Finland: Cooperative Principles & National Legislation (1995)

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   This document has been made available in electronic format
           by the International Co-operative Alliance.
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          COOPERATIVE PRINCIPLES AND NATIONAL LEGISLATION
                     THE NORDIC COUNTRIES

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                            FINLAND
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Cooperative activities in Finland found their organized forms in
the beginning of the 20th century. Setting up Pellervo
Association in 1899 to promote rural cooperation and imposing
cooperative legislation in 1901 laid down the grounds for
cooperative development in Finland.

1.   Principles

The principles of Finnish cooperative activities are based on
widely agreed international standards. The following
characterizations of cooperatives draw on tradition and
legislation.

     A cooperative is a common interest group exercising
     economic activities.

     A cooperative helps its members make their living, and
     members use its services.

     A cooperative is an open voluntary organization.

     A cooperative is member-driven democratic group of
     individuals.

     In the so called primary form of cooperation each member
     has one vote.

     Operative surplus is divided among the members with respect
     to their service-usage rate.

2.   Legislation

In Finnish legislation the Act of Cooperatives from 1954 is a
general law. It applies to all cooperative companies. In addition
to this, cooperative banks are regulated by a specific statute.
Only few sanctions are included in the 1954 Act. Discretionary
regulations are used to make the cooperative by-laws flexible
enough to ensure proper quality and extent of actions.

3.   Establishing a Cooperative

A cooperative is established by a written agreement stating the
by-laws of the cooperative. For a primary cooperative a minimum
of five originators and for the so called secondary cooperative
a minimum of three originator organizations are required. 

A new cooperative has to enter the trade register. As long as the
establishing process and the by-laws of the cooperative meet with
the leagal requirements the authorities may not deny the entrance
of the cooperative in the register on grounds of expediency.

3.   Members

Membership in a cooperative is open in the sense that cooperative
by-laws may not block new members joining in or fix the number
of members. However, restrictions may be imposed on membership
based on the general purpose or the business sector of the
cooperative.

Membership in a cooperative is voluntary in the sense that a
member can freely resign the cooperative. However, the by-laws
may prohibit a new member to resign within a certain time period
(maximum of 3 years). Membership of a cooperative may not be
transfered or inherited.

At the end of the membership, the member, his assignee or
beneficiary has the right to redeem the membership fees.

Unless otherwise stated in the by-laws, the members of a
cooperative do not carry a personal responsibility of the
liabilities or debts of the cooperative.

4.   Financing

According to a general principle a member pays one cooperative
fee to the cooperative. However, the by-laws may entitle or
obligate a member to more than one fee. Also, by-laws stipulate
the amount of the fee. The maximum or minimum of the fee or the
cooperative capital are not regulated by the law.

Voluntary means of financing are the members~ investment shares,
which can be sold to non-members as well.

5.   Administration

Mandatory bodies of a cooperative are the general meetings, board
meetings, and auditors. This administrative structure can be
modified to include other organs, too.

The board of a cooperative represents and runs the cooperative
following the law, by-laws, and resolutions of the general
meeting. A cooperative may have, and urually has, a managing
director.

A cooperative follows the principle of each member having one
vote. This is a mandatory rule used in the general meeting of a
primary cooperative. In a secondary cooperative the voting power
of member organizations may be adjusted on grounds related to the
purposes and the business sector of the cooperative. The
resolutions are usually based on majority votes, although
qualified majority rule applies to certain exceptions.

6.   Miscellaneous Remarks

Legislation which regulates entrepreneurship in general applies
also to cooperatives. Therefore, there are no special cooperative
stipulations (different from those applying to e.g. limited
companies) concerning accounting, taxation or audit. Also, the
legislation regulating the labour markets and competition applies
to cooperatives.

                                         March, 1995