Review of Co-op Laws in Iran (1997)

This document has been made available in electronic format
by the International Co-operative Alliance (ICA)

Part II - Review of Country Laws - Iran (1997)

Source: Co-operative Laws in Asia and the Pacific
by G.K. Sharma (pp.83-87)

The first cooperative law in Iran is reported to be enacted in 1925
which was amended in 1948, in 1952 and then June 1971. 

After the revolution in Iran the earlier co-operative society law of
June 1971 was replaced by the "Law of the Co-operative Sector"
on September 4, 1991. The new law has 71 articles divided into
12 chapters against 149 articles in 25 chapters. 

The important features of the law of 1991 are: 

Chapter I:
The first article provides co-operative "Sector" targets which is a
unique provision in the law. It states:

The Co-operative targets concern: 

1. Formation and Provision of conditions and work possibilities
        for the whole people to reach full employment.
2. Means to work availability to those who are able to work but
        lack means of production. 
3. Prevention of wealth accumulation and circulation in the hands
        of exclusive individuals and groups, with the aim of fulfilling
        the social justice. 
4.      Prevention of Government  becoming as an absolute employer. 
4. Accessibility of management, asset and the resulted revenues to
        the labour power and the persuasion to get the benefits directly. 
5. Prevention from monopolisation, goods accumulation, inflation,
        and exploitation.
6. Developing and strengthening the general collaboration and
        co-operation among the whole people. 

Concerning the needs governing on the general economic planning of
the country in any growth period, the above mentioned objectives
of this article have to be materialised. 

Article 3 requires government to collaborate with co-operatives
without interfering in the management or becoming an absolute

Further Article 4 states "To execute their programs and projects, 
he government and all the sub-organisations are to give priority
to co-operative sector in equal terms". 

Article 6 provides "The minimum and maximum number of the
co-operative members in proportion to the asset, employment
opportunity, kind of activity and the consideration of the principle
of absence of the centralised wealth circulation, will be determined
through a procedure approved by the Co-operative Ministry. However,
the number must not be less than seven members. 

Chapter II : Member
In this chapter from articles 8-15 membership qualification,
termination, and procedure for membership has been provided.

Chapter III : Asset 
An important provision under article 17 is, "Co-operative Societies
are those that the whole or at least 51% of the assets are put at their
disposal by the members."

Under Article 18 government can consign industrial, agricultural,
or service units and public properties at the disposal with certain
conditions which include payment of compensation as also power
to government to give suitable directions with regard to management
of such a project by the co-operatives. 

The chapter also provides share allotment and valuation of shares in
case of share contributions in funds. 

The chapter also provides to the government  extending financial
assistance directly or through banks with certain conditions. 

Chapter 4 : Income and Loss Account, Dividend and Other
Financial Regulations 
The article 25 provides profit distribution as under: 

1. At least 5% as legal deposit fund (LDF) as Co-operative
        Deposit Fund (CDF) till it reaches at least one fourth of the
        average last 3 years turnover. Co-operative can use not more
        than 50% of the fund to increase its assets.

2.      5% Precautionary Reserve Fund (PRF) 

3.      4% in the Cooperative Bank as Education Fund 

4.      Bonus to the workers - officers, members employees. 

5.      Balance to be shared as per bye-laws and agreements if any.

Chapter 5  : Production and Distribution Co-operative
This chapter gives priority to the Production Co-operatives as explained
in this article in privileges and support in comparison to other type of

Chapter 6: The Co-operative Organs
This chapter deals with functioning and powers of General Assembly
including election of Board of Directors and Inspector for 2 years. 

Article 36 provides the strength of Board as minimum of 3 and
maximum of 7 and one-third substitute members. The strength can
be increased for each extra 400 members. The chapter details the
functions and responsibilities of the Board under article 37. Article
40 deals with election of inspectors by the Annual General Meeting
and article 41 deals with the functions which include audit and
continued supervision on the working of the co-operatives. 

Chapter 7: Co-operative Union
This chapter deals with the formation and working of unions
and secondary co-operatives to provide education, research and
guidance to the co-operatives and to arrange their commercial needs.
They are also authorised to arrange arbitration in case of disputes
between co-operatives as also supervise the working of co-operatives.
One union each can be formed for different types of co-operatives. 

Chapter 8  : Establishment and Registration
The chapter details the procedure for registration of the
Co-operatives which are to be submitted to the Registrar of Companies
for registration.  

Chapter 9 : Merger, Dissolution and Liquidation
The chapter deals with the conditions under which a society can be
wound up and the procedure for it. It provides under article 55 that
extraordinary General Assembly or Ministry of Co-operative may
nominate 3 individuals to liquidate the society within 3 months. 

Chapter 10 : Co-operative Chamber 
This chapter deals with the formation of a Central Co-operative
Chamber with the following objectives: 

1. Performing the duties and authorities of the Industry, Trade,
Mines, and Chamber (ITMC) relevant to the Co-operative
2. Executing the affairs delegated to the Chamber according to
the procedure. 
3. Resolving the discrepancy and judgement within the limits
of affairs related to the Co-operatives by arbitration and
reconciliation between the members and unions, as well as,
between the Co-operatives and the Unions.

Each Co-operative Chamber has an independent, legal character and is
not dependent on government financially and administratively. 

Chapter 11 :Institution of Co-operative Movement 
Articles 57 and 58 provide for the formation of a single association as
the spokesperson of the co-operatives and its functions.

Chapter 12 : Role of Government
The Ministry of Co-operatives not only acts as a supervising agency
on behalf of the Government but also acts as a representative body of
the co-operatives [Art 66 (8)]. It also takes over functions of all other
organisations in different ministries relating to co-operatives.