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Small and medium-sized enterprises (SMEs)


A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.

The defining characteristics for a co-operative are:

  • Possibility of free, open, and voluntary association and withdrawal from the enterprise.
  • Democratic structure, with each member having one vote, majority decision making and an elected leadership accountable to its members.
  • Equitable, fair and just distribution of economic results.
  • Autonomous and independent.

Co-operatives are enterprises that exist to serve the needs of their members who contribute to their capital, own and control them, rather than to provide a return on investment. All enterprises exist to serve the interests of their cardinal stakeholder groups. For traditional companies that means investors. However in a cooperative returns on capital (which are in some cases permitted) must always be subordinated to other interests (e.g. integration of people with disabilities). In fact a non-co-operative enterprise might be called an association of capital (or investor-driven business) whereas a co-operative is an association of people (or people-driven business).

Importance of the sector

Co-operatives are an important part of European economic life and industry; there are 250,000 co-operative enterprises in the European Union, owned by 163 million citizens (1 in 3 EU citizens) and they employ 5.4 million people.

Co-operatives hold substantial market shares in important industries in most Member States, especially in agriculture (83% in Netherlands, 79% in Finland, 55% in Italy and 50% in France), forestry (60% market share in Sweden and 31% in Finland) banking (50% in France, 37% in Cyprus, 35% in Finland, 31% in Austria and 21% in Germany) retailing (consumer cooperatives hold a market share of 36% in Finland and 20% in Sweden), pharmaceutical and health care (21% in Spain and 18% in Belgium) and information technologies, housing and craft production. In Italy cooperatives represented almost 15% of the total economy. Cooperatives also provide services such as catering, accounting, legal advice or marketing for a group of enterprises (e.g. plumbers, hair dressers, taxi owners etc.). In recent years cooperatives have also been present in sectors of general interest like education, transport, energy provision.

An important specific form of cooperative is the mutual guarantee society which is a self-help initiative for small companies in the area of financial services. It is usually set up by entrepreneurs in a region or sector with the assistance of chambers of commerce, Chambers of Craft, industry federations or banks specialised credits to SMEs and other economic associations, which provide also part of the equity. Mutual guarantee societies operate as an external guarantor who can increase the bank's lending readiness towards their SMEs members.

For more information see AECM European Association of Mutual Guarantee Societies.

Communication on the promotion of co-operative societies

On 23 February 2004 the European Commission adopted a Communication on the promotion of co-operative societies addressed to the European Council, the European Parliament, the European Economic and Social Committee and the Committee of Regions.

Full text of the Communication pdf - 83 KB [83 KB]

The Communication concentrates on three main issues and establishes what Member States and co-operatives themselves can do to exploit that business potential: The main issues of the Communication are:

  • The promotion of the greater use of cooperatives across Europe by improving the visibility, characteristics and understanding of the sector.
  • The further improvement of the cooperative legislation in Europe.
  • The maintenance and improvement of co-operatives' place and contribution to community objectives.

The Statute for a European Co-operative Society (SCE)

The Statute for a European Co-operative Society was adopted on 22nd July 2003 ( OJ of 18th August 2003 (L207) ) Its objective is to provide co-operatives with adequate legal instruments to facilitate their cross-border and trans-national activities. The Statute for a European Co-operative Society parallels the Statute for a European Company (SE), adopted in 2001, but has been tailored to the specific characteristics of co-operative societies.

The Statute is not only of interest to co-operatives. It also provides an ideal legal instrument for companies of all types wishing to group together for their common benefit, for example in order to access markets, achieve economies of scale or undertake research or development activities. The Statute also enables 5 or more European citizens (physical persons) from more than one Member State to create a European Co-operative Society. As such it is the first and only European company form which can be established from scratch and with limited liability.

The nature of the European Co-operative Society

The SCE (like all co-operatives) is a legal entity that allows its members (physical persons or legal entities) to carry out certain activities in common, while preserving their independence. Members of an SCE will normally be customers or suppliers and will be directly and personally involved in the activities and the management of the SCE.

An SCE must have as its principal object the satisfaction of its members' needs and/or the development of their economic and social activities, and not the remuneration of a capital investment. Members benefit proportionally to their volume of trade with the co-operative (and not his/her capital contribution).

The SCE is an optional legal form and does not replace existing laws governing co-operatives at national or regional levels. It is an instrument designed to facilitate trans-national co-operation and therefore the members must be resident in more than one Member State.

The Main Characteristics of the SCE

  • A. A SCE might be created:
    • From scratch ('ex novo'), by five or more natural persons, by two or more legal entities or by a combination of five or more natural persons and legal entities;
    • By a merger of two or more existing co-operatives;
    • By conversion of an existing co-operative which has, for at least two years, had an establishment or subsidiary in another Member State.

In the first two cases at least two of the natural persons or legal entities should be from different Member States.

  • B. The minimum capital requirement is Euro 30,000. An SCE has a variable share capital and may have among its members not only customers or suppliers but, in some circumstances, a limited proportion of "investor members" who do not use the services of the co-operative. The voting rights of such investor members are limited.
  • C. An SCE must be registered in the Member State where it has its head office. It may move its registered office from one Member State to another without having to wind-up and re-register.
  • D. For tax purposes an SCE is treated as any other multi-national company according to the national fiscal legislation applicable at company or branch level. It will continue to pay taxes in those Member States where it has a permanent establishment.
  • E.Voting in an SCE is generally conducted in accordance with the co-operative principle of "one member-one vote". However, weighted voting may be allowed in certain circumstances to reflect the amount of business done with the SCE.
  • F. An SCE must call a general meeting at least once per year. Decisions are taken by simple majority of those members present or represented, except for changes to the internal statutes where a 2/3 majority is required.
  • G. The internal statutes of the SCE must set out its management structure according to one of two possibilities: Two-tier structure (management body and supervisory body) and One-tier structure (administrative body).

List of competent authorities (Article 78 (2) of the SCE Regulation)

Implementation of the SCE Regulation

The Directive on Employee Involvement (Council Directive 2003/72/EC of 22 July 2003)

The Directive concerning the involvement (information, consultation and participation) of employees in an SCE lays down a set of rules designed taking into account the specific characteristics of both the entities participating in the creation of a SCE and of the SCE itself, as well as of the different ways of creating a SCE. The solutions to protect acquired employees rights are based on negotiations between the participating companies and their workforce prior to the creation of the SCE. Where a negotiated mutually satisfactory arrangement cannot be found standard rules will apply based on the "before-after" (acquired rights) principle. These rules are mostly identical to those that would apply to a European Company (SE) in similar circumstances.

However, specific rules have been designed for the case of a SCE formed from scratch ("ex novo"), as no equivalent means of establishment exists in the SE statute. In this case, the probability is high that the participating persons or entities would have very few or no employees at all and that the resulting entity (the SCE) would have a very limited trans-national workforce, in terms of number of employees employed in different Member States. The "before-after" principle was therefore not appropriate, as there would be no acquired rights.

Studies and Projects

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