What are The Advantages of Agricultural Cooperatives Over Other Legal Entities (Such as Ltd, Jsc Etc) Operating in
An agricultural cooperative has the following advantages over
other legal entities:
• An agricultural cooperative is managed and its activities are
controlled by the members of a cooperative, based on
democratic principle such as “one member – one vote”; in other
legal entities number of members’ votes depends on their shares
in the entity;
• Income of agricultural cooperatives is distributed between the
cooperative members proportionally to their economic
contribution in agricultural activities. In other income-oriented
legal entities the income is distributed proportionally to the
shares of partners.
• Members of an agricultural cooperative are directly involved in
agricultural activities of the cooperative; Members of other
legal entities may not be directly involved in economic activities
of the entity.
• Consolidation of cooperative resources (land, human and
financial resources) reduces the costs and promotes increase
• Compared to individual farmers an agricultural cooperative
shareholder becomes wholesale market player and gains
opportunity to purchase services, products or other inputs at
wholesale prices; it promotes formation of a sustainable
supplier with the advantage to sell products at better terms.
Currently the agricultural cooperatives has following advantages
over other legal entities:
• Tax benefits, that significantly reduce expenses of agricultural cooperatives;
• Opportunity to be involved in state programs specially designed for support of agricultural cooperatives.
Where Information on Establishment of Agricultural
Cooperatives is Available?
The detailed information is available at Legal Entity under the Public Law
(LEPL) – Agricultural Cooperatives Development Agency (ACDA); at regional
level initial information is available at Regional Information-Consultancy
Centers (RICCs) of the Ministry of Agriculture of Georgia (MoA).
What is the Main Function of the Agricultural
Cooperatives Development Agency (ACDA)?
The main functions of the ACDA are:
• Granting and terminating the status of an agricultural cooperative;
• Providing consultation service to cooperatives;
• Implementation of state support programs and other related
activities for cooperatives;
• Monitoring of agricultural cooperatives.
Is There a HOT LINE Available to Contact Agricultural Cooperatives Development Agency?
Interested persons can obtain needed information on the telephone
line 231 30 26 of the Legal Entity under the Public Law– Agricultural
Cooperatives Development Agency.
How Activities of Agricultural Cooperatives are Controlled?
Agricultural cooperatives are controlled by the same state mechanism (e.g. taxation, etc.) as set for the other entrepreneurial
The agricultural activities of the bodies having the status of agricultural cooperatives are monitored by the Legal Entity under the Public Law – Agricultural Cooperatives Development Agency. The General Meeting of members (shareholders) and/or Supervisory Board (if established) carries out internal control of the cooperative.
What Kind of State Support Activities are Available for Cooperatives?
At this stage the project providing motor blocks and manual seeder
machines to the agricultural cooperatives is underway envisaging
handover of agricultural machinery (1700 units of motor blocks and
2000 manual seeder machines) to cooperatives at favorable prices.
Agricultural cooperatives have considerable tax allowances
promoting to their significant financial benefits.
An agricultural cooperative can be a grant recipient unlike other
entrepreneurial legal persons.
Implementation of various target programs is planned in 2015
aiming at support of institutional development of cooperatives.
What Financial/Tax Benefits are Available for Cooperatives and for What Period?
Profit tax reliefs are set for:
a) Grants obtained by agricultural cooperatives in accordance with
the “Law of Georgia on Grants” and contributions (shares) of the
members of an agricultural cooperative;
Example: Cooperative is a grant recipient of GEL 15,000. At the end
of a calendar year, upon balancing of incomes and expenses the
cooperative will be exempted from payment of profit tax (15%) for
the grant amounting to GEL 15,000.
b)Profit gained from primary supply of agricultural output, produced in
Georgia by agricultural cooperative, before its industrial processing
(prior to change of product code), until January 1, 2017.
Example: Agricultural cooperative produces peaches and canned
peach juice. Profit gained by sale of sorted peaches will be
exempted from 15% profit tax and profit of an agricultural
cooperative gained from production of peach juice and its sale will be
taxed by 15% profit tax.
The following will not be reflected in joint income:
• Supply of agricultural outputs produced in Georgia as a result of
agricultural activities of the cooperative and its members
(shareholders) and/or the services provided in relation to the
above activities, until January 1, 2017.
Example: Annual income of the cooperative is GEL 100,000 out of
which GEL 80,000 is gained from sales of agricultural products
(before change of product code) produced by the cooperative and
the remained GEL 20,000 is gained from the leased out buildings
owned by the cooperative. GEL 80,000 will be exempted from
income tax and 20% tax imposed for the remained GEL 20,000.
Dividends exempted from tax:
• Dividends gained by a cooperative member as a result of
cooperative activities will not be taxed and will not be reflected in
the joint income by the dividend recipient until January 1, 2017
Example: if other entrepreneurial legal bodies pay 5% of the amount
to be released as a dividend, the dividends of the cooperative are
exempted from taxation. An agricultural cooperative has no
obligation to reflect dividends in its joint income.
The following items are exempted from property tax:
• Agricultural land plots up to 5 ha owned by physical persons as
of March 1, 2014.
Note: the tax relief under the above sub-point is also applicable
to property handed over to family member or/direct/secondary
heirs as a result of deed of gift or inheritance or cases of
contributing such property by the cooperative member
(shareholder) as a share in a cooperative.
Property used for agricultural activities and owned by the
agricultural cooperative (except land) and movable
property leased for the same purposes until January 1,2017
Example: The cooperative owns building and machinery. The
cooperative will not pay property tax for the owned building and
machinery. Property tax is also not imposed on the movable property
leased out to the cooperative by a leasing company.
Agricultural cooperatives also take advantage of
other tax benefits being in force for agricultural sector.
If a 'socially Unprotected' Person Becomes a Member of a Cooperative Will He/She be Deprived of the Status of the 'socially Unprotected'?
Registration of any person in the General Database of Socially
Unprotected Families (i.e. granting the status of the so called socially
unprotected person) is provided by the Legal Entity under the Public
Law – Social Service Agency (or its territorial units) based on individual
assessment scoring system. If final scoring of the economic condition
of a person, based on the assessment conducted after his/her joining
of a cooperative is above the margin (necessary for access to social
aid) set by the legislation, this person will be suspended subsistence
aid. Therefore, suspension of subsistence aid is not affected by only
the membership of the cooperative. Decision is made by the
authorized body, based on individual evaluation in each particular
Does a Cooperative Need a Stamp?
According to the law it is not obligatory for the cooperatives to have a stamp, though the need of a stamp may emerge from daily trade relations or bank/taxation transactions. Therefore cooperatives are recommended to have a stamp.
How to Register and Obtain a Status of a Cooperative?
For registration of a cooperative, foundation of a cooperative is required, which envisages submission of foundation documents (charter, minutes of General Meeting) to the Legal Entity under the Public Law – National Agency for Public Registry. After registration the body applies to the ACDA for obtaining of agricultural cooperative status.
Following documents should be attached to the application:
a) Extract from the Register of Entrepreneurial and Nonentrepreneurial
(non-profitable) legal Persons, which certifies
registration of the cooperative and authority of the applicant;
b) If needed, an extract from the National Agency of Public
Registry certifying ownership of agricultural land or property by
c) Cooperative charter.
If submitted documents are in line with the requirements of
Georgian legislation, the ACDA takes decision of granting status
of agricultural cooperative to the applicant.
Does Cooperative Pay for Granting/Termination of a Status?
Fee for registration of a Cooperative in the National Agency of Public
Register is GEL 100. Fee for certification of authentic signatures on
foundation documents is GEL 5.
Granting of Agricultural Cooperative status is free of charge.
Is Cooperative Online Registration Service Available?
At the present moment online registration of cooperatives is not
Who is Authorized to Establish a Cooperative?
To establish and obtain a status of an agricultural cooperative the
following requirements should be recognized by its members:
џ Georgian citizen aged 18 who has a share and is directly
involved in agricultural activities of the cooperative;
џ And/or the members having the status of an agricultural
Can a Cooperative be Established as a Processing Enterprise?
Cooperatives can be established with the profile of a processing
Who Prepares the Charter of a Cooperative and is Consultation Available on This Issue?
The Charter is prepared by the founders of a cooperative.
Consultations on establishment of a cooperative and preparation
of the related documents can be received at ACDA and/or
Regional Consultation Information Centers.
For simplification of the procedure of establishment of a
cooperative, Agricultural Cooperatives Development Agency has
prepared a sample charter, which is placed at ACDA
(www.acda.gov.ge) and National Agency of Public Registry
(NAPR) (www.napr.gov.ge) web-pages.
Does the Charter Need Notarization?
Notarization of founders’ authentic signatures on the charter is needed
if signatures are not certified in the National Agency of Public Registry
What are the Minimum Membership Requirements for Formation of a Cooperative?
The membership requirement for the villages, communities and
settlements that fall under the “Law on Social-economic Cultural
Development of High Mountainous Regions” is at least 3 members;
the requirement for the rest of Georgian territory is minimum 5
Can a Foreign Citizen Become a Member of a Cooperative?
Foreign citizens cannot become cooperative members. According to the law
only Georgian citizens (or persons having dual citizenship being at the same
time Georgian citizens) can be cooperative members.
What are the Procedures for Admission of New Members in a Cooperative?
The procedure for admission of a new member in a cooperative is provided in
the charter or established by the General Meeting. Article 5 of the sample
charter defines procedures on admission to a cooperative;
In Case of Admission of a New Member is it Obligatory to Notarize the Membership in the Register of Shareholders?
There is no obligation under Georgian legislation for notarization of
documents (including the shareholders’ register) for registration of
new members in the agricultural cooperative.
To ensure maintenance of shareholders’ register, the ACDA worked
out relevant instructions.
Is there an Obligation for Charter Amendment When Admitting a New Cooperative Member?
No, it is not obligatory.
Can Family Members or Other Persons be Admitted to Membership of a Cooperative?
Yes, it is possible.
Can Members of One Family Establish a Cooperative?
Members of an agricultural cooperative (including founders) can be
members of one family.
Can One Person be a Member of Two Cooperatives?
Yes, it is possible.
When Cooperative Status is Terminated?
The status of an agricultural cooperative can be terminated in cases
1. Agricultural activities provided by the “Law on Agricultural
Cooperatives” are not fulfilled;
2. The minimum membership requirements set by the legislation
are not met;
3. Liquidation or insolvency of an agricultural cooperative is
4. Other requirements of the “Law on Agricultural Cooperatives”
or the charter are not met.
Will Agricultural Cooperative Status be Suspended if After Leaving Cooperative by One Member the Minimum Number of Members Becomes Less Than 5 for Lowlands and Less Than 3 for Highlands?
The above will result in suspension of the status of Agricultural
Cooperative for the period of 6 months. If in this period a new
shareholder does not join cooperative ensuring compliance to the
minimum membership requirements, the status will be terminated.
What is the Minimum Requirement for the Number of Cooperative Board Members?
Agricultural Cooperative Board should consist of no less than 2
How the Board of a Cooperative is Formed?
The General Meeting elects members of a Board for 4 years or other
period set in the Charter. The exact number of Board members is also
defined in the Charter.
Is it Obligatory for a Cooperative to Submit Annual Declarations?
It is obligatory for all agricultural cooperatives to submit annual
declarations and fulfill other tax obligations.
Does a Cooperative Need an Accountant?
It is obligatory for an agricultural cooperative to keep accounting
records and accordingly it is recommended to employ an accountant.
Does a Cooperative Need a Bank Account?
For economic-financial activities and relations with the taxation bodies
it is necessary for a cooperative to have a bank account.
If a Cooperative Employs (I.E. Hires) a Non-member, Will the Salary of the Employed Person be Charged With Income Tax?
In case of employing a non-member by an agricultural cooperative,
non-member’s salary will not be taxed with income tax if the joint
income of the cooperative as a result of agricultural activities does not
exceed GEL 200,000.
If a Cooperative Applies for a Bank Loan Can Shareholder's Property be Used as a Loan Security?
Property of the shareholder or any third person (physical or legal
person) can be used for securing monetary obligations (including
loans) of an agricultural cooperative only with the agreement of the
shareholder or the third person.
If a Cooperative Fails to Pay the Loan Will a Shareholder Loose His/Her Own Property?
In case of failure of fulfillment of monetary obligation by an
agricultural cooperative the compulsory payments can be made
only from the property owned by a cooperative.
If a Person Willing To Join a Cooperative Has a Bank Loan Will It Hamper His/Her Joining the Cooperative?
No it will not.
When Leaving Cooperative Membership What is the Procedure for Returning Property Contributed as a Share and/or Other Monetary Contributions?
According to the recommended sample charter, after a member
submits a written request for leaving the membership, the final
repayments to the member leaving is made on the basis of the
balance sheet as of the day of leaving. If a member leaves
cooperative during the economic year, repayment is made based on
the recent balance sheet. The procedure for returning the
shareholder’s property or monetary contributions or other assets
shall be defined by the charter and/or by the agreement signed
between the Board of the cooperative and the shareholder.
Who Defines the Minimum Value of the Share?
The minimum value of the share is defined by the charter of an
What is the Maximum Number of Shares That One Member Can Own?
The number of maximum share of the cooperative member is not
defined by the legislation.
Can Share be Contributed in Money or Property Expressed in Monetary Value?
Cooperative members can contribute by monetary shares or by
property expressed in monetary value.
By Whom and How Property is Valued When Contributed as a Share of a Cooperative?
According to the recommended sample charter, the value of the
property to be contributed as a cooperative share is assessed by the
auditor contracted upon decision made by the General Meeting.
Can a Land Plot Located Beyond the Village Where the Cooperative is Based be Used as a Contribution for a Share?
Yes, it is possible.
Can a Person Contribute Leased Land/Property as a Share in a Cooperative?
Only property owned by a member can be contributed as a share
in a cooperative.
Can a Person Contribute Part of His/her Property Owned as a Share in a Cooperative and Keep the Rest of the Property in His/Her Ownership?
Yes, it is possible.
How Incomes/Dividends of a Cooperative are Distributed Among Members?
Distribution procedure of income/dividends between the members
is defined in the charter.
What is a Shareholder's Dividend?
Dividend is the income generated from shareholder’s agricultural
activities in the cooperative, which is gained after distribution of
profit and calculated (according to the recommended sample
charter) proportionally to the member’s share.
What is an Additional Share?
An additional share is a monetary or property contribution
(expressed in monetary value) of the shareholder according to the
needs of a cooperative, enabling the member to receive dividends
from the cooperative’s profit.