreviation after its name: U.A. indicates a cooperative with non-liable members, B.A. stands for limited liability, while W.A. indicates statutory liability.

 

Taxation

As a commercial enterprise, a cooperative must pay corporation tax (vennootschapsbelasting) on its profits. Any profits on disposal or distributions received by members who are natural persons and have a holding of 5% or more are taxed in Box 2. Other natural persons are subject to taxation in Box 3. Members who are liable to corporation tax may be eligible for the substantial shareholding exemption.

 

Please contact us for further information and advice about setting up a cooperative or amending the Constitution of an existing cooperative.

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