The aim of this page is to offer an interpretation of the conditions for approval set out in the royal decree of 8 January 1962 laying down the conditions for approval of groupings of cooperative societies and cooperative societies.
Membership in a cooperative society is voluntary
(Translation) "The affiliation of associates must be voluntary and the cooperative society may refuse the affiliation of associates or declare their exclusion only if the persons concerned do not meet or cease to meet the general conditions of admission provided for in the articles of association or if they commit acts contrary to the interests of the society". (Art. 1, § 1, 1°, of the royal decree of 8 January 1962).
"In the event of refusal of membership or exclusion referred to in paragraph 1, 1°, the company shall communicate the objective reasons for the refusal of membership or exclusion to the person concerned who so requests". (Art. 1, § 2 of the royal decree of 8 January 1962).
The cooperative society is, by its nature, open to any person wishing to join it. This cooperative principle does not mean, however, that anyone wishing to join the society has the right to be admitted.
The associates of the society decide with whom they wish to collaborate. In other words, they may designate categories of persons who may become associates of the society. As such, members of the society may have a legitimate interest in accepting only new associates who meet certain membership conditions objectively set out in the articles of association (such as residence, profession, capacity, etc.).
The principle of voluntary membership presupposes that the conditions of membership are objective and non-discriminatory. As such, an application for membership cannot be refused on the basis of the applicant's sex, race, social origin or political or religious beliefs. The applicant must, therefore, be able to ensure that the decision to refuse his application for membership is based on objective and non-discriminatory grounds. To this end, the royal decree of 8 January 1962 stipulates that the approved cooperative society must, at the request of the applicant associate, communicate the objective reasons for refusing membership.
The shares confer the same rights and obligations by category of securities
"The shares of the share capital, even though they are of different value, confer, per category of securities, the same rights and obligations, subject to what is stated in 3° below regarding the right to vote at general meetings". (Art. 1, § 1, 2°, of the Royal decree of 8 January 1962).
An approved cooperative society may create several classes of shares which, per category, entail different rights and obligations for the associates who own them.
For example, a society that creates classes of shares may attach different rights and obligations to these classes, in particular with respect to dividends (e.g., 6% net for Class A and 4% net for Class B), the possibility of receiving a patronage dividend, the right to nominate candidate-directors, the payment of a fixed contribution, a quorum of votes or the redemption of shares.
However, the conditions for approval apply to all types of shares. As such, it is not possible to create a class of shares that would give the right to a dividend of more than 6% net.
The condition for approval also does not allow a distinction to be made between the associates with regard to the right to vote at the general meeting (this is how the phrase "subject to what is stated in 3° below regarding the right to vote at general meetings" is to be interpreted).
The vote of associates at the general assembly is democratic
"All associates shall have an equal voice in all matters at general meetings, regardless of the number of shares they hold". (Art. 1, § 1, 3°, of the Royal decree of 8 January 1962).
"The articles of association may derogate from the provision of paragraph 1, 3°, provided that no associate may take part in the vote, either personally or as a representative, for a number of votes exceeding 10% of the votes attached to the shares present and represented. Moreover, if the society has more than a thousand associates, the vote may be taken in the second degree". (Art. 1, § 3 of the Royal decree of 8 January 1962).
Various systems concerning voting rights are compatible with this condition for approval, provided that the system chosen does not result in a shareholder being able to cast at the general meeting, in a personal capacity or as a representative, a number of votes that is greater than one-tenth of the votes attached to the shares present and represented.
The following voting systems are therefore valid (provided that the limit of one tenth of the votes attached to the shares present or represented is respected):
- each associate has only one vote;
- each share entitles the holder to one vote;
- only one vote per series of shares (for example, one vote per 5 or 10 shares);
- one vote per associate + one vote per series of shares;
- each share gives the right to a series of votes, granted according to the nominal value of the share (for example: a share with a nominal value of 100 euros gives the right to one vote; a share of another category with a nominal value of 200 euros gives the right to two votes, etc.).
If there is no provision in the articles of association, the suppletive rule of Article 382 of the Companies Code applies ("each share gives the right to one vote"). However, this default voting system is incompatible with the condition for approval... unless each associate owns exactly the same number of shares.
Finally, large cooperative societies with more than a thousand associates have the possibility of organising a "second degree" voting system.
This system, which aims at simplifying voting in the general meeting by organising a voting mechanism by representation, is specifically as follows: in a first step, the associates meet by category, by provinces or by regions (local committees) or in some other way and proceed to a vote (= first-degree vote) to appoint their representatives who, in a second step, will take part in the votes in the general meeting of the society (= second-degree vote).
The statutory auditors and directors are appointed by the general meeting of shareholders.
"The directors and the statutory auditors are appointed by the general meeting" (Art. 1, § 1, 4°, of the royal decree of 8 January 1962).
"The provision of paragraph 1, 4°, does not preclude directors under the articles of association from being appointed, provided that the articles of association provide for the possibility and procedures for the general meeting to dismiss them. Furthermore, if one or more directors or statutory auditors are not appointed by the general meeting but are appointed by the board of directors or by a separate category of associates, the general meeting shall have the right to oppose such appointment". (Art. 1, § 3 of the royal decree of 8 January 1962).
Under this condition for approval, the decision-making power to appoint directors and statutory auditors rests with the general meeting.
The board of directors or a separate category of associates (e.g. the founders of the company) could, however, appoint directors or statutory auditors provided that the general meeting has the power to oppose such appointment.
Statutory directors may also be appointed provided that the articles of association provide for the possibility and modalities for the general meeting to dismiss them. It is therefore only when the articles of association impose directors "by right", without leaving the possibility for the general meeting to revoke them, that the articles of association would be contrary to this condition for approval.
The dividend distributed to the associates is moderate
"The dividend granted to the associates on the shares of the share capital may not exceed 6% of the nominal value of the shares after deduction of the withholding tax". (Art. 1, § 1, 5°, of the royal decree of 8 January 1962).
This condition for approval must be interpreted as follows:
- The interest rate of 6% is based on the amount attributable to each share (and not on the overall distributable amount). As such, for example, if a share has a nominal value of 500 euros, it could bring in a maximum of 30 euros in dividends per year.
- As long as the interest rate granted to the capital shares does not exceed 6% net, there is no objection to the distribution of a different interest depending on the date of the associate's joining ("pro rata temporis" interest). It is because it is possible to create several classes of shares, each of which gives rise to different rights and obligations.
- The amount paid as a dividend may not - after withholding tax has been withheld - exceed 6% of the nominal value of the shares held. The 6% does not therefore include the withholding tax that the cooperative has to withhold.
An exception to this rule exists when the associates of the society are legal entities. In such cases, the dividend paid could consist of a higher sum (corresponding to a sum equal to 6% of the nominal value of the shares held plus the amount of the withholding tax), provided that after the withholding tax has been paid by the respective legal entity associates, the dividend actually paid does not exceed 6% of the nominal value of the shares held.
The directors exercise their mandate free of charge
"The mandate of the directors and the associates in charge of the audit is free of charge". (Art. 1, §1 7°, of the royal decree of 8 January 1962).
"The articles of association may derogate from the provision of paragraph 1, 7°, provided that the remuneration, if any, of the directors does not consist of a share in the profits of the society and is fixed by the general meeting". (Art. 1, §6 of the royal decree of 8 January 1962).
This condition for approval enshrines the principle that the directors and associates in charge of the audit should hold office free of charge. However, the articles of association may derogate from this principle (for example, for the directors responsible for the day-to-day management of the society) provided that any remuneration of the directors is fixed by the general meeting and does not consist of a share in the society's profits.
The purpose of the society is to satisfy the needs of its associates
"The main purpose of the society is to provide the partners with an economic or social benefit in the satisfaction of their professional or private needs". (Art. 1, §1, 6°, of the royal decree of 8 January 1962).
"If the advantage referred to in paragraph 1, 6°, consists in the granting of a patronage dividend, it may, if applicable, be granted only in proportion to the transactions that the associates have had with the society". (Art. 1, §5 of the royal decree of 8 January 1962).
The main purpose of an approved cooperative society must be to provide its associates with an advantage in satisfying their professional or private needs. It can be at the economic level (larger opportunities, better prices, more continuous purchases, faster payment, etc.) or at the social level (satisfaction of certain social needs).
In concrete terms, the economic or social advantage may take various forms, including the form of a patronage dividend (which is no longer a separate and autonomous condition for approval). If the cooperative society opts for the allocation of a patronage dividend, this may only be allocated, where applicable, in proportion to the transactions that the associates organised with the society. Patronage dividends cannot be granted on the basis of other criteria.
This condition of approval does not apply to cooperative societies with a social purpose since the text of Article 661 of the Companies Code, which is applicable to them, is incompatible with this condition for approval.
A portion of the annual resources is devoted to informing and training associates.
"A portion of the annual resources is devoted to informing and training associates, current and potential, or the general public". (Art. 1, §1, 8°, of the royal decree of 8 January 1962).
Approved cooperative societies must every year devote part of their resources to informing and training their associates, current or potential, or the general public.
Verification of the conditions for approval
The royal decree of 8 January 1962 laying down the conditions for the approval of groupings of cooperative societies and cooperative societies provides that "the officials of the FPS Economy regularly check whether the groupings and cooperative societies continue to fulfil the conditions for approval issued to them. If it deems it necessary, the FPS Economy may request from the grouping or cooperative society the special report referred to in Article 1, §7, or additional information in the context of the verification of the conditions for approval". (Art. 6 of the royal decree of 8 January 1962).
The directors of cooperative societies are required to make a special report annually on how the society has ensured that the conditions for approval have been met, in particular those relating to economic advantage or informing or training associates.
This special report is, where appropriate, included in the management report which is drawn up in accordance with articles 95 and 96 of the Companies Code. The directors of approved cooperative societies who are not required to prepare a management report keep the special report at the head office of the society.