Review of Co-op Laws in Japan (1997)

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

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

Source: Co-operative Laws in Asia and the Pacific
by G.K. Sharma (pp.88-99)

Japan
*****
The transformation of Japan into a modern society started during
the middle of 19th century when the Meiji Restoration took place
and Japan changed from a feudal society into modern state. During
the Meiji period, industrial development was of primary importance
in the Government Economic Policy and agricultural sector was
imposed with heavy responsibility not only in food supply but also
in tax assessments. Consequently many farmers were forced to ruin,
leading to the spread of social unrest. To face this situation the
Government decided to extend positive assistance to promote
establishment of co-operative societies and during 1880s many
marketing societies in primitive form were established on voluntary
basis for major export commodities, such as silk and tea. 

With the efforts particularly of Mr. Tosuka Hirata who was a member
of Iwakura mission to USA and Europe in 1871 to study international
law and who was President of Co-operative Union of Japan from 1905
to 1922 the first co-operative law was enacted in 1900 which gave
statutory approval for establishment of four kinds of primary co-operative
societies, such as credit, marketing, purchasing and processing. The first
revision of the law in 1906 enabled credit co-operative societies to
operate marketing, purchasing and processing businesses concurrently.
This established the groundwork for the development of present type of
multi-purpose co-operative societies. The second revision of the Law in 
1909 opened the way for establishment of federations and national union.

Towards the end of 1930s, along with the shift to a wartime economic
control, the business activities of co-operatives were brought within the
confines of overhead control. In 1943, the Agricultural Society Law was
promulgated and the co-operative societies were merged into agricultural
society together with other agricultural organisations. All the farmers were
forced to become members of Agricultural Society. Thus the co-operative
movement started in 1900 ceased to exist until 1947 when the new
Agricultural Co-operative Law was enacted.      
In pre-war days, cooperatives in rural areas experienced a lot of
difficulties since they included landlords and non-farmer residents also
as members. But their interests often conflicted with those of farmers.
In post war period the government, therefore, enacted separate
Agricultural Co-operative Law to enable Agricultural Co-operative
Societies to serve farmers in voluntary and democratic manner to the
maximum extent by making farmers as their regular members with a
view to eliminating any possible interference of the Government and
non-farmers interests. 

Thus after World War II, co-operative societies were re-established
under the new co-operative laws. In pre-war period it was only one
co-operative law, under which various types of co-operatives were
registered. After World War II, however, cooperative laws were enacted
separately for each type of co-operatives, such as agriculture, consumers,
fisheries, small and medium enterprises and forestry owners. The
development of co-operative law can be seen in the attached statement
at the early 1976. (the statement is not produced here. If needed, you may contact the ICA Regional Office in New Delhi, e-mail <icaroap@giasdl01.vsnlnet.in>)

Japan at present has 6 cooperative laws, which are as under:

1.      Agricultural Co-operative Law, 1947 
2.      Consumers Livelihood Co-operative Society Law, 1948 
3.      Labour Bank Law, 1953 
4.      Credit Bank Law, 1951 
5.      Fisheries Co-operative Association Law, 1948 
6.      Forestry Owners Cooperative Law, 1951 
7. Central Co-operative Bank for Agricultural and Forestry
        Law, 1943.

The Agricultural co-operative society law was the first sectoral law
in Japan which gives the broad frame- work for other co-operative laws.

It has 102 articles divided into 6 Chapters and has been amended 27
times from 1943-1993.

Chapter I -  General Provisions
-------------------------------------
This chapter deals with objects of the law and definition of farmer,
agricultural and firewood. The object of the law under article 1 defines as
"This law has for its objective the promotion of the sound development
of the farmers cooperative system, thereby improving agricultural
productivity and the socio-economic states of farmers as well as
ensuring the development of national economy." 

The consumer co-operative law includes "society shall not be utilised for
any political purposes." Similarly, in case of Labour Bank Law, it  also
include "a credit co-operative shall maintain a political neutrality in
conduct". It is interesting to note that there is no such provision in case
of Agriculture Co-operative Law and Fisheries Co-operative Law.

Chapter II : Agricultural Co-operatives  and their Federation
------------------------------------------------------------------------
This section contains 6 sections as under:

Section 1 : General Rules 

The important provision in this section is article 6 which states 
"The amount equivalent to the surplus dividends which are paid by a
co-operative in proportion to the rate at which its business is utilised
shall, in accordance with the provision of the corporate tax law, be
counted as the amount of loss on the income of the said co-operative
for each business year".

This provision is provided in the Fisheries Co-operative Law also but
not provided in consumer co-operative law and labour bank law.

Further article 8 provides "a co-operative has for its objective the
performance of business in order to serve its members and member
co-operatives to the maximum degree, and shall not be allowed to do
business for profit making purpose".

Section 2  : Business 

This section deals very exhaustively the scope of business which a
co-operative could do for its members which include along with others
credit, savings, installation of joint use facilities, management of land,
rural industries, mutual relief insurance, medical facilities, welfare of
elderly people, educational facilities, discounting of bills, exchange
transactions, lending of securities, underwriting Government bonds,
Trust Business, Protective Custody of securities, precious metals and
other items as also loans to local public organisations or non-profit
juridical persons and creating of subsidiaries of a federation of
agricultural co-op and holding shares of Securities Company etc.:

i. In case of consumer cooperative it shall not make its facilities
available to other than members except when permitted by
administrative authorities. 

ii. It shall also not affect and hurt the interest of the businessmen
of the medium and small retail traders as a result of supplying
commodities. 

Section 3 : Membership 

Agri. Co-ops            Consumer Co-ops Labour Credit Co-ops 
Article 12              Article 14              Article 11

1. Farmers              1. As provided in       1. A trade union
the bye-laws but        having office in
have to be              area of co-op.
juridical persons       not allowed 

2. A Farmers            2.Who lives in          2.Consumer 
Group Corpn             the area in the         co-ops having 
engaged in farm case of fixed           office in area of
management              area co-ops.            Co-operatives

3. An individual        3. Those who are        3. An organisa-
living in area          engaged in same tion of national
and qualified to        occupation in case      public employees,
make use of             of co-operatives        health insurance
services.               of specific             and its federation
occupation              and a mutual aid
association having
office in area of
labour credit co-ops. 

4. Any other Agri.
Co-operatives

5. Farmers Group which 
has object of common
interest of farmers
through co-op system

Revolving Fund
-------------------
In addition to capital stock contribution (share capital)  under article
13.2 "a capital stock co-operative may, in accordance with the provision
of the articles of incorporation, ask its members to contribute the whole
or part of the surplus funds to be paid to its members as dividends in
proportion to the rate of their utilisation of its business, but such capital
contribution shall be limited to a period not exceeding five years".

In agricultural co-op law, article 16.5 and also fisheries law "No proxy
may stand proxy for five or more members. In case of consumer
co-operative law article 17.4  allows, proxy of 10 persons. There is
no such provision in Labour Bank Law.

All the laws provide that a member who does not use services of the
co-operative for a reasonable long time will stand disqualified. 

Section 4 : Administration 

Article 28 provides subjects to be included in the Articles of
incorporations including the procedure of election of officers. In addition
article 29 provides items to be included in the bye-laws namely:

i.      General Meetings 
ii.     Conduct of business operations and accounting 
iii.    Officers 
iv.     Members 
v. Other matters

Article 31 deals with conduct of elections. It also states that two-thirds
of the officers to be elected have to be from regular members and the
term of office shall not be more than 3 years.

Under article 32 "the board of directors shall decide on the execution of
co-operative business and supervise the execution of duties of directors".

Under article 43 "A member (excluding an associate member) may, with
consent of one tenth or more of the members, request the directors to
dismiss a general manager or a chief accountant."

Article 49 provides for reduction in face value of share as under "In case
where a capital stock cooperative makes a decision on the reduction in
the face value of each share, a new inventory and balance sheet shall be
prepared within two weeks after the day on which the decision was
made."

Section 5 : Establishment 

The section deals with registration procedure and under article 60
application may be refused on the following grounds:

The administrative authorities shall, upon application for approval
under Paragraph 1 of the foregoing Article, grant the approval except
in the following cases:

1. In case where the procedures for the establishment, or the contents
of the articles of incorporation, or the business plan are in violation
of the laws, orders or actions taken by the administrative
authorities based upon the laws or orders;

2. In case where the business is deemed unwholesome and contrary to
public interest; 

3. In case where the establishment of a federation of agricultural
co-operatives is deemed detrimental to the sound development of
a central union of agricultural cooperatives, on ground that the
proposed federation of agricultural co-operatives plans to carry on
the same business in whole or in part of the business carried on by
a central union of agricultural cooperatives. 

Under article 61 if approval or disapproval is not conveyed within two
months, the society shall be deemed to be approved for registration. 

The section also deals with the procedure of promoters meeting and how
the society will be operative. 

Section 6 : Dissolution and Liquidation 

Under article 64 a cooperative shall be dissolved for the following
reasons: 

1.      Resolution adopted by general meeting 
2.      Amalgamation 
3.      Bankruptcy 
4.      Expiration of duration 

Under article 71, in case where a cooperative has been dissolved, its
directors shall act as the liquidators, except in the case of dissolution
due to the amalgamation or bankruptcy. This rule however, shall not
apply to the case where the persons other than the directors have been
nominated at a general meeting. 

In case where a co-operative carrying on the business under Item 8,
Paragraph 1, Article 10, has dissolved in accordance with the provision
of Paragraph 6, Article 64, the administrative authorities shall nominate
liquidators irrespective of the Commercial Law that applies
correspondingly under the preceding paragraph and Article 72-2.

Chapter II -  Farmers Group Corporation
-------------------------------------------------
The object of a farmer group co-operative under article 72.3  states "a
farmer group corporation shall aim to increase the interests common to
the members through facilitating cooperation in agricultural production by the members". 

Under article 72.5 they are entitled to have tax exemption as to
co-operative and provides other provisions similar to those applicable
to agricultural co-operatives. 

Chapter III - Central and Prefectural Unions of Agricultural Co-ops
---------------------------------------------------------------------------------
The chapter deals in detail about the establishment and working of central
and prefectural unions. Under article 73, "The Government may subsidise
part of the expenditure of the unions required for carrying on their
business, within budgetary limitations of each financial year".

Under Article 73-9 each union shall perform the following businesses
in order to attain its objective:

1. Guidance for member co-operatives in their organisation, business
operation and management;

2.      Auditing of the accounts of member co-operatives; 

4. Offering of education and information to member co-operatives;

5. Liaison among member co-operatives and mediating in disputes
involving member co-operatives; and

5.      Investigation and study regarding co-operatives.

Article 73 -10 - the Central Union, in order to secure the extension of its 
business to the fullest extent, or in order to coordinate the business of the
respective prefectural unions, may give them guidance and instructions.

In case where the Central Union deems it necessary to do so in order to
give guidance and instructions to prefectural unions, the Central Union
may, in accordance with the provision of its articles of incorporation, give
directives to prefectural unions on matters relating to the establishment of
business plans or to changes in business plans on important matters
relating to other business or accounting; or the Central Union may
encourage prefectural unions to consult with the Central Union or may
request them to present their business reports or required papers or
accounting books. 

In Central Union, the President is responsible for supervising the business
under article 73-19. The President shall represent the central union and
shall have prime supervision over its business.

The Vice-President shall, in accordance with the provision of its articles of
incorporation, represent the central union, assist the President, take charge
of the business of the central union, act on behalf of the President in case
of an accident involving the President, and shall perform the duties of the
President in case the presidency is vacant.

Chapter IV -  Registration
-------------------------------
This chapter deals with registration of the establishment of branches,
offices, auxiliary office, dissolution, amalgamation of co-operatives,
farmer group and unions which is post operative after the articles of
memorandum are approved.

Chapter V - Supervision 
------------------------------
Article 93 authorises administrative authorities to call information and
reports from co-operatives to find out whether they are working
according to the law. 

Under article 94 administrative authorities may inspect a co-operative
at the request of 10% of the members as also at their own initiative to
examine the working. Under article 94 (4) the administrative authorities
shall inspect every co-operative once a year. 

The article also gives powers to administrative authorities to give
directions with regard to their business, amendments of bye-laws in a
reasonable time and in case of non-compliance ask for re-election or
even cancellation of the registration. However, before giving such order
an advance notice has to be given to the concerned higher union and hear
their views. However, the law does not provide to take over management
of a co-operative by the administrative authorities as in some other laws.

Chapter VI - Panel Provisions
------------------------------------
The chapter provides for 20 types of offences which in some cases include
imprisonment up to 3 years and fine and in other non-criminal offences
fine not exceeding 1000,000 Yen.

..