Owner's equity in co-operatives
2003
Parts, V. | Visberg, A.-E. (Estonian Agricultural University, Tartu (Estonia). Inst. of Accounting and Finances)
Transition from the application of the Cooperatives' Act of the Republic of Estonia to the application of the Commercial Associations' Act has brought and will bring along principal changes in the establishment of new cooperatives. The minimum number of members enacted with law has increased. The cooperative's liability principles have also changes. Wheather full personal liability or the members' additional liability. The requirements established for the share capital differ according to the liability principle chosen. As a commercial association is established, it must have the compulsory reserve capital and other capital, arising of the Statues. As the economic year's net profit is distributed, allocations must be made into reserves not subject to distribution. In case dividends are to be made, as enacted with the Statutes, the members participation in the business of the cooperative is used as the basis; the payment of dividends arising of the capital is of secondary importance. In practice, the elaboration of the methodologies for the calculation of work contribution and assimilation shall be rather complicated. From the statements provided above it can be seen that the member of a cooperative has no reason to hope for dividends without being actively engaged in the business of a cooperative. Stricter requirements established for the share capital and distribution of dividends may easily become the reason why several cooperatives, being in business now, shall terminate their operations as of December 1, 2003
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