A cooperative act is the national or sub-national legislation that defines what a cooperative is, how it must be registered, how it is governed, and what tax treatment it receives. Without a governing law, there is no legal cooperative — only an informal group. For an overview of how cooperative governance works in practice, see cooperative governance. The major cooperative acts worldwide differ substantially in their scope, their registration requirements, and the protections they extend to members.
Cooperative Law at a Glance: Key Acts by Country
| Country | Primary Legislation | Regulator | Minimum Members | Key Feature |
|---|---|---|---|---|
| Philippines | Republic Act 9520 (2008) | Cooperative Development Authority (CDA) | 15 | Tax exemption for coops with assets under ₱10M |
| India | Multi-State Cooperative Societies Act 2002 + state acts | State Registrars; NABARD | 50 (multi-state) | 97th Constitutional Amendment 2011 |
| UK | Cooperative and Community Benefit Societies Act 2014 | Financial Conduct Authority (FCA) | 3 | Community benefit test; model rules available |
| USA | No federal law; state-level (varies) | State agencies; IRS (tax) | Varies by state | Subchapter T for federal tax treatment |
| Kenya | Cooperative Societies Act Cap 490 | Commissioner of Cooperatives; SASRA | 10 | SASRA oversight for financial cooperatives |
| International | UN Guidelines (2001) | — | — | Non-binding; policy framework |
Philippines: Republic Act 9520 — Philippine Cooperative Code of 2008
Republic Act 9520, known as the Philippine Cooperative Code of 2008, is the principal law governing cooperatives in the Philippines. It replaced the earlier Cooperative Code of 1990 (Republic Act 6938) and established the Cooperative Development Authority (CDA) as the primary regulatory body.
Registration Requirements
To register under RA 9520, a primary cooperative must have:
- A minimum of 15 members (for primary cooperatives)
- A minimum paid-up share capital appropriate to the cooperative type (varies by category)
- A set of articles of cooperation and by-laws filed with the CDA
- Completion of a pre-membership education seminar (PMES) by all founding members — this is mandatory and distinguishes the Philippine system from most other jurisdictions
The CDA processes applications at regional offices across the country. Registration is completed within 30 working days of a complete submission under the law's provisions.
Types of Cooperatives Recognised
RA 9520 recognises a broader range of cooperative types than most national laws, including:
- Credit cooperatives — providing savings and loan services to members
- Consumers cooperatives — supplying goods and services at lower cost
- Producers cooperatives — assisting members to produce and market goods
- Marketing cooperatives — selling or distributing members' products
- Service cooperatives — providing services (transport, health, insurance, housing)
- Multi-purpose cooperatives — combining two or more of the above functions
- Advocacy cooperatives — promoting cooperative values and education
- Agrarian reform cooperatives — supporting beneficiaries of agrarian reform programmes
- Transport cooperatives — operating vehicle transport services
- Water service cooperatives — supplying potable water to communities
- Electric cooperatives — distributing electricity (also regulated under a separate Act)
Tax Exemptions Under RA 9520
The Philippine Cooperative Code provides among the most detailed cooperative tax exemptions in the world:
Full tax exemptions apply to cooperatives with accumulated reserves and undivided net savings of not more than ₱10 million, including:
- Exemption from income tax
- Exemption from value-added tax (VAT) on transactions with members
- Exemption from documentary stamp taxes
- Exemption from local government taxes and fees
- Exemption from all taxes on transactions related to the cooperative's legitimate activities
Cooperatives with accumulated reserves exceeding ₱10 million remain exempt from income tax on transactions with members but pay taxes on transactions with non-members at standard rates.
This tiered approach encourages growth while maintaining incentives for smaller, community-based cooperatives.
Reporting Obligations
Philippine cooperatives must file annual reports with the CDA including audited financial statements, performance reports, and compliance certificates. Cooperatives are also required to set aside specific percentages of net surpluses to mandatory funds: the Cooperative Education and Training Fund (CETF), the Reserve Fund, and the Optional Fund.
Practical note: The Philippines has one of the densest cooperative sectors in Southeast Asia. As of recent CDA data, there are more than 27,000 registered cooperatives with over 15 million members, making cooperative law a topic with direct relevance to a significant share of the working population.
India: Multi-State Cooperative Societies Act 2002 and the 97th Amendment
India's cooperative law operates on two levels: national legislation for cooperatives operating across state lines, and state legislation for cooperatives operating within a single state. The two principal laws are:
- Multi-State Cooperative Societies Act 2002 — governs cooperatives with members in more than one state
- Individual state cooperative acts — each of India's 28 states has its own cooperative societies act, with significant variation in registration requirements, governance rules, and enforcement
The 97th Constitutional Amendment (2011)
The 97th Constitutional Amendment to the Indian Constitution inserted Article 43B (promoting cooperative societies) and Part IXB (covering cooperative societies specifically). This was a landmark change that:
- Gave constitutional status to cooperatives for the first time
- Required state legislatures to include democratic governance provisions in their cooperative laws
- Set minimum standards for elections, audit, and member rights
- Limited government interference in day-to-day cooperative management
The 97th Amendment was partially struck down by the Supreme Court in 2021 (in Union of India vs Rajendra N. Shah) on the grounds that multi-state provisions should have required state ratification. This created a complex legal situation that has not been fully resolved by subsequent legislation.
Registration Requirements (Multi-State)
Under the Multi-State Cooperative Societies Act 2002, a multi-state cooperative requires:
- A minimum of 50 persons from each of at least two states (for primary cooperatives)
- An application to the Central Registrar of Cooperative Societies in New Delhi
- Submission of proposed by-laws, details of promoters, and the area of operation
For single-state cooperatives, requirements vary by state. Most require a minimum of 10–25 members, submission of by-laws to the State Registrar, and payment of a registration fee.
Section 43B — Tax Treatment
Under Section 43B of the Income Tax Act, certain cooperative payments are deductible only on actual payment rather than accrual basis — a provision that affects cash flow planning for cooperative finance functions.
The more significant tax provisions for cooperatives are in Section 80P of the Income Tax Act, which provides deductions for cooperative income:
- Agricultural cooperatives — 100% deduction on income from farming and related activities
- Consumer cooperatives — deduction up to ₹1 lakh (₹100,000) on net income from consumer trading activities
- Credit cooperative societies — deductions on income from providing credit to members
India's cooperative banking sector — including urban cooperative banks and state cooperative banks — is regulated jointly by the Reserve Bank of India (RBI) and state governments, creating a dual regulatory structure that has been a source of governance challenges. The Urban Cooperative Bank failures of the 2010s (Punjab and Maharashtra Co-operative Bank being the most prominent) prompted calls for consolidated RBI authority over cooperative banks.
Scale context: India has an estimated 850,000 cooperatives with approximately 290 million members — the largest cooperative sector of any country by membership count. The dairy cooperative sector alone, anchored by AMUL and its federated Gujarat Cooperative Milk Marketing Federation, generates over $7 billion in annual revenue. See cooperatives in India for more on the Indian cooperative landscape.
United Kingdom: Cooperative and Community Benefit Societies Act 2014
In the UK, the principal legislation is the Cooperative and Community Benefit Societies Act 2014, which consolidated and replaced several earlier statutes. The Act is administered by the Financial Conduct Authority (FCA), which maintains the register of cooperatives and community benefit societies in England, Scotland, and Wales. Scotland has additional provisions under Scottish law; Northern Ireland has its own industrial and provident societies legislation.
Registration Requirements
To register as a cooperative under the 2014 Act, an organisation must:
- Have a minimum of 3 members (the lowest threshold of any major cooperative jurisdiction)
- Demonstrate that it is a bona fide cooperative — meaning it operates for the mutual benefit of members, with democratic governance and limits on the return of interest on share capital
- Submit a set of rules (equivalent to articles and by-laws) to the FCA
- Pay a registration fee (currently £40 for new societies using standard model rules)
The FCA does not automatically approve every application. Organisations that are essentially investor vehicles dressed as cooperatives will fail the bona fide test and be refused registration.
Model Rules
One practical feature of the UK system is the availability of model rules developed by cooperative sector bodies including Cooperatives UK and the Plunkett Foundation. Organisations that adopt these pre-approved rule sets benefit from expedited registration and lower legal costs. This has made cooperative formation significantly more accessible for small community enterprises, housing cooperatives, and worker cooperatives.
Community Benefit Test
The Act distinguishes between:
- Cooperative societies — operated for the mutual benefit of members
- Community benefit societies — operated for the benefit of the community at large, not just members
A community benefit society (formerly Industrial and Provident Society) must pass the community benefit test: it must demonstrate that its activities primarily serve a wider public purpose beyond member benefit. This distinction affects access to community shares, asset locks, and certain grants.
Reporting and Compliance
UK registered cooperatives must:
- Submit annual returns to the FCA
- File audited accounts (for larger cooperatives) or exempt from full audit (if turnover is below £250,000)
- Hold annual general meetings and maintain democratic governance as specified in their rules
- Notify the FCA of any changes to rules or significant changes in membership structure
The UK cooperative sector is managed primarily through Cooperatives UK, the national trade body, which provides model rules, legal guidance, and sector data. The UK has approximately 7,000 registered cooperatives with around 15 million members and £38 billion in combined turnover.
United States: No Federal Cooperative Act
The United States has no federal cooperative act. There is no single national law that defines what a cooperative is, how it must be structured, or how it must be governed. Instead, cooperative law in the US operates at two levels:
- State law — governs cooperative formation, governance, and operation
- Federal tax law — governs how cooperatives are taxed (separately from state governance)
State-Level Cooperative Law
Each US state has its own cooperative statutes. The most relevant for worker and consumer cooperatives:
- Uniform Limited Cooperative Association Act (ULCAA) — a model law developed by the Uniform Law Commission and adopted by several states including Wyoming, Minnesota, Iowa, Kansas, and Vermont. It allows limited investor members alongside traditional member-owners, giving cooperatives more flexibility to raise capital.
- State agricultural cooperative acts — virtually every state has specific statutes for agricultural cooperatives, many modelled on the federal Capper-Volstead Act of 1922, which granted agricultural cooperatives limited antitrust exemptions.
- Consumer cooperative acts — several states have dedicated consumer cooperative statutes; others allow consumer cooperatives to form under general cooperative statutes or even LLC or nonprofit law.
Worker cooperatives can form under various legal structures depending on the state: dedicated worker cooperative statutes (California, New York, and a growing number of states), general cooperative law, LLC statutes, or in some cases cooperative corporation statutes.
Federal Tax Law: Subchapter T
The primary federal framework for cooperative taxation is Subchapter T of the Internal Revenue Code (IRC Sections 1381–1388). This does not define cooperatives for formation purposes — it defines how cooperatives are taxed. Under Subchapter T:
- Cooperatives may deduct patronage refunds paid to members from their taxable income
- This effectively prevents double taxation on member-level income that is returned as patronage
- Cooperatives must still pay corporate income tax on income not distributed as patronage
The USDA cooperative programs provide additional federal support for agricultural cooperatives specifically. The USDA Rural Development agency provides loans, grants, and technical assistance for cooperative formation in rural areas. This does not substitute for a federal cooperative act, but it gives agricultural cooperatives a federal relationship that other cooperative types lack.
The absence of a federal cooperative act means cooperative formation in the US is more complex and more variable than in countries with unified national laws. An organisation forming as a worker cooperative in California faces different requirements than one forming in Texas or Ohio.
Kenya: Cooperative Societies Act Cap 490
Kenya's Cooperative Societies Act Cap 490 is the primary legislation governing cooperatives in Kenya. It establishes the office of the Commissioner for Cooperative Development, who oversees registration, supervision, and dissolution of cooperatives.
Registration Requirements
Under Cap 490, a cooperative society requires:
- A minimum of 10 members
- Submission of by-laws (rules) to the Commissioner
- A demonstrated common bond — members should share an economic or social interest
- Payment of registration fees
The Commissioner has authority to refuse registration if satisfied that a proposed cooperative does not serve a genuine cooperative purpose, has insufficient membership, or its rules are inconsistent with the Act.
SACCO Societies Regulatory Authority (SASRA)
Kenya's financial cooperative sector — primarily Savings and Credit Cooperative Societies (SACCOs) — is regulated separately by SASRA, established under the SACCO Societies Act 2008. See cooperatives in Kenya for more on how SACCOs operate in practice. SASRA requires deposit-taking SACCOs to:
- Maintain minimum core capital of KSh 10 million
- Maintain a minimum capital-to-total-assets ratio of 8%
- Submit quarterly returns and annual audited accounts
- Obtain a licence before accepting deposits from the public
This two-tier regulatory system (Commissioner for general cooperatives; SASRA for financial cooperatives) reflects Kenya's particularly active SACCO sector. Kenya has one of the highest rates of SACCO membership in the world — approximately 14 million SACCO members — and SACCOs collectively hold over KSh 800 billion in assets.
Tax Treatment
Under Kenya's Income Tax Act, cooperative societies are generally exempt from income tax on income arising from their cooperative activities with members. Investment income (from non-member activities) may be taxable. Withholding tax applies to dividends distributed to members at standard rates.
Reporting Obligations
Kenyan cooperatives must file annual returns with the Commissioner including audited accounts, a list of members, and details of officers. Cooperatives with financial irregularities may be placed under supervision, have external administrators appointed, or be dissolved by the Commissioner.
Scale context: Kenya has approximately 22,000 registered cooperative societies across all types — agricultural, dairy, tea, housing, and financial. Agricultural cooperatives remain the largest sector by number, historically anchored in coffee and tea production.
UN Guidelines: Creating a Supportive Environment for Cooperatives (2001)
The UN Guidelines Aimed at Creating a Supportive Environment for the Development of Cooperatives were adopted by the UN General Assembly in 2001 (Resolution 56/114). These guidelines are non-binding — they do not constitute a cooperative act — but they provide the international policy framework that many national governments use as a reference when reforming cooperative law.
The guidelines recommend that governments:
- Establish a clear, enabling legal framework for cooperatives that does not subject them to more burdensome regulation than other forms of enterprise
- Ensure cooperatives are not disadvantaged in access to finance, government procurement, or tax treatment
- Support cooperative education and training, including training for cooperative members and managers
- Promote cooperative values and principles as defined by the International Cooperative Alliance (ICA)
The ICA Cooperative Principles — voluntary and open membership, democratic member control, member economic participation, autonomy and independence, education/training/information, cooperation among cooperatives, and concern for community — are referenced in the UN guidelines and inform the "bona fide cooperative" tests in national laws including the UK's 2014 Act.
Comparing Key Registration Requirements
| Requirement | Philippines (RA 9520) | India (MSCSA) | UK (2014 Act) | USA (state-level) | Kenya (Cap 490) |
|---|---|---|---|---|---|
| Minimum members | 15 (primary) | 50 (multi-state) | 3 | Varies (5–25 typical) | 10 |
| Pre-membership training | Mandatory (PMES) | Not required | Not required | Not required | Not required |
| Regulator | CDA | Central/State Registrar | FCA | State agency | Commissioner |
| Registration fee | Small (CDA schedule) | Small (state schedule) | £40 (model rules) | Varies by state | Small |
| Annual audit | Required | Required | Required (>£250K) | Varies | Required |
| Tax regulator | BIR | Income Tax Dept | HMRC | IRS | KRA |
FAQ
What is a cooperative act?
A cooperative act is national or regional legislation that establishes the legal framework for forming, operating, and dissolving cooperatives. It typically defines what a cooperative is, how many members are needed to register, what governance rules must be in place, and what reporting is required. Without a cooperative act or equivalent legislation, there is no legal form called a "cooperative" — an organisation would have to form as a company, partnership, or nonprofit instead.
Which country has the strongest cooperative legislation?
There is no single answer, but the Philippines' RA 9520 is frequently cited for the depth of its tax exemptions and the range of cooperative types it recognises. Italy's cooperative law is considered highly enabling and is credited with the density of cooperatives in regions like Emilia-Romagna. The UK's 2014 Act is noted for its low barrier to entry (3 members) and the availability of model rules that make formation practical and affordable.
Does the USA have a national cooperative act?
No. The United States has no federal cooperative act. Cooperatives form under state law, which varies significantly. The federal Capper-Volstead Act (1922) provides antitrust protection for agricultural cooperatives, and Subchapter T of the Internal Revenue Code governs federal tax treatment of all cooperatives — but there is no federal law that defines what a cooperative is or how it must be governed.
What is the Philippine Cooperative Development Authority (CDA)?
The CDA is the government agency responsible for the registration, regulation, and development of cooperatives in the Philippines under RA 9520. It processes registration applications, conducts audits, provides technical assistance, and maintains the national registry of cooperatives. The CDA operates regional offices across the Philippines and manages the cooperative education requirements including the mandatory pre-membership seminar (PMES).
What does it mean for a cooperative to be registered with the FCA in the UK?
FCA registration gives a UK cooperative legal personality — the ability to own property, enter contracts, and sue or be sued in its own name. It also gives members the legal protections specified in the Cooperative and Community Benefit Societies Act 2014, including rights to audited accounts, democratic governance, and limitations on how the cooperative can be dissolved. Registered societies are listed on the FCA's public register, which establishes their legal status and provides transparency for members and third parties.
Can a cooperative operate without a specific cooperative act?
In some jurisdictions, yes — cooperatives can be formed under general company law, partnership law, or LLC statutes if no specific cooperative legislation exists. However, doing so typically means losing access to cooperative-specific tax treatment (like Subchapter T in the US), cooperative-specific registration processes, and the legal clarity that comes with a dedicated legal form. Most cooperative development practitioners recommend forming under the most specific cooperative statute available in the jurisdiction.
What is the 97th Constitutional Amendment in India?
The 97th Constitutional Amendment (2011) inserted Article 43B into the Indian Constitution, directing the state to promote cooperative societies, and added Part IXB, setting constitutional standards for cooperative governance including democratic elections, audit requirements, and limits on government interference. It was the first time cooperatives were given constitutional recognition in India. A 2021 Supreme Court ruling partially struck down its application to state cooperatives, on procedural grounds related to how the amendment was passed.
What is the minimum number of members required to form a cooperative?
This varies significantly by country and cooperative type. The UK requires just 3 members — the lowest of any major jurisdiction. Kenya requires 10. The Philippines requires 15 for primary cooperatives. India requires 50 for multi-state cooperatives (individual state acts may require fewer). The US has no federal minimum; state requirements typically range from 5 to 25 depending on the state and cooperative type. Agricultural cooperatives in most jurisdictions have different (often higher) minimum requirements than consumer or worker cooperatives.
Related Articles
- Types of Cooperatives — the different legal and functional categories of cooperatives
- How to Register a Cooperative — step-by-step registration process by country
- Cooperative Taxation — how cooperative acts interact with tax law in each jurisdiction
- Cooperative Governance — member voting, board structure, and governance requirements under the law
- Cooperatives in the Philippines — country profile including CDA data and sector breakdown
- Cooperatives in Kenya — SACCO sector, regulatory structure, and cooperative statistics
Sources & further reading
This guide is researched against primary sources. Where we cite figures, they reflect the most recent data published by these organisations at the time of writing.
- Cooperative identity, values & principles — International Cooperative Alliance
- Cooperatives and the world of work — International Labour Organization
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