Question 25. I know the distribution of income of the cooperative is relatively different from the enterprise. Please indicate the distribution of cooperative income in accordance with current legislation?
Answer:
The distribution of incomes of cooperatives is provided for in Article 46 of the Cooperative Law. Accordingly, after fulfilling its financial obligations as prescribed by law, the income of a cooperative may be distributed as follows:
1. Deduction for the development investment fund at a rate of at least 20% of income; deduction for the financial reserve fund at the rate of at least 5% of income;
2. Deduction for other funds as decided by the general meeting of members;
3. The remaining income after the deduction of funds as prescribed in Clauses 1 and 2 of this Article may be distributed to members according to the following principles:
a/ Distribution mainly based on the level of use of products and services by members; and labor effort contributed by members for job creation cooperatives;
b/ Division of the remaining income in proportion to contributed capital;
c/ The rate and mode of distribution are specified by the charter of the cooperative.
4. Income distributed to members or member cooperatives is the asset under the ownership of these members. The members may hand over their distributed incomes to the cooperative for management and use under the agreement with the cooperative.
Question 26. Please indicate the sources of assets and undivided assests of the co-operative?
Answer:
According to the provisions of Clause 1, Article 48 of the Law on Cooperatives, the properties of cooperatives shall be formed from the following sources:
a/ Contributed capital of members or member cooperatives;
b/ Mobilized capital of members or member cooperatives and other mobilized capital;
c/ Capital and assets formed during the operation of the cooperative or union of cooperatives;
d/ Subsidies and financial assistance of the State and other offered and donated amounts;
The undivided property of the cooperative includes:
a/ Use rights of land allocated or leased by the State;
b/ Non-refundable subsidies and financial assistance of the State; offered and donated amounts treated as undivided assets as agreed upon;
c/ Annual deductions from the development investment fund which are included in the undivided assets under decisions of the general meeting of members;
d/ Other capital and assets being undivided assets as prescribed by the charter.
The cooperative shall manage and use its assets in accordance with its charter and regulations on financial management, resolutions of its general meeting of members and relevant laws.
Question 27. Please provide the regulations on handling of assets and capital of cooperatives upon dissolution?
Answer:
The handling of assets and capital of cooperatives upon dissolution is provided for in Article 49 of the Cooperative Law. Accordingly, the handling of capital and assets of the cooperative shall be carried out in the following order:
a/ Recovery of its assets;
b/ Liquidation of assets, excluding undivided assets;
c/ Payment of its liabilities payable and fulfillment of financial obligations.
For the remaining assets, except for undivided property, the handling shall be carried out in the following order of priority:
a/ Payment of dissolution expenses, including expenses for the recovery and liquidation of assets;
b/ Payment of debts being salaries, allowances and social insurance of laborers;
c/ Payment of secured debts as prescribed by law;
d/ Payment of unsecured debts;
e/ The remaining value of asset must be returned to members or member cooperatives according to the ratio of their contributed capital to total charter capital.
In case the value of remaining assets is insufficient to pay debts under the same payment priority line, only a part of debt must be paid in proportion to the debts payable in that priority line.
Question 28. Please indicate how the losses and debts of the cooperative will be handled?
Answer:
According to the provisions of Article 50 of the Cooperative Law, by the end of a fiscal year, if losses arise, a cooperative shall seek to reduce losses as prescribed by law. In case the loss reduction has been made but is still insufficient, the financial reserve fund must be used to offset; if still insufficient, the remaining losses may be carried forward to the subsequent year and deducted from taxable income. The time for carrying forward losses must comply with the tax law.
Debts of a cooperative must be handled in accordance with law and its charter.
Question 29. Please indicate the procedure for returning capital to cooperative members?
Answer:
The procedure for returning capital to cooperative members is provided in Article 51 of the Cooperative Law. Accordingly, the return of contributed capital to members must only be made after the cooperative has finalized tax of the fiscal year and ensure solvency to pay its debts and fulfill its financial obligations.
Members may only be returned their contributed capital after fulfilling their financial obligations toward their cooperative or union of cooperatives.
An individual or a collective making decisions on the return of contributed capital to the members not in accordance with this Clause shall pay compensation for damage to the cooperative.
The return of capital to members is prescribed by the charter and in accordance with Clause 1 of this Article and relevant laws.
Hoang Thanh Tuan
(Source: Agency for Business Registration)