THE LEGAL STATUS AND NATURE OF COOPERATIVE SOCIETIES IN ETHIOPIA: A CRITICAL STUDY OF THE EXISTING LEGAL FRAMEWORKS

Abstract

A co-operative is both an enterprise and, as a membership based and membership driven organization. The prime purpose of all co-operatives is to meet the needs of their members, not to make a profit for shareholders. International instruments which have a direct bearing on the subject of cooperative law are:-the 1995 International Cooperative Alliance (ICA) Statement on the co-operative identity; the 2001 United Nations Guidelines aimed at creating a supportive environment for the development of cooperatives (UN Guidelines) and; the 2002 International Labor Organization (ILO) Recommendation No. 193 concerning the promotion of cooperatives (hereinafter: ILO R. 193). Recommendation 193 provides a framework for governments to develop the laws, administrative systems and policies that can enable co-operatives to flourish. Recommendation 193 is not an end in itself. It must be translated into action. Indiscriminate application of other rules to cooperatives which were designed for stock companies and which contribute to shaping cooperatives as institutions and/or to defining their operations. This is by, (i) the alignment of cooperative law on stock company law, especially as far as the intertwined matters of capital structure, management and control mechanisms are concerned; and ) (ii) the unification of special laws applying to different types of cooperatives at national levels. So, this study is aimed to examine the legal status and nature of cooperatives and to analyze the extent of adoption of cooperative principles under the cooperative legal regime in Ethiopia. To achieve this objective, the study has mainly followed doctrinal legal research method in reviewing and analyzing the ILO Recommendation, UN Guide line, Ethiopian cooperative legal frameworks and available literatures. Finally, the study has found that the existing legal framework in Ethiopia is insufficient in recognizing the particular needs of different kinds of cooperatives. Even though, different kinds of cooperatives are established based on the proclamation, some types of cooperatives require special support, monitoring and evaluation, which the proclamation needs to give consideration. Persisting limitations, especially in the financial sector, are justified, at times rightly so, by missing or ineffective prudential mechanisms. Legal rules and provisions under cooperative society’s proclamation do not observe cooperative principles. It has modified many of cooperative principles and hence it assimilates cooperatives to other business organization which are established to make profit. Hence, it is recommended that the national legislative and respective bodies should any possible rate come up with a suitable legal regime that enables establishment, regulation and clear operation procedures for different cooperatives in Ethiopia