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Study of legal framework acting in the Republic of Armenia regulating the activities of Cooperatives YEREVAN 2014 Study of legal framework acting in the Republic of Armenia regulating the activities of Cooperatives Necessity and importance of cooperatives................................................. 3 a. Legal acts regulating the activities of cooperatives acting in the Republic of Armenia (Law, Decision of the Government, Normative Act, etc.)................................................................................................. 18 List of the legal acts regulating the activities of cooperative acting in the Republic of Armenia............................................................................... 35 b. Analysis of strengths and weaknesses of legal acts focusing on legal acts related to agricultural cooperatives............................... 36 c. Study and analysis of draft legal acts on cooperatives currently circulated within the RA Government (focusing on agricultural cooperatives); expected outcomes of adoption (approval) of draft legal acts............................................................ 42 2 Study of legal framework acting in the Republic of Armenia regulating the activities of Cooperatives. Necessity and importance of Cooperatives Cooperatives have existed for over two hundred years. Acting in all spheres of economic activity, cooperatives are more durable than investment tended companies. Cooperative model has permanently adapted to the changing conditions, and the innovative new ways of cooperation have arisen in order to solve the new economic and social problems. Cooperatives have developed in the countries with highly different political conditions, economic development levels, cultural characteristics and historical background. The number of certain types of cooperatives has noticeably icreased in specific countries. At the end of nineteenth century cooperatives, as economic and social institutions, have played an important role in Central and Eastern Europe. There were interesting examples of succeeding with independent initiatives in Czech, Bulgaria, Serbia and Poland namely before entering of the socialism in these countries. Likewise, cooperatives have had the key role in developing countries, even though they often have not been defined and regulated by the law. The main reason for the success and longevity of cooperatives is that they are not interested in maximizing investors’ profit, but interested in satisfying needs of communities. Cooperatives should be referred as common (collective) solvers of problems. Cooperatives’ world history provides lessons to be learnt in order to understand their rationale. Cooperatives have also prospered as they have inherent advantages in comparison with the investment tended organizations, in a sense that they assume such a role that investment tended organizations are unable or do not wish to assume. Users and consumer cooperatives have been established to decrease fees and retail prices, agricultural cooperatives have been established to strengthen weak market potential of manufacturers, the workers cooperatives have been established for self-management of their businesses. Workers and communities have established the mutual assistance companies to provide global insurance and assistance. Cooperatives have contributed to the improvement of life quality of the most vulnerable and wider groups of society by satisfying the needs of their members. Many public welfare programs have been brought to 3 life due to inventions and experimental works carried out by cooperatives. The basic institutions providing welfare have initially developed through the mutual assistance and cooperative groups. Historical evidence indicates that during the crises cooperatives are not only surviving better than other types of organizations, but also resist crisis influence successfully. The history of British consumer cooperatives of the nineteenth-century is a sustainable development story, which was only insignificantly affected by the periodic declines. In the 1930s during the Great Depression cooperatives of energy and telecommunications spherehelped to reform the U.S. agriculture. In the 1960s, the cooperative movement began in New York City involving 27,000 families. In the 1970s, during a radical restructuring, a number of Workers' Cooperatives increased in Europe, where a number of failures within that cooperatives was lower than within commercial companies. In 2008-2009, once again the crisis attested the power and flexibility of cooperatives. In order to assess the scales of Cooperative's movement, it is necessary to carry out a realistic evaluation of the total extent of cooperative sector. In the whole wide world there are three times more member-owners of cooperatives than an individual shareholders of the joint stock companies, and in rapidly developing countries (Brazil, Russia, India, China) the number of cooperative’s members exceeds the number of shareholders for four times. The total membership of cooperatives is from 800 million to 1 billion. According to the International Cooperative Alliance, cooperatives operate in all countries, with their importance to be especially big in poor communities. In European countries about 60 percent of the total market share of agricultural cooperatives is in sphere of processing and sales of agricultural products and about 50 percent in sphere of supply of inputs. In the U.S. about 28 percent of the market share of cooperatives is in processing and sales of agricultural products and about 26 percent - in market supply of inputs. About 56 thousand credit cooperatives and credit associations operate in the world. There are about 4200 credit cooperative banks with 36 thousand branches in Europe. 400 thousand persons work in and 29 million people are members of 3200 consumer cooperatives of the European retail trade sector. 4 According to the International Cooperative and Mutual Insurance Federation, in 2008, 25 percent of the global insurance market was cooperatives’ share. Social cooperatives, which are widely spread particularly in European countries and in Canada, are the new types of cooperatives, which clearly aim at improving collective benefit. As a type of cooperative, social cooperative is between traditional cooperative and non-profit organization and generally brings numerous interested parties (members of the cooperative) together for the purposes of common interest. A cooperative should be viewed as such type of a private enterprise, which is owned by its members, is jointly controlled by them and provides services to them. The objectives of cooperatives are economicmainly . The establishment and successful development of a cooperative is not an easy task. Generally it is time-consuming and complicated process. Market conditions, policy of the government, as well as legal framework should favour the development of cooperatives. At the same time, the essential prerequisite is the selection of strong leaders with management skills and capacities, as well as existence of sufficient financial resources. A cooperative, under the influence of current trends of the market tended reforms, privatization and decentralization, is rightly viewed as the most appropriate organizational form in order to call into being the economic initiatives of villagers, to implement sustainable development and good management. The best evidence of the abovementioned is the emphasis of the importance of cooperatives in the development of agriculture made by many countries, donors and NGOs. However, the state should not interfere in the establishment and management of cooperatives. The task of the government is an implementation of the functions supporting their establishment, as well as forming favorable legal and economic environment. By the simplest definition, a cooperative is the voluntarily established economic unit to produce goods and supply services, the members of which carry out the management and jointly share the emerged risks and profits1. According to the definition of the International Co-operative Alliance (Established in 1895, in London) “A cooperative is an autonomous association of persons, who are voluntarily 1Urutyan V., Avetisyan S. Agricultural Cooperatives. Yerevan, Asoghik, 2011, page. 5 united to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise”2. The characteristics and statistics of the cooperative movement in the Republic of Armenia It is obvious from the nature of problems currently faced in Armenia's agri-food sector, that the successful development of agriculture and agri-businesses is essentially conditioned by the establishment and development of cooperatives. In conditions of market economy the cooperation can coordinate the various functions in agricultural production, as well as in service, marketing and supply processes. The idea of cooperation is conditioned by the necessity of solving problems in agriculture area, such as difficulties in marketing of the agricultural products, inaccessibility of the services and the main resources used, such as techniques, fuel, fertilizers, etc. Many international and national programs and activities in the Republic of Armenia have been aimed at promoting the establishment and development of cooperatives. It is expedient for the cooperative movement in the Republic of Armenia to be presented by the following stages: 1993-1999 Since 1993 some local and regional

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