Cooperatives

The cooperative is an association for the advancement of commerce which is regulated in a special way. It does not comprise investors, but members, who pursue the purpose of advancing a common goal by collective self-help. The legal status of a cooperation is attractive for company founders especially in cases, where they not only seek mere investment success, but for example want to pursue the common sale of goods or services or the provision of housing space to members

One characteristic of a cooperative is, that it is particularly flexible and can be fitted to the ideas and goals of a company’s founder. For example the charter can permit the admission of investing members. There is also the possibility for the cooperative to invest in companies and other associations if this can further the cooperative’s common goal. Hereby the cooperative can also realize profits from investment.

The cooperative has the advantage over other securities and investments that the shares can be offered publicly without a prospectus. Currently a change in this legislation is not in sight. The draft of an act to amend the German law on the brokerage of investments (“Entwurf eines Gesetzes zur Novellierung des Finanzanlagenvermittler- und Vermögensanlagenrechts“ (Reg-E VermAnlG)), presented by Germany’s federal government on 6th of June 2011, explicitly excludes shares of cooperatives from the obligation to publish a prospectus. Furthermore, the distribution company is not required to have a KWG-conforming permission to provide investment advisory services or brokering services when these services are related to shares of cooperatives. The proposed act to amend the German law on the brokerage of investments rather requires a permission pursuant to § 34f of the German law regarding the regulation of trade, commerce and industry (Gewerbeordnung) to perform the services mentioned above. This is not a distinctive feature of cooperatives, though, but rather applies to all investments mentioned in the draft proposal of § 34f Gewerbeordnung (German law regarding the regulation of trade, commerce and industry).

Taking into account all features mentioned, the cooperative is an attractive legal status for many companies. The design of the charter is of special importance and should therefore be constructed by specialized lawyers only.