The cooperative: when it makes sense

The cooperative (Genossenschaft) is a legal form less well known than the GmbH and AG, but anything but marginal: in Switzerland some of the largest economic organisations are cooperatives. It is governed by articles 828 et seq. of the Code of Obligations and follows a logic different from that of the capital company. Let us see when it is genuinely worthwhile.

The logic: mutuality, not profit

The cooperative exists to promote the economic interests of its members through joint action. It does not aim to maximise the profit distributed to investors, but to offer members a concrete advantage: purchases on better terms, access to services, an outlet for their own products, housing at controlled prices.

This is the mutuality principle: members are at once owners and users of the cooperative. If your objective is to remunerate invested capital, the cooperative is the wrong form; if it is to unite several people or businesses to obtain together what they could not obtain alone, it may be the right one.

Who uses it

Cooperatives are widespread in many sectors:

consumption and distribution (organised large-scale retail);
housing, with building cooperatives offering homes at moderate rents;
agriculture, for joint marketing and purchasing;
services and credit;
energy and participatory local projects.

How it is formed

You need at least seven members (natural or legal persons): this is the legal minimum, and it is the main barrier to entry compared with a GmbH, which can even be formed by a single person. Formation takes place through a meeting that approves the articles of association and appoints the bodies, by public deed and entry in the commercial register.

There is no compulsory minimum capital. The share capital, where provided for, is variable: it comes in and goes out with the members, without amending the articles. This makes the cooperative an open-membership structure, designed to admit and lose members easily.

The one-member-one-vote principle

Here is the other substantial difference from capital companies. In a cooperative, as a rule, “one member, one vote” applies, regardless of how much each has contributed. Decision-making weight follows the person, not the capital.

This ensures democracy and prevents a few members from taking control, but it is also why the cooperative is not suited to those who want to invest in order to carry weight in proportion to the money paid in. Likewise, any advantages are distributed according to the use members make of the cooperative, not according to capital.

The bodies

The structure resembles that of an AG:

the general meeting (or the delegates’ meeting, in large cooperatives) is the supreme body;
the administration manages and represents the cooperative; it must be composed in the majority of members;
the auditors are required under the general rules on auditing.

Liability and obligations

In principle, the corporate assets answer for the debts. The articles may, however, provide for personal liability of the members or an obligation to make additional contributions: this is a point to check carefully, because it changes the member’s risk profile. In the absence of such clauses, the member essentially risks only what they have contributed.

On the accounting and tax side, the cooperative follows the common rules: the obligation to keep accounts, tax on profit and capital, VAT liability above the threshold of CHF 100,000 in turnover, and full accounting above CHF 500,000 in revenue.

Cooperative, GmbH or AG?

Let us summarise the choice:

do you want to remunerate capital and attract investors weighted by shareholding? Choose a GmbH or AG.
do you want to unite several parties for a common advantage, on an equal footing and with doors open to new members? The cooperative is designed for this.
do you have few members and a classic business logic? The GmbH is simpler and does not require seven members.

How we help you

We assess with you whether the cooperative is the right form for the project, draft tailored articles of association — including the clauses on liability and additional contributions — and take care of formation and compliance. Let’s talk about your project.