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Practical Handbook for Companies 2021

Loss of tax-sheltered cooperative status

Regulation:Article 13 Law 20/1990

Any of the following circumstances shall result in the loss of the status of fiscally protected cooperative:

  1. Failure to make allocations to the mandatory reserve fund and to the education and promotion fund.

  2. To distribute among the shareholders the irreparable reserve funds during the life of the company and the surplus assets in its liquidation.

  3. Misuse the education and promotion fund.

  4. Failure to comply with the destination of the result of the regularisation of the cooperative's balance sheet or of the updating of the members' contributions to the capital.

  5. Retribution of the contributions of the members or associates to the capital with higher interest rates than those authorised.

  6. Provide evidence of returns in different proportion to the deliveries, activities or services of the partners.

  7. Failure to properly allocate losses for the year.

  8. Making contributions to the capital exceeding the legal limits.

  9. To participate, without authorisation, in the capital of non-cooperative entities in an amount exceeding 10 per cent, or 40 per cent in the case of entities that carry out activities complementary to those of the cooperative.These shares may not exceed 50 per cent of the cooperative's own resources.

  10. Carrying out impermissible co-operative transactions with non-member third parties, not accounting for them separately and not allocating the results obtained from them to the obligatory reserve fund.

  11. Employing more employees than the authorised number where such a limitation exists.

  12. Existence of a lower number of members than expected without being re-established within 6 months.

  13. Reduce the capital to an amount lower than the statutory minimum without it being restored within 6 months.

  14. The paralysis of the co-operative activity or the inactivity of the social bodies for 2 years without a justified cause.

  15. The conclusion of the company that constitutes its object or the impossibility of carrying out the cooperative activity.

  16. The lack of external audit in the cases indicated in the legal regulations.