Part II - Review of Co-op Laws in Afghanistan (1997)

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

Part II - Review of Co-operative Laws - Afghanistan (1997)

Source: Co-operative Laws in Asia and the Pacific
by G.K. Sharma (pp.31-35)

Review of Country Laws

No information is readily available whether there were any local
initiatives to promote co-operatives in Afghanistan. It is a
land-locked country with staunch tribal society - literacy rate
is very poor. Being staunch Muslims they are not easily
influenced by external factors. Even the British Raj in India
could not influence much on the life of Afghans. The initiative
with regard to co-operatives seems to have come from the
Government only in the sixties. According to the ILO/TAP/
Afghanistan/RS Report in 1965 we find a reference some years back,
the Government of Afghanistan had asked an expert to study and
report on the possibility of organising cooperative credit societies
in the country. The expert suggested that a cooperative law should
be enacted. 

Another expert in the following years prepared a draft law on
Co-operation.  This draft was based on the existing laws prevailing
in various Indian states, the basis of which had been the Indian Act
of 1912." 

The co-operative law was first time approved by the Cabinet  on
August 26, 1974  and by the King on October 30, 1974.  It became
operative from November 23, 1974 from the date of its publication
in the official gazette.  The law has 51 articles divided in 13 chapters.
It is a short, simple law which can be easily understood by any person
and does not need the help of experts to interpret it.  Some of the
important provisions in this law chapterwise are as under:       

Chapter I
It contains only two articles.  Article two deals with definitions
and defines a co-operative as under: 

`Co-operative' an association of persons who have voluntarily
joined together to achieve a common social and economic end through
the formation of a democratically managed and controlled organisation.

`Primary Co-operative': a cooperative formed by at least eleven

`Secondary Co-operative' : a co-operative formed by at least three

Chapter II :
It has only one article and deals with responsibilities and functions of
the Co-operative Department.  These include, to register co-operatives,
prepare model bye-laws, enforce law, regulations and bye-laws
provide assistance, guidance and advise and audit the accounts of
the co-operatives.  The law also authorizes the co-operative department
to represent the co-operatives till a national co-operative federation is

Chapter III :
This chapter has five articles and deals with registration of
co-operatives as also amendment of bye-laws.  Article 6 provides
that in case the Registrar declines registration he must inform
justification for non-registration within 60 days. 

Chapter IV :
It has only two articles dealing with membership which include
"no member of a primary co-operative shall hold membership in
another primary co-operative with the same objects and functions
in the same area of operation."

Chapter V :
The chapter has four articles and deals with termination of membership
as also voting rights.  It provides six months notice for withdrawal and
a member remains responsible  for two years from the date of termination
for liabilities during his membership. For voting rights while in case of
primary co-operatives, there is one member one vote in case of secondary
co-operative up to five votes are allowed to a member depending on the
provisions of the bye-laws.

Chapters VI &  VII :
These deal with annual and extra-ordinary general meetings. Important
feature is that a quorum for AGM is minimum of 51% and in case of
extra-ordinary general meeting it is 75%. However, if the quorum is
not present, next meeting will be called within one month when
quorum will be only ten excluding managing committee members.
In case of second extra-ordinary general meeting within one month,
if there is no quorum of 75%, a third meeting will be called within
three months.  If the quorum is still not there the matters will be
referred to Registrar to enquire the reasons under Article 4 and
initiate appropriate action thereafter.

Chapter VIII :
This chapter deals with managing committee.  The important
features are: 
i. The minimum number has to be five and the maximu
	tenure can be three years. 
ii.	A member can be elected for two terms only. 
iii.	It must meet at least once in a month. 

Chapter IX :
It deals with the capital and financial affairs and includes article
28 to 36. Some of the important features of these articles are: 

i. the number of shares of a co-operative is to be unlimited but in
	case of a primariy co-operative no member shall hold more
	than 10% of the paid up capital.
ii.	Reserve has to be a minimum of 25% of surplus. 
ii. Not more than 20% of surplus can be allotted for the interest
	on capital and rate of interest shall not be more than 5%. 
iii. A minimum of 30% surplus has to be allotted for patronage
	rebate to members based on the business done. 
iv. Loan to non-member cooperative has to be decided by the
	General Meeting only and needs approval of the Registrar.
The co-operatives are also allowed tax exemptions under article
35 for 10 years from registration.

i. All fees and taxes in connection with registration, or with sale,
purchase, rent and mortgage are exempted. 
ii.	50% on income tax levies, exempted
iii.	Fees and expenses of courts not charged
iv.	Audit and supervision fee by department to be free 
v.	Other privileges may be decided by the government.

Chapter X :
It deals with Accounts and Audit and provides about maintenance
of accounts books, year and period of the accounting.

Chapter XI :
It deals with settlement of disputes, inspection and enquiry. The
important provisions are:

* The Registrar is authorised under article 39 to arbitrate in
all disputes between cooperatives  and their members. An
aggrieved party can go for appeal to any court having
jurisdiction for judgement. 

Article 41 prescribes the conditions for initiating enquiry by the
registrar and under article 42 if the enquiry finds the managing
committee culpable, he may dismiss the managing committee and
appoint a new committee from the staff of the Department. If the
new committee is not elected within 2 years he can order to dissolve
the society. Further, in the enquiry if a person is found to be responsible
of an offence or crime, he may be referred to the court. 

Chapter XII :
This chapter deals with amalgamation, merger and dissolution.
An important feature is that members have no claims except their
paid-up share capital on the surplus after liquidation. The surplus has
to be used for development of the co-operative with the approval of
the government.

Chapter XIII :
This deals with miscellaneous items including appeals for refusal
to registration.