Company Law

Co-operative Societies

Types of Co-operatives

There are three types of cooperatives:

1. Primary Society – a co-operative in which a majority of members are individual persons;

2. Secondary Society – a co-operative in which a majority of members are themselves primary societies;

3. Tertiary Society – a co-operative society in which a majority of members are themselves primary and, or, secondary


The Co-operative Societies Act defines a co-operative society an autonomous association of persons united voluntarily to meet their economic, social and cultural needs and aspirations, including employment, through a jointly-owned and democratically-controlled enterprise, in accordance with cooperative principles, and which, may be registered as co-operative society under the act.

This definition is base on seven fundamental principles:

1. First principle – voluntary and open membership:

Co-operatives are voluntary organizations open to all persons who are able to use their services and willing to accept their responsibilities of membership, without gender, social, racial, political or religious discrimination.

2. Second principle – democratic member control:

Co-operatives are democratic organisations controlled by their members, who actively participate in setting their policies and taking decisions. Those persons serving as elected representatives are accountable to the members. In primary co-operatives, members have equal voting rights – each member having one vote only. Co-operatives at other levels are also organized in a democratic manner.

3. Third principle – member economic participation:

Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes:

 developing their co-operative, possibly by setting up reserves, at least part of which would be indivisible;

 benefitting members in proportion to their transactions with the co-operative; and

 supporting other activities approved by the members.

4. Fourth principle – autonomy and independence:

Co-operatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organisations, including the Government, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy.

5. Fifth principle – education, training and information:

Co-operatives provide education and training for their members, elected representatives, managers and employees so that they may contribute effectively to the development of their co-operatives. They inform the general public – particularly young people and opinion leaders – about the nature and benefits of cooperation.

6. Sixth principle – co-operation among co-operatives:

Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures.

7. Seventh principle – concern for the community:

Co-operatives work for the sustainable development of their communities through policies approved by their members.


The Act provides that a society, on registration, shall be known by the name under which it is registered and shall be a body corporate, having power to hold movable and immovable property, to enter into contracts, to sue and be sued, and to do all things necessary for the purposes for which it is constituted.


A member of a co-operatives enjoys limited liability. In fact , just as a shareholder in a company, the liability of a member present or past, of a co-operative is limited to the amount, if any, unpaid of the shares held by him.

When dealing with liability, the Act also regulates particular instances. It provides that the liability of a past member for the debts of a society is limited to those which existed on the date on which he ceased to be a member. Such liability ceases on the expiration of two years commencing on that date on which he ceased to be a member. On the other hand, the Act provides that the liability of the estate of a deceased member is limited to the debts of the society, as they existed on the date of the death of the member . Such liability ceases on the expiration of two years from his death.


Both a company and a co-operative have legal personality and afford limited liability to their shareholders/members limited liability. Nonetheless, the main difference between a company and a co-operative is that while on the one hand a company is set up by shareholders having the primary aim of getting prosperous and making profit, on the other hand the co-operative is a gathering of person having a common goal and pursuing that same.

This brings about a primary difference also in voting rights. In a company , the voting rights depends on the ownership of shares by the shareholders. Thus, the more shares a shareholder owns, the more he has power to influence the decision making. In a co-operative, on the other hand, each member always has one vote, irrespective of his shareholding in the co-operative. The principle of one member, one vote is applied unless otherwise is provided in the statute of the co-operative.

On the principle “United we stand, divided we fall”, Maltese law on co-operatives provides a structure whereby competing entrepreneurs, usually of small or medium size business, team up together, to pursue a common goal.

Just like a company, a co-operative holds general meetings, can increase its share capital and can be liquidated and dissolved.


The Act provides for a number of requirements for a Co-operative to be registered:

1. In those cases where the proposed society is:

– a primary society ,the founding members must be at least five persons, and must be of 18 years of age and not an undischarged bankrupt.

– a secondary society, the founding members must consist of at least two primary societies;

– a tertiary society, the founding members must consist of at least two societies, of which at least one is a secondary society:

2. In the case of secondary or tertiary societies, the founding members shall duly elect at least three individuals, who shall be suitably representative of the founding members, to be the first committee of management of the society.

3. An application for registration, in the form stipulated by law, must be filed with The Board of Co-operatives together with a statute for the particular co-operative to be set up, listing the regulations by which membership and running of such co-operative shall be regulated.

4. The Board of Co-operatives registers, monitors and exercises supervision over co-operatives and ensures compliance with the provisions of this Act;

5. Where the Board is satisfied that a co-operative has complied with the provisions of this Act, that its proposed statute in no way contravenes those provisions, that the proposed cooperative is likely to be viable and that the proposed management of the co-operative is appropriate, it registers the society and issues a certificate of registration;

6. After registration, the members of the co-operative are bound by its statute;

7. After registration, the co-operative has the obligation of keeping audited accounts, and submit a copy of such audited accounts to The Board of Co-operatives, not later than five months from the end of each financial year;

8. Any member in a co-operative cannot hold more than 40% of the shares of the co-operative.