Cooperative Companies

Cooperative Companies

Cooperatives represent modern forms of cooperation and have been established in many countries by various social groups for diverse purposes. Cooperative companies are one of the seven types of companies recognized under the Iranian Commercial Code. The purpose of this text is to examine the activities of cooperative companies and to clarify their distinguishing features in comparison with other forms of companies. Cooperative companies are typically formed among members of a specific profession or among individuals who share common interests and objectives. The first cooperative company in Iran was established in 1935, and today all such entities operate under the supervision of the Ministry of Cooperatives, Labour, and Social Welfare.

Governing Bodies of Cooperative Companies

The Concept of Cooperative Companies

A cooperative company is an entity formed for employment and activities related to production and distribution, aimed at improving the economic and social conditions of natural persons through cooperation and collective effort.

The key points reflected in this definition include the following:

• Only natural persons are eligible for membership in cooperative companies.
• The activities of cooperative companies are limited to production and distribution.
• The formation and operation of cooperative companies are subject to the specific objectives set out in Article 1 of the Law on the Cooperative Sector.
• Activities within cooperative companies are carried out through cooperation, collective participation, and shared effort.
• Compliance with legal regulations governing the formation and operation of cooperative sector companies is mandatory.

Types of Cooperative Companies

In terms of the nature of their activities, cooperative companies are divided into two main categories: production cooperatives and distribution cooperatives.

• Production Cooperative Companies: These are companies whose objective is to employ members in activities related to agriculture, livestock farming, animal husbandry, fisheries, industry, urban and rural development, nomadic development, and mining.
• Distribution Cooperative Companies: These companies provide and distribute housing, goods, services, and other essential needs. In addition, cooperative companies are classified according to whether they are members of general or specific cooperatives.
• General Cooperative Companies: Membership is open to the public. The founders or the company itself are required to offer shares to the public to provide part of the initial capital or to increase the company’s capital.
• Specific Cooperative Companies: Membership in these cooperatives is limited to specific groups such as employees, workers, farmers, veterans, students, women, or individuals engaged in particular professions. Based on the above, it is evident that there is no restriction on membership for applicants who meet the required qualifications.

Objectives of Establishing Cooperative Companies in Iran

Cooperative companies are established within the Iranian economic system for multiple objectives, including the following:

• Providing the necessary facilities and conditions to achieve full employment.
• Making work tools and resources available to individuals who are capable of working but lack the necessary means.
• Preventing the concentration and circulation of wealth in the hands of specific individuals or groups.
• Avoiding excessive dominance of the state as an employer.
• Encouraging the workforce to directly benefit from the results of their labor and placing management, capital, and resulting profits under their control.
• Preventing harm to others, monopolies, hoarding, and inflation.
• Promoting and strengthening public cooperation and participation among all members of society.

Legal Rules and Characteristics of Cooperative Companies

• The minimum initial capital required to establish a cooperative company under applicable regulations is one hundred million tomans.
• The number of members at the time of registration or during operation must not be fewer than seven persons.
• In cooperative companies formed for employment, service, or production purposes, the number of members must be at least 50% of the permanent jobs defined in the cooperative plan.
• The maximum number of members in housing cooperatives is determined by the General Directorate of Cooperatives, taking into account the qualifications of the managers.
• The amount of capital and the value of shares are determined by the founding board and specified in the articles of association.
• Members are obligated to pay the committed value of their shares within the period specified in the articles of association, which must not exceed two years.
• The contribution of all members to the capital is equal, unless the general assembly has approved the purchase of additional shares by certain members.

Profit Distribution in Cooperative Companies

In cooperative companies, net profit is calculated at the end of each financial year and distributed among the members. At least five percent of the profit is allocated as a statutory reserve, and up to an additional five percent is allocated as a contingency reserve. 4% of the profit is also allocated to training under the cooperative contribution heading.

In general, the annual profit of cooperative companies must not exceed six percent. A portion of this profit may be allocated as a reward to members upon the board of directors’ proposal and the general assembly’s approval.

Frequently Asked Questions About Cooperative Companies