What are cooperative enterprisesA cooperative is a society of people, not of capital, formed by people who voluntarily join together to carry out an economic activity for their common benefit, with no profit motive for the cooperative itself. It is managed democratically: each member (called a cooperado) has one vote, regardless of how much capital they have invested.The members themselves, through the general assembly and the bodies they elect (a board of directors or executive board and a fiscal council), are responsible for managing and overseeing the cooperative.Under Brazil's Civil Code, every cooperative is a sociedade simples (a non-business company), whatever its activity, but it is registered with the Junta Comercial (state commercial registry). The specific law is Law No. 5,764/1971, the Cooperatives Law.In a single cooperative, one member holds 30% of the capital and another holds 2%. How do they vote at the general assembly?Answer: Each has one vote — one member, one vote applies regardless of capital. Proportional voting can only be adopted by central cooperatives, federations and confederations that are not credit cooperatives.Examples of cooperativesCapalCapal, founded in 1960 in Arapoti (Paraná) by 21 farmers of Dutch origin, works in agriculture, dairy farming and pig farming. It covers a large area between Paraná and São Paulo and has more than 3,700 members.To serve its members, Capal maintains, among other facilities, a fuel station and an animal feed mill in Arapoti.CopacolCopacol, founded in 1963 in Cafelândia (Paraná), has become one of the largest chicken exporters in the country and the largest tilapia producer in Brazil. With its own product line and a supermarket chain, it operates from grain production to pig farming.SicrediSicredi is a system of credit cooperatives, created to offer financial services tailored to the needs of its members. It is an important instrument of economic and social development, because the cooperatives use the funds they raise to finance their own members, keeping the money in the communities where it was generated.How a cooperative is formedGather the founders: Law 5,764/1971 requires at least 20 individuals for a single (first-tier) cooperative. Worker cooperatives, governed by Law 12,690/2012, can be formed with at least 7 members. The Civil Code only refers to the minimum number needed to fill the management positions, which is why some legal scholars argue for a lower minimum; before starting, check with your state's Junta Comercial the number required for your type of cooperative.Draft the bylaws: they define the purpose, the area from which members can be admitted, the value of the membership share (quota-parte), members' rights and duties, how the cooperative is managed and overseen, and what is done with the surplus.Hold the founding general assembly: the founders approve the bylaws, subscribe their shares and elect the management bodies and the fiscal council. Everything is recorded in minutes signed by all the founders.Register with the Junta Comercial the founding act and the bylaws, and then register the cooperative with the CNPJ (national corporate taxpayer registry) and with the state and municipal registries.Register with the OCB: the law requires registration with the Organization of Brazilian Cooperatives or the corresponding state organization.The share capital is divided into membership shares, and no member may hold more than one third of the total, except in cases provided for by law. Shares cannot be sold to non-members.Twelve farmers want to open a single agricultural cooperative. What does the law say?Answer: Law 5,764 requires at least 20; the minimum of 7 is for worker cooperatives, and it is worth checking with the Junta Comercial — Law 5,764/1971 sets 20 individuals for a single cooperative. The minimum of 7 comes from Law 12,690/2012 and applies only to worker cooperatives.Advantages of cooperativesShared ownership and democratic participationEach member has one vote, regardless of the capital invested, which ensures more democratic and participatory management. This fosters a sense of belonging and alignment with the cooperative's goals.Distributed economic benefitsIn a cooperative, the positive result for the year is not called profit, but sobras (surplus). After the mandatory funds are set aside, the surplus is returned to members in proportion to the transactions each one carried out with the cooperative, not to the capital invested, unless the general assembly decides otherwise. This can lead to a fairer distribution and a better quality of life for members.Focus on community well-beingCooperatives focus on serving their members and the community rather than maximizing profit. By law, at least 5% of the surplus goes to the Technical, Educational and Social Assistance Fund (FATES), and many cooperatives also invest in social and environmental projects.Sustainability and resilienceBecause they prioritize longevity and members' well-being over short-term profit, cooperatives tend to be more resilient in economic crises. By law, at least 10% of the surplus goes to the Reserve Fund, which is used to cover losses and support the cooperative's development.Specific tax treatmentThe ato cooperativo (cooperative act), a transaction between the cooperative and its members, is not considered a market transaction and has its own tax treatment. Brazil's tax reform (Complementary Law 214/2025) kept a specific regime for cooperatives under the new CBS and IBS taxes, with a zero rate on several transactions between the cooperative and its members.Autonomy and independenceCooperatives are autonomous, controlled by their own members, and less dependent on outside control.A cooperative had a net surplus of R$ 100,000 and allocates only the legal minimums to the funds. How much is left to distribute, and on what basis?Answer: R$ 85,000, in proportion to each member’s transactions — 10% goes to the Reserve Fund and 5% to FATES, or R$ 15,000. The return is proportional to transactions, unless the assembly decides otherwise.Continuing: Ana carried out 10% of the cooperative’s transactions and holds 1% of the capital. Unless the assembly decides otherwise, how much does she receive of the R$ 85,000?Answer: R$ 8,500 — 10% of R$ 85,000. Using capital as the basis gives the wrong R$ 850, and forgetting the funds gives the wrong R$ 10,000.Disadvantages of cooperativesSlower decision-makingDemocratic management can lead to longer decision-making processes, since consensus or a majority vote in the assembly is needed. It can be difficult to implement fast or innovative changes.Difficulty raising capitalCooperatives may have difficulty obtaining financing, because they do not attract outside investors the way traditional companies do: shares cannot be sold to third parties and voting does not depend on capital. The absence of shareholders investing capital can limit rapid growth.Complex managementThe need to balance the interests of all members can make management more complicated. Cooperative managers often need specialized knowledge of democratic governance.Lower returns for those who invest moreBecause the surplus is distributed based on transactions and not on investment, those who put in more capital do not receive a proportional return, which reduces the financial incentive compared with a traditional company. Interest on capital, when paid, is limited by law to 12% per year.Less focus on profitThe focus on meeting members' needs can give cooperatives less incentive to maximize results, which may limit their competitiveness against traditional companies.An investor wants to put R$ 1 million into a cooperative, expecting a return proportional to the money. What does the law allow?Answer: Only joining as a member, with at most 1/3 of the shares, interest on capital of up to 12% per year and surplus based on transactions — capital gives neither proportional votes nor proportional surplus, shares cannot be transferred to non-members and the return on capital is capped. That is why cooperatives attract few outside investors.What the Cooperatives Law saysLaw No. 5,764/1971 defines cooperatives as societies of people, with their own legal form and nature, not subject to bankruptcy, set up to provide services to their members. Art. 4 lists the characteristics that set them apart from other companies, including:voluntary membership, with an unlimited number of members, unless it is technically impossible to provide services;variable share capital, represented by membership shares;a limit on the number of shares per member;shares that cannot be transferred to third parties outside the society;one member, one vote, with central cooperatives, federations and confederations of cooperatives, except those engaged in credit activities, allowed to opt for proportional voting;a quorum for the general assembly to meet and decide based on the number of members, not on capital;return of the net surplus for the year in proportion to the transactions carried out by each member, unless the general assembly decides otherwise;indivisibility of the Reserve Fund and the Technical, Educational and Social Assistance Fund;political neutrality and no religious, racial or social discrimination;an area for admitting members limited to the possibilities of meeting, control, transactions and service provision.Members' rightsTo vote and be elected to the cooperative's positions.To take part in assemblies, give opinions and vote.To use the cooperative's services.To receive surplus in proportion to their transactions.To have access to the cooperative's information and accounts.Members' dutiesTo behave appropriately as a member.To work and do business with the cooperative.To pay up their membership shares on time.To respect decisions made collectively, even when they are not their own.To know and comply with the cooperative's bylaws, regulations and rules.To meet their financial commitments, including sharing any losses in proportion to their transactions.To look after the cooperative's activities, products and services, and its good name and assets.
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