Latest regulations on management and use of assets of cooperatives in Vietnam

Latest regulations on management and use of assets of cooperatives in Vietnam (Internet image)

Latest regulations on management and use of assets of cooperatives in Vietnam

According to Article 88 of the Law on Cooperative 2023 (effective from July 1, 2024), regulations on management and use of assets of cooperatives and unions of cooperatives are as follows:

- Assets of a cooperative or cooperative union are established from the following sources:

+ Stakes of its official members and contributing members, and membership fees;

+ Capital raised from its members and other sources;

+ Capital and assets acquired during its operation;

+ State financial assistance and lawful grants or donations received from other organizations and individuals.

- Undistributed assets of a cooperative or cooperative union include:

+ LURs over land areas allocated by the State without collecting land levies; LURs over land areas allocated by the State with collecting land levies or leased by the State or acquired from purchase of property attached to land or receipt of lawful transfer of LURs from others for which land levies, land rents or payments for purchase of property or receipt of transfer of LURs are covered by State financial assistance;

+ Assets established from its undistributed fund;

+ Assets which are partially or entirely acquired using the State financial assistance and must be considered as undistributed assets;

+ Assets lawfully given or donated by organizations and individuals and considered as undistributed assets as agreed upon by the parties;

+ Assets which are works or structures invested or built by the State for public interests of communities and transferred to the cooperative or cooperative union for management and operation;

+ Other assets which are considered as undistributed assets as prescribed by its charter.

- Management and use of undistributed assets of a cooperative or cooperative union are subject to the following provisions:

+ Assets specified in Clause 2 of Article 88 of the Law on Cooperative 2023 shall be managed and used in accordance with regulations of law and its charter or specific agreement between the donor and the cooperative or cooperative union. The cooperative or cooperative union must open separate book to monitor and record its undistributed assets by their sources.

+ The cooperative or cooperative union shall protect and carry out periodical maintenance and repair of undistributed assets using its funding during their use;

+ Undistributed assets whose values have been determined as prescribed in Clause 3 Article 77 of the Law on Cooperative 2023 may be transferred or liquidated if such transfer or liquidation is made with the GMM’s approval and in conformity with regulations of law and the cooperative or cooperative union’s charter or specific agreement between the donor and the cooperative or cooperative union;

+ The cooperative or cooperative union may use its undistributed assets as collateral when applying for loans but must ensure capital conservation, except those specified in Points a, c and dd Clause 2 of Article 88 of the Law on Cooperative 2023 and those which are established from donations or grants and cannot be used as collateral for loans as required by donors.

- Assets of a cooperative or cooperative union shall be managed and used in accordance with its charter, resolutions of the GMM, its financial management regulations and regulations of law.

Regulations on income distribution of cooperatives in Vietnam

Income distribution of cooperatives and cooperative unions is prescribed in Article 86 of the Law on Cooperative 2023 as follows:

After making contribution to its undistributed fund, paying taxes and fulfilling other financial obligations, and settling business losses as prescribed by laws, the remaining incomes of a cooperative or cooperative union shall be used for:

- Making contributions to funds as prescribed by laws (if any);

- Making contributions to other funds as decided by its GMM;

- The incomes that remain after making contributions to the funds specified in Clauses 1 and 2 of Article 86 of the Law on Cooperative 2023Article 86 of the Law on Cooperative 2023 shall be distributed by the cooperative or cooperative union to its official members and contributing members as follows:

+ At least 51% of the remaining income earned from internal transactions shall be distributed to its official members in proportion to their levels of use of products/services and levels of labour contribution; the remainder shall be distributed to its official members and contributing members in proportion to their holdings as prescribed in its charter;

+ The remaining income earned from external transactions shall be distributed to its official members and contributing members as prescribed in its charter.

Settling losses and debts of cooperatives and cooperative unions in Vietnam

Pursuant to Article 89 of the Law on Cooperative 2023, regulations on settling losses and debts of cooperatives and cooperative unions are as follows:

- At the end of the fiscal year, cooperatives or cooperative unions shall carry forward their losses, if any, to the following year in accordance with regulations of law on tax administration.

- Debts of a cooperative or cooperative union shall be settled in accordance with regulations of law and its charter.

Doan Duc Tai

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