Law on Agricultural Cooperatives28 march 2016, 16:36
GRATA Finance & Securities Group has released a legal alert covering important legal developments in the Kazakhstani legislation that occurred in 2015.
Most of the changes were introduced in the legislation pursuant to adoption in May 2015 of a new policy document – the Plan of the Nation: 100 Steps for Implementation of 5 Institutional Reforms – governing the development of Kazakhstan in the short-term perspective.
The legal review covers the following areas:
1. Law on Corruption Countermeasures
2. New Civil Procedure Code
3. Law on Astana International Financial Center
4. Law on Judicial System
5. Law on Supreme Judicial Council
6. Resolution on Application of Bankruptcy and Rehabilitation Legislation by the Courts
7. New Commercial Code
8. PPP Law
9. Law on WTO Accession
10. Law on Special Defensive, Antidumping and Compensational Measures
11. Law on Ownership Right Further Protection
12. Law on Amendments to Electric Power Industry
13. Law on Amendments Related to Non-performing Loans, Financial Services and Financial Organisations
14. Law on Agricultural Cooperatives
15. Privatisation Decree
16. Rules of Electronic Trades
17. New Procurement Law
Each of them is addressed in a separate release on our website, whereas the today’s release deals with the changes in the Law on Agricultural Cooperatives.
LAW ON AGRICULTURAL COOPERATIVES
The Law on Agricultural Cooperatives (Law of the Republic of Kazakhstan dated 29 October 2015 no. 372-V "On Agricultural Cooperatives") was signed by the President on 29 October 2015 and came into effect from 1 January 2016.
The Law on Agricultural Cooperatives is aimed to increase the attractiveness of membership in agricultural cooperatives, encouraging of competition for the purposes of development of agricultural sector in Kazakhstan.
Please note the following provisions of the Law:
Making Agricultural Cooperatives Commercial
Currently, most of agricultural cooperatives are established as non-commercial organisations (except agricultural cooperatives established in the form of so called production cooperatives). Non-commercial organisations cannot distribute dividends to its members. Accordingly, agricultural cooperatives were not really attractive for the members to join.
The Law provides that from 1 January 2016 all agricultural cooperatives shall be established and perform their activity in the form of production cooperative that is a commercial legal entity that allows to distribute dividends to its members. Agricultural cooperatives established as non-commercial organisations shall be reorganised and become commercial organisations (in the form of production cooperative) within 1 year from the effective date of the Law on Agricultural Cooperatives.
Introduction of Associated Members
The Law on Agricultural Cooperatives provides that, apart from other members, agricultural cooperative can have so called “associated” members.
The contribution of associated members can be made only with money (and not other property). Associated members receive dividends for the amount of their contribution, bear liability to the cooperative’s creditors only for the amount of their contribution, are not entitled to participate in the management of agricultural cooperative (have a right of advisory vote only) and are not obliged to take part in business activity of agricultural cooperative. The total number of associated members shall not exceed one fifth of the total number of participants of agricultural cooperative.
The Law on Agricultural Cooperatives provides that associated participants can be individuals and legal entities that are agricultural producers who make contributions to the agricultural cooperative as a prepayment of agricultural raw materials in order to guarantee the delivery of such materials. It is not clear whether non-agricultural producer can become an associated member of agricultural cooperative.
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