What If a Cooperative Member Contributes Less Than the Minimum Charter Capital?

What rights and obligations do cooperative members have?

The rights and obligations of cooperative members are prescribed in Articles 31 and 32 of the Law on Cooperatives 2023 (17/2023/QH15, effective from 01/7/2024) as follows:

* Rights of official members (Clause 1, Article 31):

– To be supplied with products, services and jobs by the cooperative.

– To receive income distribution as prescribed by this Law and the Charter.

– To enjoy the cooperative’s welfare.

– To attend or elect delegates to attend the Members’ General Meeting.

– To vote on matters within the competence of the Members’ General Meeting.

– To stand for election or nominate members of the Board of Directors, the Director (General Director), members of the Supervisory Board or supervisors, and other elected managerial positions.

– To propose and request the Board of Directors, the Director (General Director), the Supervisory Board or the supervisor to explain the cooperative’s operations.

– To request the Board of Directors, the Director (General Director), the Supervisory Board or the supervisor to convene an extraordinary Members’ General Meeting.

– To be provided with necessary information relating to the cooperative’s operations; to receive training and professional development serving the cooperative’s operations.

– To leave the cooperative as prescribed by this Law and the Charter.

– To have part or all of the contributed capital returned as prescribed by this Law and the Charter.

– To receive the remaining asset value of the cooperative as prescribed by this Law and the Charter.

– To complain, denounce, and initiate lawsuits as prescribed by law.

– Other rights as prescribed by law and the Charter.

Note: the rights of associated contributing members and associated non-contributing members are separately prescribed in Clauses 2 and 3 of Article 31 (the new member classification under the 2023 Law, not present in the 2012 Law).

* Obligations of official members (Clause 1, Article 32):

– To contribute in full and on time the committed capital as prescribed by the Charter.

– To use the cooperative’s registered products and services or contribute labor as agreed with the cooperative.

– To be responsible for the cooperative’s debts and financial obligations within the scope of their contributed capital to the cooperative.

– To compensate for damage caused by them to the cooperative as prescribed by law and the Charter.

– To comply with the cooperative’s principles, purposes, Charter, regulations, resolutions of the Members’ General Meeting, and decisions of the Board of Directors (for the full governance structure) or the Director (for the streamlined governance structure).

– Other obligations as prescribed by law and the Charter.

Note: the obligations of associated contributing members and associated non-contributing members are separately prescribed in Clauses 2 and 3 of Article 32.

How is capital contribution by cooperative members regulated?

Cooperative members contribute capital to the cooperative under Articles 74 and 75 of the Law on Cooperatives 2023 (17/2023/QH15) as follows:

– The capital contribution of an official member shall be made by agreement and in accordance with this Law and the Charter on minimum and maximum capital contributions. The maximum capital contribution may not exceed 30% of the charter capital for a cooperative and 40% of the charter capital for a cooperative union.

– The time limit, form and amount of a member’s charter capital contribution shall follow the Charter, but the deadline for full contribution is no later than 06 months from the date the cooperative or cooperative union is granted the Cooperative Registration Certificate, or from the date of admission, excluding the time for transporting or importing contributed assets and for completing administrative procedures to transfer asset ownership (if any).

– Upon full contribution of the committed capital, the member is granted a Capital Contribution Certificate by the cooperative and recorded in the member register.

– The order and procedures for issuing, re-issuing, exchanging and revoking Capital Contribution Certificates shall follow the Charter.

Based on the above, capital contributed by cooperative members is made by agreement but limited to a maximum of 30% of the cooperative’s charter capital (instead of 20% under the 2012 Law on Cooperatives), and the deadline for full contribution is no later than 06 months from the date the cooperative is granted the Cooperative Registration Certificate or from the date of admission.

If a cooperative member contributes less than the minimum stated in the Charter, can they become a cooperative member?

Under Point a, Clause 6, Article 74 and Point g, Clause 1, Article 33 of the Law on Cooperatives 2023 (17/2023/QH15) on termination of cooperative membership:

– After the deadline for full contribution of the committed capital, a member who has not contributed as committed, or who contributed less than the minimum capital contribution prescribed in the Charter, shall have their membership terminated (Point a, Clause 6, Article 74).

– Official membership is terminated when: at the time of commitment to full contribution, the member fails to contribute or contributes less than the minimum capital contribution prescribed in the Charter (Point g, Clause 1, Article 33).

– The authority to decide on termination of membership and to settle the rights and obligations of the member in the case of membership termination shall follow this Law and the Charter (Clause 4, Article 33).

– The settlement of the rights and obligations of the member in the case of membership termination shall follow this Law and the Charter.

Thus, under the above provisions, where a cooperative member contributes less than the minimum capital contribution prescribed in the Charter, their cooperative membership shall be terminated; the authority to decide on membership termination and to settle rights and obligations shall follow the Law on Cooperatives 2023 and the Charter (the 2023 Law no longer provides for the mechanism where the Board of Directors decides/reports or submits to the Members’ General Meeting for decision, as under the 2012 Law).

Notes on applying current legal provisions

This article belongs to the Enterprise Knowledge & M&A group and is presented for reference, helping readers understand the legal issue at an overview level before preparing dossiers or conducting transactions.

Legal provisions may change depending on timing, locality, dossier type and specific circumstances. Where it is necessary to determine the exact legal basis applicable to your dossier, you should contact an ANT Legal lawyer at 0966.475.966 for review and advice before proceeding.

Common risks to note

• Applying legal texts that have been amended, supplemented or replaced.
• Preparing incomplete dossiers, documents or evidence.
• Misunderstanding the applicable conditions, procedures, time limits or competent authority.
• Signing, filing or conducting transactions without fully assessing legal risks.

How can ANT Legal help?

ANT Legal assists in reviewing specific situations, checking dossiers, identifying the applicable legal basis, advising on handling plans, and representing you in working with individuals, organizations or competent authorities when necessary.

For quick advice, you may contact a lawyer at 0966.475.966.

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