Chapters of the article
Legal regulation of rights and obligations
The basic regulation is based on the Commercial Corporations Act. The provisions of Section 575 specify what the members of cooperatives are obliged and required to do. The provisions of this Act state that
A member has the right, in accordance with the law and the articles of association, in particular:
(a) to elect and be elected to the bodies of the cooperative,
b) to participate in the management and decision-making of the cooperative,
(c) to participate in the benefits provided by the cooperative.
In particular, a member is obliged to:
(a) comply with the statutes,
b) abide by the decisions of the cooperative bodies.
The statutory regulation provides for only the essentials, but this is an indicative and primarily demonstrative list. In practice, the characteristics and functioning of individual cooperatives are so different that it is not possible to define more universal rights and obligations that would apply to each type of cooperative. For example, compulsory work for the cooperative is usually part of the obligations (and rights) of social cooperatives, but would not make much sense for a housing cooperative.
Do you run a cooperative?
We will provide you with an experienced lawyer for your business. Whether you need his help on an emergency basis or for a whole year, he will always be there for you. When you order, you pay only the price for the first month of service, and payment is made at monthly intervals thereafter.
Tip: Have you set up a social or housing cooperative that has already fulfilled its purpose? Do you have a production cooperative that is economically impossible to keep alive? Sometimes a situation arises when objective circumstances or the will of the members of the cooperative dictate that the cooperative be dissolved. How to proceed and what not to forget? And when can a cooperative be dissolved against the will of its members? This is the subject of our separate article.
Statutory rights of members of cooperatives
The law lists the first right to elect members of the cooperative bodies from among the other members of the cooperative and, conversely, the right to be elected to these bodies.
The second right mentioned is to participate in the management and decision-making of the cooperative. This is typically done by attending a membership meeting, where the member has the opportunity to make proposals, communicate with other members of the cooperative and, above all, vote. Direct participation in the management of the cooperative is also manifested through membership of the elected bodies of the cooperative, i.e. the board of directors, the control committee and other bodies established by the cooperative.
The last right mentioned in the law, i.e. ‘to participate in the benefits provided by the cooperative‘, is a very generally formulated fact that cooperatives are usually focused on providing specific services or producing products and often provide discounts on their goods or services, or may make available to members tools or apparatus used by the cooperative or offer other similar benefits. Again, the specific amount of the discounts and the procedure for applying the benefits should be set out in the statutes, as completely different benefits may be offered by, for example, a housing cooperative and a production cooperative.
Other rights also arise under the Business Corporations Act. These include, for example, the right to a settlement share, the right to appeal against the invalidity of a resolution of a membership meeting, etc.
In the articles of association, members can regulate the right to a share of profits.
Obligations imposed on members of the cooperative by law
The basic obligation is the obligation to comply with the statutes of the cooperative. This emphasises the importance of the basic internal rules of the cooperative, particularly in the context of the fact that, by their nature, not all obligations can be laid down by law.
Failure to comply with the obligations imposed by the statutes may also lead to the expulsion of a member, which is an essential instrument that also underlines the importance of the statutes.
Another obligation is the duty to comply with the resolutions of the cooperative’s bodies, in particular the members’ meeting and the board of directors.
Other typical obligations that the statutes may impose on members of a cooperative relate to a monetary or non-monetary contribution to the cooperative, the obligation to work for the cooperative or to provide other assistance, etc.
Tip: Co-operative building is starting to boom again. Some cities, including Prague, are launching projects based on cooperation between local government and the private sector to make housing more affordable for citizens. In our separate article, we look at how such housing cooperatives work and what the advantages and disadvantages of cooperative housing are.
Rights and obligations of members of housing cooperatives
Transfer of rights and obligations
As a general rule, members of a cooperative may transfer their membership rights and obligations to another member only if the bylaws do not preclude it. At the same time, an agreement to transfer membership rights and obligations to another person is subject to the approval of the board of directors. However, a special provision applies to a housing cooperative, according to which the transfer of rights and obligations associated with membership in a housing cooperative on the basis of an agreement is not subject to the consent of the cooperative’s bodies. The rights and obligations of membership shall pass to the transferee in relation to the cooperative on presentation of the membership transfer agreement to the cooperative or on a later date specified in the agreement. The same effects as the presentation of the membership transfer agreement shall take place when the relevant cooperative receives written notification from the existing member of the transfer of membership and the written consent of the transferee.
The transfer of membership rights and obligations in the cooperative may thus be effected by agreement between the existing members of the cooperative or between a third party member of the cooperative. The parties to the agreement are the transferor of the membership rights and obligations associated with membership in the housing cooperative and their transferee, and not the housing cooperative.
Conclusion of a contract for the lease of a cooperative apartment
Membership in a housing cooperative has many specific features compared to membership in other cooperatives. The most important one is the right of the member to conclude a contract for the lease of a flat. The statutes of the cooperative must always contain the conditions under which a member of a housing cooperative has this right. In the case of a housing cooperative, the member has the right to conclude a lease agreement for an indefinite period of time. The contract shall relate to a flat in the acquisition of which the member has contributed a membership contribution or to a flat to which a further membership contribution is attached. This is the case when an existing member of the cooperative, who has already fulfilled his/her deposit obligation, commits to a further deposit, for example, when further flats are built, extensions are built, etc. This may give rise to the right to conclude a lease agreement for another cooperative apartment or to increase the shareholding in the housing cooperative.
Rights and obligations associated with the lease of a cooperative flat
As we have already mentioned, members of a cooperative derive their rights and obligations primarily from the statutes. Here is an overview of the most frequently enshrined rights and obligations:
- the obligation to pay rent, including service charges, the repair fund and the annuity payment,
- the obligation to comply with the penalties laid down in the event of late payment
- the obligation to notify and obtain the co-operative’s consent for building alterations (without this consent, the building alterations cannot be carried out),
- the obligation to respect the statutes, failure to respect them may result in expulsion of the member,
- the obligation to vacate the apartment if the cooperative loses its membership rights,
- the obligation to notify and document to the cooperative any change in the data registered in the list of members,
- the obligation to refrain from anything that prevents the maintenance, repair, alteration, conversion or other change to the house or land that has been duly decided and to allow access to the cooperative flat,
- the obligation to observe the house rules, to comply with fire protection regulations, to properly use and maintain the cooperative apartment or cooperative non-residential premises, including the common areas and facilities of the building, and to protect the cooperative’s property from threat, damage, destruction or loss,
- the right to vote, where each member has one vote. The bylaws may provide that voting rights vary according to the size of the apartment,
- the right to buy the flats if the members’ meeting agrees to sell the flats.
It should be borne in mind that non-compliance with the obligations imposed by the statutes may also result in the expulsion of a member of the cooperative. If such a situation threatens you,do not hesitate to consult a lawyer.