Circular No. 9-TT/KHDT guiding the implementation of the Model Charter for Industrial and Construction Cooperatives

CIRCULAR

Guidelines for Implementing the Model Charter of Industrial and Construction Cooperatives
(Issued pursuant to Government Decree No. 44/CP dated April 29, 1997)

Based on the Law on Cooperatives dated March 20, 1996 and Government Decrees concerning policies to encourage and develop cooperatives; Decree on the conversion, registration of cooperatives, and organization of activities of cooperative unions; Decree on the tasks, powers, and responsibilities of ministries, ministerial-level agencies, government agencies, and local people's committees at all levels in managing cooperatives;
Pursuant to Article 2 of Government Decree No. 44/CP dated April 29, 1997, which issued the Model Charter of Industrial and Construction Cooperatives, the Ministry of Industry hereby provides specific guidelines as follows:

A. REGARDING THE ORGANIZATION AND DIRECTIVE AT PROVINCE, CITY, DISTRICT, AND TOWN LEVELS

Each province and centrally-administered city shall establish a steering committee to implement the conversion and re-registration of cooperatives. At the provincial and centrally-administered city level, the Director of the Department of Industry shall be a member of the provincial steering committee and concurrently serve as the head of the sub-committee responsible for industrial and small-scale industrial cooperatives (hereinafter referred to as ICSC).

At the district and town level, the District/Town Industry Office Director shall be a member of the district/town steering committee and oversee the block of ICSCs within the district/town. The steering committees implementing the conversion and re-registration of cooperatives must issue decisions in writing by the Chairperson, specifying the duties of each member and notifying relevant agencies and units to enforce them.

- The Director of the Department of Industry shall prepare plans and manage the block of ICSCs to ensure alignment with the overall progress of industries in the province and with vertical sectors at the district and town levels.

- The steering committee at the district and town level responsible for the conversion and re-registration of ICSCs shall guide cooperatives to establish preparatory boards for each ICSC to submit to the approval of the District/Town People's Committee.

The preparatory board shall consist of the management board, supervisory board of the ICSC, representatives of members, and representatives of the District/Town People's Committee.

Once the District/Town People's Committee has approved the preparatory board for each cooperative, the preparatory board shall study the Law on Cooperatives, related Decrees, particularly Decree No. 16/CP dated July 21, 1997; Decree No. 44/CP dated April 29, 1997, and guiding Circulars to apply to ICSCs for implementation.

B. REGARDING THE ORGANIZATION AND IMPLEMENTATION AT COOPERATIVES

1. For ICSCs existing prior to the issuance of the Decree.

- Organize propaganda and explanations to members about the purpose and significance of the conversion so that cooperatives operate in accordance with the Law on Cooperatives and mobilize everyone to participate in new-style cooperatives.

- Conduct an inventory and assessment of all assets, capital, funds, and debts of the cooperative according to the Circular guiding the conversion and registration of cooperatives, the Law on Cooperatives under Decree No. 16/CP dated February 21, 1997. The preparatory board must focus on conducting a comprehensive inventory and assessment of the cooperative's assets based on current market values in the locality.

- After completing the reassessment of all cooperative assets, the distribution of benefits will be carried out through a meeting of members and relevant local authorities to agree on a principle for benefit distribution and proceed with distributing benefits to individual members of the cooperative.

Upon completion of the benefit distribution process for each member, the preparatory board must inform members of their rights but not immediately distribute money, instead clarifying the rights and responsibilities of each person, while the amount remains part of the factory, machinery, and structures of the cooperative. The preparatory board must develop production, business, and service plans suitable for the cooperative and draft a new charter for the cooperative.

The drafting of the current charter for ICSCs must incorporate the Law on Cooperatives and the model charter for ICSCs issued by the Government under Decree No. 44/CP dated April 29, 1997, and these guidelines.

2. For newly established cooperatives after the issuance of the Decree.

Individuals or production groups wishing to contribute capital to form new ICSCs according to the Law on Cooperatives shall act as the preparatory board for establishing ICSCs and must thoroughly study the Law on Cooperatives and related Decrees, especially Decree No. 44/CP dated April 29, 1997, regarding the issuance of the model charter for ICSCs.

Each founder must understand the new provisions in the charter such as voluntariness, democracy, equality, joint contribution of capital and effort for common benefit.

C. REGARDING ALL MEMBERS

Any individual wishing to join an ICSC to become a member must study and understand the Law on Cooperatives and the model charter for ICSCs to clearly see the advantages of the new law and charter, particularly the principles of voluntariness, democracy, profits belonging to members, and concern for the common interests of the cooperative.

Therefore, Article 1 clearly states that an ICSC is an autonomous economic organization established voluntarily by workers with common interests, contributing capital and effort according to the law to engage in industrial, small-scale industrial production, and industrial services.

In this context, it is emphasized that propaganda and explanation should be provided to workers to make them aware of the benefits to ensure voluntariness in joining the entire cooperative, and no coercive measures should force unwilling individuals to join the cooperative.

Article 2.- The provision that ICSCs are economic organizations with legal personality, having their own name, specific address, charter, registered capital, bank account, seal, and operating in accordance with the law proves that the cooperative organization is recognized by the law, eliminating the possibility of fraudulent organizations masquerading as ICSCs to operate in the market.

Article 3.- At present, there are three basic forms for Industrial Cooperatives to choose and apply appropriately. When selecting each form, a thorough analysis of strengths and weaknesses must be conducted, presented at the Members' Congress for discussion and voting. Once a form is chosen, production shall be organized according to that selected form.

Article 4.- Political and social organizations operating within industrial and small-scale handicraft cooperatives aim to promote the freedom of members but must comply with the law, register their activities to develop and protect the production and business operations of the Cooperative without conflicting with the interests of the Cooperative.

Article 5.- Several points need attention: members must be at least 18 years old, have full civil capacity and behavior, there must be at least nine members, and two-thirds of the members must have appropriate professional skills. This ensures the quality of the Cooperative from its establishment, only those aged 18 and above are eligible members; individuals under 18 can work as laborers until they reach 18 when they become formal members. The requirement that two-thirds of the members have skills means that when establishing an industrial or small-scale handicraft cooperative, six out of nine members must have skills to ensure the quality of production and business results, making the Cooperative sustainable over the long term. Therefore, when mobilizing to establish a Cooperative, it is necessary to select people who not only have high skills but also enthusiasm to participate in the establishment of the Cooperative, making it truly a support for workers to contribute capital and effort for long-term business.

Article 6.- In the Model Charter, there are twelve rights. Depending on the specific situation of each industrial and small-scale handicraft cooperative, these twelve rights may be detailed or combined into fewer rights, but they must cover all aspects of the twelve rights as outlined in the Model Charter and must be discussed and unanimously agreed upon at the Congress.

Article 7.- Obligations must also be clearly stated, analyzed, discussed, and voted on individually to demonstrate democracy and concentration. Once recorded in the Charter of the Cooperative, all members have equal obligations and must comply.

Article 8.- Termination of member status: The Model Charter lists six cases, but during discussions for voting, it is necessary to delve deeply into the case where a member does not work, has no economic relations with the Cooperative, or lacks sufficient contributed capital... to ensure fairness right from the Charter.

Article 9.- The Members' Congress, emphasized in the Model Charter, highlights the significant importance of the Members' Congress because it holds the highest decision-making power of the Cooperative, promoting community responsibility, democracy, and concentration, thus requiring careful preparation and advance notice.

Article 10.- The Members' Congress discusses and decides on major issues; the Model Charter mentions ten typical issues, each cooperative should specify based on specific conditions, and all decisions must be voted on during discussions.

Article 11.- The number of representatives and voting procedures at the Members' Congress must be specified, with at least two-thirds (two-thirds) of the total members or member representatives required to attend; otherwise, the Congress must be postponed and reconvened, reflecting the communal nature and avoiding mere formalities. For significant decisions such as amending the Charter, merging, splitting, or dissolving the Cooperative, approval requires at least three-quarters (three-quarters) of the total members or member representatives present at the Congress to vote in favor. This ensures thorough deliberation and caution for major actions. Other issues require only a simple majority (over half).

Note that voting at the Members' Congress and meetings does not depend on the amount of capital contributed or the position held by members in the Cooperative. Each member or representative has only one vote, clearly demonstrating the equality of members.

Article 12.- Clearly define the role of the Management Board as the body managing and directing all Cooperative affairs, stipulating that the Management Board must convene at least once a month with at least two-thirds of its members attending, ensuring the regularity of leadership.

Article 13.- The duties and powers of the Management Board are listed as eight items in the Model Charter, which can be adjusted according to the specific circumstances of the Cooperative, but it is important to distinguish that Management Board members cannot simultaneously serve as Supervisory Board members, Chief Accountant, Cashier, or be related by blood or marriage to these positions; this provision creates an objective environment ensuring fairness, transparency, and democracy, preventing factionalism in the Cooperative.

Article 14.- This provision clearly defines the role of individuals, distinguishing the duties and authorities between the individual head and the leadership collective of the Management Board.

Article 15 and 16.- This provision clearly defines the responsibility of the Supervisory Board as the supervising and inspecting body for all activities of the cooperative, elected by the General Assembly of Members, responsible for inspecting and supervising from the head to members, ensuring that the cooperative operates legally and according to its charter with high efficiency, preventing and stopping any possible violations.

Article 17.- This reflects the nature of Industrial - Small Craft Cooperative being both capital and labor contributions, therefore all members must contribute capital, however, the form of contribution can be more flexible, either contributing once at full amount or in multiple installments as determined by the specific charter of the cooperative decided by the General Assembly of Members.

A principle stipulated in the Law on Cooperatives is that the capital contribution of each member at any time shall not exceed thirty percent (30%) of the total charter capital of the Cooperative - this provision aims to ensure that the Cooperative has sufficient capital for normal production and business operations, not dominated by a few members with large capital contributions.

If a member has significant capital, they may lend it to the Cooperative through the method of raising loans from members as decided by the General Assembly of Members.

Articles 18, 19, 20, 21:- These are activities related to capital and assets; The Cooperative must present them to the General Assembly of Members for discussion and voting to include in the specific charter of the Cooperative but not contrary to legal provisions.

Article 22:- Profit Distribution

The establishment of various funds and profit distribution based on member contributions is decided by the General Assembly of Members. Each year, preparations should be made to present these matters for discussion and voting at the General Assembly. As each year has different needs for investment and development of the Cooperative such as purchasing equipment or training, the Management Board must prepare thoroughly and explain the necessity for each type of fund before presenting them to the General Assembly of Members for discussion and voting.

Article 23.- The handling of losses must clarify the personal responsibility of members causing them, then those members must compensate the Cooperative according to the decision of the General Assembly of Members. Losses due to external factors must be analyzed clearly and deducted from the Cooperative's reserve fund as decided by the General Assembly of Members.

Articles 24, 25, 26:- The merger, division, dissolution, and bankruptcy of the Cooperative shall be carried out in accordance with the Law on Cooperatives and the Bankruptcy Law for Enterprises.

Article 27: Awards

Members of the Cooperative and outsiders who have made outstanding contributions to production, business, and services, and have contributed to protecting, building, and developing the Cooperative will be rewarded by the Cooperative and recommended for higher-level rewards. The form and level of rewards must be drafted into a reward document to be reported to the General Assembly of Members for discussion and voting to serve as a basis for applying rewards.

Article 28: Handling Violations

Violation handling is also regulated in writing for members who do not comply with the charter and internal regulations of the Cooperative, do not comply with resolutions of the General Assembly of Members, and harm the interests of the Cooperative. Depending on the severity, appropriate measures such as material compensation, administrative penalties, or criminal liability as prescribed by law will be imposed.

To implement Decree No. 44-CP dated April 29, 1997 of the Government, the Ministry of Industry requests the provinces and centrally administered cities, Directors of Provincial Departments of Industry to direct the implementation of the model charter of industrial cooperatives and construction for newly established cooperatives. During the implementation process, if there are any unclear issues, please compile them and report back to the Provincial Department of Industry for the Department of Industry to work with the Ministry of Industry and provide supplementary guidance. For major issues exceeding the scope of the Ministry's handling, the Ministry will compile them nationwide and report to the Prime Minister.