A cooperative is a pool of businesses and persons with similar needs who want to cooperate economically, but remain independent. In cooperating with others, some areas of business can be handled cheaper or better. Purchase or sales cooperatives, when pooling their effort, fetch better prices and reduce their dependence from suppliers.
Credit cooperatives ensure the provision of affordable financial services. Cooperatives allow for joint investments in working capital, which would not pay off for a single person. Housing cooperatives provide for affordable living space. Citizens and local communities organise local services (e.g. energy supply) along cooperative lines.
Historically, cooperatives have evolved out of the need for self-help and democratic self-government. Around the globe, some 900 million people today are members of cooperatives.
Relevance for artists
The corporate form of a cooperative appears to be less suitable for realising specific artistic projects. Its potential in the field of art lies in being able to organise similar needs and interest. Artists may, for instance, found a cooperative for the joint procurement of material and operating equipment, the joint sale of their services or to outsource activities from their own business, because they can be delivered better or cheaper in a pool.
Examples from other lines of business: doctors under the state health scheme from a region handle their billing and settlement via a cooperative, chartered accountants organise their central data processing on a cooperative basis.
To found a cooperative, a minimum of two members is needed. The requirements are written statutes, a positive business plan and becoming a member of an auditing association. The auditing association is a higher-level pooling of cooperatives for the regular audit of their business operations. The foundation of a cooperative does not entail capital duty. A cooperative does not have a fixed stated capital, the share capital varies depending on the number of members. The minimum at formation is EUR 2.
A cooperative has legal capacity and is formed on registration in the companies register.
The circle of members is open, i.e. you can accede to a cooperative at any time by subscribing to its shares, and leave it by selling these shares. The managing board decides on the admission of members.
The supreme body of a cooperative is the meeting of members. The right to vote is laid down in the Statutes: either one vote per head, or pro-rated according to the shares. Members of the managing board are at the same time members of the cooperative (principle of self-government). Under certain conditions, the Law on Cooperatives (Genossenschaftsgesetz) provides for setting up a supervisory board that is to supervise the management.
Members are liable to the extent of their shares and under a duty to make supplementary payments as laid down in the Statutes.
The mandate of a cooperative is not to maximise its profits, but to promote its members in economic, but also social and cultural matters. This is why the relationship of the members vis-à-vis the cooperative is always a twofold one. They are at the same time investors and clients, suppliers and buyers, employers and employees (production cooperative), etc. Unlike with corporations, business relations between shareholders (members) and their company (cooperative) are not just allowed, but desired in keeping with its mandate of promoting the members.
The audit of a cooperative does not only look at correctness and legality (mandatory every two years, with larger cooperatives every year) like the end-of-year financial audit of a corporation, but also verifies the efficiency and effectiveness of management and provides reassurance to the decision-makers.
Advantages of a cooperative
A cooperative combines the elements of an association with that of a corporation: democratic decision-making internally, economic operations externally.
Open circle of members, members may leave at any time and be admitted by consent of the managing board. With corporations, the accession or resignation of members requires an amendment of the Articles of Association in notarised form.
Mandate to promote the members instead of maximising profits. The members cooperate but remain economically independent.
Owing to the limitation of liability and institutional audit, the cooperative is one of the safest company forms. The audit association advises the cooperative from its formation and even allows for management by an unsalaried managing board.
Disadvantages of a cooperative
The administrative burden of a cooperative is not suited for every company.