Products and Services a Cooperative Provides to Members

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1. What are the rights and obligations of a cooperative?

* Rights of cooperatives and unions of cooperatives under Article 9 of the Law on Cooperatives 2023 (17/2023/QH15, effective from 01/7/2024):

Effectively organizing the implementation of set goals and targets.
Deciding the organization, management and operation of the cooperative or union of cooperatives; hiring and employing labor.
Being entitled to conduct business and production in sectors and trades not prohibited by law.
Requiring members to register their demand for using products and services in order to formulate and implement plans for supplying and selling products and services to members.
Supplying products and services to outside parties after fulfilling obligations to and ensuring the interests of members under the Charter or relevant law.
Providing services and organizing economic, social and cultural activities with the goal of caring for the livelihood of members and the community and for sustainable development.
Participating in implementing policies, programs and projects for economic, cultural and social development, ensuring political security, social order and safety, and environmental protection in residential communities.
Admitting new members and terminating member status as prescribed by cooperative law.
Increasing or decreasing charter capital during operation.
Mobilizing capital as prescribed by law.
Internal lending as prescribed in this Law.
Separately tracking revenues and expenses of internal transactions and external transactions.
Forming consortiums, associating and cooperating with domestic and foreign organizations and individuals to achieve the cooperative’s or union’s operational goals.
Contributing capital, purchasing shares and establishing enterprises to support the operation of the cooperative or union of cooperatives.
Distributing income and handling losses and debts of the cooperative or union of cooperatives.
Participating in representative organizations of cooperatives and unions of cooperatives.
Complaining about and denouncing acts violating the lawful rights and interests of the cooperative or union of cooperatives as prescribed by law; resolving internal disputes and handling violating members under the Charter.
Other rights as prescribed by law and the Charter.

* Obligations of cooperatives and unions of cooperatives under Article 10 of the Law on Cooperatives 2023 (17/2023/QH15):

Admitting members who fully satisfy the conditions prescribed in this Law, the Charter and relevant law.
Ensuring the lawful rights and interests of members as prescribed in this Law and the Charter.
Implementing agreements between the cooperative or union of cooperatives and members, maximally meeting members’ registered needs before serving non-member customers.
Complying with law on finance, taxation, accounting, auditing, statistics and relevant law.
Managing and using capital, assets and funds of the cooperative or union of cooperatives as prescribed by law and the Charter.
Managing and using land and resources as prescribed by law.
Signing and performing labor contracts and paying social insurance and other policies for employees as prescribed by law.
Educating, training, disseminating and fostering members and employees.
Fully, accurately and timely performing cooperative/union registration obligations as prescribed in this Law.
Publishing information to members as prescribed in Article 14 of this Law and as prescribed by relevant law.
Compensating for damage caused by the cooperative or union of cooperatives to members as prescribed by law and the Charter.
Preparing, updating and keeping the register of official members and capital-contributing associate members.
Implementing the reporting regime and updating information on the operation of the cooperative or union of cooperatives as prescribed by law.
Other obligations as prescribed by law and the Charter.

2. What products and services does a cooperative provide to its members?

Under Clause 1, Article 4 of the Law on Cooperatives 2023 (17/2023/QH15), the provision of products and services by cooperatives and unions of cooperatives to members is defined as an “internal transaction” as follows:

1. An internal transaction is the provision of products and services, including job-creation services and internal lending activities, by a cooperative or union of cooperatives to official members under a written agreement.

Thus, under the Law on Cooperatives 2023, products and services provided by a cooperative to its official members (including job-creation services and internal lending activities) are implemented under written agreements and are called “internal transactions” (as distinguished from “external transactions”, which are transactions other than internal ones). The 2023 Law no longer uses the concept of “service contract” and no longer lists in detail activity groups (joint purchasing, joint selling, processing, credit, etc.) as the 2012 Law on Cooperatives did.

3. May a cooperative supply products and services to non-member customers?

The supply of products and services to non-member customers is governed by Article 5 of Decree 193/2013/ND-CP (amended by Clause 1, Article 1 of Decree 107/2017/ND-CP), as follows:

Cooperatives and unions of cooperatives have the right to supply and sell products, services and jobs to members and member cooperatives and to non-member customers, but must ensure the fulfillment of obligations to members and member cooperatives.
The ratio of products, services and jobs that a cooperative or union of cooperatives commits to supply and sell to members and member cooperatives versus non-member customers is specified in detail by the cooperative’s charter but may not exceed the following levels:

No more than 50% of the total value of products and services supplied by the cooperative or union of cooperatives in the agricultural and non-agricultural sectors.
For cooperatives creating jobs, wages paid to employees who are not members under indefinite-term labor contracts may not exceed 30% of the total wages paid by the cooperative to all employees under indefinite-term labor contracts.

Accepting deposits and granting credit to non-member customers of people’s credit funds is governed by the Law on Credit Institutions and guidance of the State Bank.
For cooperatives and unions of cooperatives established after the Law on Cooperatives takes effect, the ratio of products, services or jobs committed to members, member cooperatives and non-member customers must comply with Clauses 2 and 3 of this Article.
For cooperatives and unions of cooperatives established before the Law on Cooperatives takes effect:

Where the cooperative or union already satisfies the supply and sale ratios committed to members, member cooperatives and non-member customers under Clauses 2 and 3 of this Article, it continues operating under the Law on Cooperatives;
Where the cooperative or union has not yet satisfied such ratios, it must reorganize its operations to meet the ratios in Clauses 2 and 3 within 36 months from 01 July 2013, or establish an enterprise to conduct business in those products, services and jobs.

Based on the above, a cooperative may supply products and services to non-member customers but must respect the prescribed limits: for products and services of cooperatives and unions of cooperatives in the agricultural and non-agricultural sectors, the supply ratio may not exceed 50% of the total value of supply.

Notes on applying current legal provisions

This article belongs to the General Knowledge 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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