Law on Cooperatives

USSR Supreme Soviet, Law on Cooperatives. May 26, 1988

Original Source: “Zakon kooperatsii v SSSR,” Pravda, 8 June 1988.

I. THE SOCIALIST COOPERATIVE SYSTEM AND ITS PLACE IN THE COUNTRY’S ECONOMY

Art. 1. The Cooperative System in the System of Socialist Social Relations

1. Socialist cooperatives are a constantly developing and progressive form of socially useful activity. They open up extensive opportunities for citizens to use their strength and knowledge for the purpose of productive work in accordance with each person’s vocation, desire, and abilities; to earn income depending on the amount and quality of their work and their contribution to the end results of the cooperative’s activity; and to meet the demands of its members.

2. Under the conditions of the USSR’s political and economic systems and given the leading role of the state (nationwide) form of ownership, the comprehensive development of the cooperative movement is aimed at making fuller use of the potential and advantages of socialism, at augmenting social wealth, at saturating the market with high-quality goods and services, at making those goods and services cheaper, and at the increasingly full satisfaction of Soviet people’s material and spiritual needs.

3. The state, on the basis of the great importance of the cooperative system for the economic and social development of society, the rational utilization of material and labor resources, and the deepening of the democratization process, supports the cooperative movement in every possible way, promotes its expansion, and guarantees that the rights and legitimate interests of cooperatives and their members will be observed.

4. Cooperative enterprises (organizations), henceforth known as “cooperatives”, together with state enterprises (associations) are the main component in the unified national economic complex. Work in cooperatives is honorable and prestigious and is encouraged in every possible way by the state.

5. The cooperative system in the USSR gives cooperative members real opportunities and provides a material incentive for them to improve efficient economic management based on the independent development and implementation by cooperatives of their production plans, the distribution and sale of goods, the execution of work, the provision of services, and the implementation of other kinds of activity, as well as to improve the social conditions of the collective’s life.

The activity of cooperatives, their high labor productivity, and their remuneration system are designed to give an incentive to the development of economic competition and competitiveness in the market for goods, jobs, and services both among cooperatives and between cooperatives on the one hand and state enterprises and organizations on the other hand, and to promote the improvement of the efficiency of economic management in every possible way.

Art. 2. Legislation on Cooperatives

Relationships associated with the creation and activity of cooperatives are regulated by the present Law and other acts of USSR and union republic legislation issued in accordance with it.

Art. 3. The Cooperative System, Types of Cooperatives

1. The consistent development of the cooperative movement in the country is turning the cooperative system into a broadly ramified system organically linked with the state sector of the economy and the population’s individual labor activity.

Cooperatives can be set up and can operate in agriculture – where they predominantly take the form of kolkhozes – in industry construction, transportation, trade public catering, the paid services sphere, and other sectors of production and socio-cultural life.

Cooperatives are entitled to engage in any kind of activity save those prohibited under USSR and union republic law.

2. Two main kinds of cooperative – production cooperatives and consumer cooperatives – function within the socialist cooperative system. Production cooperatives produce goods, products, and jobs and also provide paid services to enterprises, organizations, institutions, and citizens.

They are created and operate for the production, procurement, processing, and sale of agricultural output and technical production commodities; the manufacture of consumer goods; the collection and processing of secondary raw materials and usable production waste; the repair and servicing of equipment; the provision of services to production, highway, and housing construction, the retail trade, public catering, and consumer services; the organization of cultural leisure and medical aid; and the provision of legal, transport, forwarding, scientific research, planning, design, consultancy, sports and fitness, and other services, and also in the spheres of fishing, fish farming, production of fish products, timber procurement, extraction of minerals and other natural resources, and other spheres of economic activity.

The activities of these cooperatives are based on the individual labor participation of their members.

Consumer cooperatives meet the requirements of their members and other citizens for trade and consumer services and the requirements of cooperative members for housing, dachas, garden plots, garages and parking lots for vehicles, and socio-cultural and other services. Alongside these functions consumer cooperatives may also develop diverse production activity – that is, they may be mixed cooperatives.

Art. 4. The Main Tasks of the Cooperative System

1. The central function of cooperatives’ activity is to meet the requirements of the national economy and the population for food, consumer goods, housing, technical production output, jobs, and services with high consumer qualities; to develop the labor and social activeness of cooperative members; and to boost their material prosperity, cultural standards, and professional skills.

In order to resolve these tasks within the cooperative system, production is being developed and its efficiency improved, the quality of products, the work being carried out, and the services provided is being enhanced, labor productivity is being boosted; local raw materials and supplies are being employed in economic turnover to the greatest possible extent, and waste-free and resource-saving technologies are being developed and introduced.

2. The cooperative system increases the number of people engaged in socially useful work, attracts additional labor resources to the production of goods (and the execution of jobs and services) and also creates conditions for citizens who are not cooperative members to participate in cooperatives’ activity on a contractual basis in their spare time.

3. Operating on the principles of self-financing, cooperatives through their income improve the living standards of cooperative members and their families, resolve social tasks, create favorable opportunities for highly productive work, protect their members’ property interests and social rights, and participate in the shaping of the state budget.

II. COOPERATIVES-THE PRIMARY COMPONENT OF THE COOPERATIVE SYSTEM IN THE USSR

Art. 5. Socialist Cooperatives

1. The cooperative is a public organization of Soviet citizens in voluntary association on a membership basis in order jointly to conduct economic and other activity based on property legally belonging to them, rented, or provided for their use free of charge, autonomy, self-management, and self-financing, as well as the material interest of cooperative members and the fullest possible combination of their interests with the interests of the collective and society.

2. Cooperatives, as the primary component of the cooperative system in the USSR, are called upon to actively participate in the country’s economic and social development and the attainment of the supreme goal of social production under socialism – the fullest possible satisfaction of people’s growing material and spiritual needs.

3. In the interests of the implementation of the tasks laid down under this law, cooperatives are entitled to make any decisions provided such decisions do not contravene existing legislation and the cooperative statutes. A cooperative is a legal entity, enjoys the rights and fulfills the duties linked with its activity, and has an independent budget.

4. The following structural subunits may be set up within a cooperative (including territorially distinct subunits): divisions, shops, livestock units, workshops, studios, stores, and other subunits operating, as a rule, on a collective, family, or individual contract basis, which may include the leasing of property. Cooperatives are entitled to open their own branches and agencies.

Art. 6. Cooperatives’ Labor Collectives

1. Cooperative members participating through their labor in its activity, and people working in a cooperative on the basis of a labor contract make up the cooperative’s labor collective.

2. The cooperative molds a labor collective able to achieve high end results under the conditions of full economic accountability and self-financing, shows concern to improve the professional ski Its of cooperative members and the other persons working in the cooperative, and distributes work between them bearing in mind their skills and the cooperative’s economic interests.

3. The cooperative’s party organization, as the political nucleus of the collective, operates within the framework of the USSR Constitution, promotes the enhancement of the production initiative and social activeness of labor collective members and boosts their political self-awareness, their proprietary sense, and their responsibility for the results of the cooperative’s activity. 4. Socio-economic decisions concerning the cooperative’s activity are worked out and adopted by its administrative organs with the participation of the labor collective and the party, trade union, Komsomol, and other social organizations operating within it in accordance with their statutes and legislation.

Art. 7. The Cooperative’s Property

1. A cooperative’s property consists of the means of production belonging to it and other property that it may need to carry out its statutory tasks. Cooperatives may own buildings, installations, machines, equipment, means of transport, productive and working livestock, finished output, goods, funds, and other property in accordance with the aims of their activity.

2. A cooperative’s property is formed by the monetary and material dues paid by its members, the output they produce, the income generated by output sales and other activities, revenue from the sale of shares or other securities issued by the cooperative, and bank credit. State, cooperative, and other public enterprises (organizations) as well as citizens who are not members of a given cooperative but who work in it under labor contract may participate in forming the cooperative’s property on a contract basis by way of contributions of money and materials.

3. A cooperative’s property consists of the property of the enterprises and organizations created by it, along with the property of inter-farm enterprises and organizations in proportion to their shareholding.

The property of associations comprised of cooperatives and other public and state enterprises and organizations is the joint property of the state, the cooperatives, and other public organizations.

The property of unions (associations) comprised solely of cooperatives belongs to those cooperatives under the right of joint ownership or can be the property of a union (association).

4. The cooperative, as the rightful owner of the property belonging to it and being used by it, is obliged to augment it, utilize it efficiently, and safeguard it. Nobody is entitled to utilize cooperative property to obtain illegal income or for other mercenary ends.

Art. 8. The Legal Protection of Cooperatives’ Property

1. Cooperative ownership as a form of socialist ownership is inviolable and is protected by the state. It enjoys legal protection on a par with state ownership. A cooperative’s property may be confiscated only at the decision of a court or arbitration in accordance with their authority.

2. The right to disposal of property belongs to the cooperative alone. A cooperative’s property may not be diverted for aims unconnected with its statutory activity.

3. Cooperatives are entitled:

To sell and transfer to other enterprises, organizations, institutions, or citizens, to exchange, to lease, to lend, or to transfer for free temporary use buildings, installations, equipment, means of transport, stocks, raw materials, and other material assets, and to write off fixed assets provided they are worn out or obsolescent;

To transfer on a contractual basis material and monetary resources to other enterprises, organizations, and citizens producing output or carrying out work and services for the cooperative.

4. Cooperatives are independently liable for all the property belonging to them, including fixed assets. The state is not responsible for cooperatives’ liabilities. Cooperatives are not responsible for the liabilities of the state or their members. Members of a cooperative are not responsible for its debts, save where envisaged by the present Law, other USSR and union republic legislation, or the cooperative’s statutes.

Art. 9. The Use by Cooperatives of Natural Resources and Property That They Do Not Own

1. Cooperatives use land and other natural resources under the procedure laid down by USSR and union republic legislation. Cooperatives are responsible for observing demands and carrying out measures to ensure the rational utilization and safeguarding of the land, water, mineral resources, forests, and other natural resources allocated to them.

2. Cooperatives are obliged to ensure the effective utilization of land, to show constant concern to improve its fertility, to use it carefully in accordance with the aims for which it was allocated, to protect the environment from pollution and other harmful influences, and, in this connection, to organize production based on low-waste and waste-free technologies.

Through their own funds and credits cooperatives carry out nature conservation measures to compensate for the detrimental affect of production on the environment. In individual cases these measures may be financed through central sources.

Cooperatives are obliged to compensate for any damage caused by them as a result of contravention of environmental protection legislation.

A cooperative that blatantly violates the established procedures for the use of nature may, under the procedure laid down by USSR and union republic legislation, have its activities suspended until the violations are eradicated.

3. In order to implement their statutory tasks cooperatives are entitled to use property allocated to them by state, cooperative, or other social enterprises, organizations, institutions, and citizens on a contractual basis. With the consent of the enterprises, organizations, institutions, and citizens granting it use of their property, a cooperative may acquire the buildings, premises, equipment, and other property relating to fixed assets that have been allocated to it.

Art. 10. The Principles of a Cooperative’s Activity

1. Cooperatives’ activities are based on the principles of voluntary membership of and unhindered withdrawal from the cooperative, the combination of personal, collective, and state interests, economic autonomy, material interest, social justice, and the direct participation of cooperative members in running the cooperative’s affairs on the basis of cooperative democracy and socialist legality.

2. Interference in the economic or other activity of a cooperative by state or cooperative organs (unions, associations of cooperatives) is not permitted, save where envisaged by this law.

Losses incurred by the cooperative as a result of the fulfillment of directives from state or cooperative organs that violated the cooperative’s rights, or as a consequence of the improper fulfillment by cooperative organs of their obligations with respect to the cooperative, shall be reimbursed by these organs. Disputes over reimbursement of losses shall be decided by the courts or state arbitration.

3. With a view to making more efficient use of production potential anti expanding production and sales of goods (jobs, services) cooperatives may, on a voluntary basis, pool some of their funds with the funds of state, cooperative, or other public enterprises and organizations. Cooperatives are entitled to participate:

In the joint fulfillment of work linked with the modernization and retooling of enterprises and production facilities, the acceleration of scientific and technical progress, the improvement of output quality, the development of consumer goods production, and the provision of services to the population;

In the creation of inter-sector production facilities, and repair, construction, trade, and other enterprises and organizations;

In the construction and operation of agricultural projects, housing, and other production, social, cultural, and consumer projects and also in highway construction;

And in the training of specialists and the creation of production training enterprises.

In order to implement the aforesaid and other joint activity cooperatives shall conclude contracts that stipulate the resolution of questions linked with the organization and activity of joint enterprises and organizations.

Soviets of people’s deputies and other state organs shall provide assistance to cooperatives in the development of joint enterprises and organizations and promote the implementation of the rights granted to cooperatives in this sphere.

Art. 11. The Creation of a Cooperative and Its Statutes

1. Citizens may set up cooperatives exclusively on a voluntary basis as and when they wish to do so. The creation of a cooperative is not contingent on any special permission from soviet, economic, or other organs. Cooperatives shall be considered to exist from the moment their statutes – which are the fundamental documents regulating their activities – are registered. The statutes are adopted by a general meeting of those citizens wishing to set up a cooperative. A cooperative cannot have fewer than three members. Cooperatives are organized and operate both on an autonomous basis and at state, cooperative, or other public enterprises, organizations, or institutions.

2. A cooperative’s statutes shall be registered with the local raispolkom, gorispolkom, or city raispolkom at the site of the cooperative. If a cooperative is set up under a state or cooperative enterprise or organization the registration of its statutes shall require the consent of the said enterprise, organization or institution.

3. In cases when the cooperative requires a plot of land or other natural resources in order to pursue its activities, the registration of its statutes shall require the consent of the corresponding state organ or primary user.

4. A cooperative’s statutes shall be examined by the executive committee of the corresponding soviet of people’s deputies within one month of presentation for registration.

If the executive committee fails to observe the one-month period granted for the registration of statutes, a cooperative is entitled to appeal to the ispolkom of the superior soviet, autonomous republic council of ministers, or council of ministers of a union republic without oblast divisions.

The cooperative’s appeal must be examined by these bodies within fifteen days.

Raispolkoms, gorispolkoms, and city raispolkoms are only entitled to refuse registration of a cooperative’s statutes in the event of their contravening existing legislation.

5. A cooperative’s statutes define: the name of the cooperative, its location, the subject and aim of its activity, the procedure for joining and leaving the cooperative, the rights and duties of cooperative members, the cooperative’s management and control organs, their competence, the procedure for shaping the cooperative’s property and distributing its income (profits), the grounds for expulsion from the cooperative and the procedure pertaining thereto, and the conditions for reorganizing and ending the cooperative’s activity. The statutes may also include other provisions- linked with features of the cooperative’s activity-which do not contravene legislation.

6. Changes and amendments to the cooperative’s statutes made at the decision of the general meeting of its members shall be registered following the procedure and within the period laid down by this article.

7. An appeal against a refusal to register a cooperative’s statutes or changes or additions to it may be lodged with the executive committee of the superior soviet of people’s deputies, autonomous republic council of ministers, council of ministers of a republic without oblast divisions, or with the courts. Appeals against a refusal to register a cooperative’s statutes have to be examined by the aforementioned bodies within 1 month.

Art. 12. Membership of the Cooperative

1. Membership of a cooperative is open to all citizens aged 16 or above – unless stipulated to the contrary under USSR and union republic legislation -who express a desire and have the ability to participate in the implementation of a cooperative’s aims and tasks.

In cases envisaged by this law and the cooperative’s statutes, other cooperatives and state and social enterprises and organizations may also be collective members of cooperatives. Mutual relations between cooperatives and their collective members are organized on a contractual basis.

2. A citizen may simultaneously be a member of production and consumer cooperatives. A member of a production cooperative which is the member’s main place of work may participate in another production cooperative in his or her spare time on a membership basis. Persons working at a state, cooperative, or other public enterprise or in an organization or institution may be members of only one production cooperative and may participate in its activity in their spare time.

Citizens are entitled to be members of several different types of consumer cooperatives, but cannot simultaneously be members of two or more consumer cooperatives of the same type, unless stipulated to the contrary by legislation.

People do not need the consent of the administration (management organ) at their main place of work to join a cooperative or to work in one on a labor contract.

3. Disputes over cases arising out of membership relations shall be decided by the cooperative’s organs under the procedure laid down by its statutes, or by the courts in cases covered by USSR or union republic legislation.

4. A member of a cooperative may be expelled from the cooperative on the decision of its general meeting in cases laid down by the statutes. A court appeal may be lodged against expulsion from a cooperative.

5. Persons subject to a court order prohibiting them from engaging in certain activity or from taking certain jobs cannot be members of a cooperative engaging in the said activity, cannot be involved in work in that cooperative under a labor contract, and cannot take up corresponding positions within the cooperative.

Persons with convictions for embezzlement, bribery, and other mercenary crimes cannot be elected chairman or member of the board, chairman or member of the auditing commission (auditor) of a cooperative or occupy other leading positions within a cooperative or positions linked with material responsibility.

Art. 13. The Rights and Duties of Cooperative Members

1. Members of all types of cooperatives are entitled:

To participate in the activity of the cooperative and the administration of its affairs; to elect and be elected to the cooperative’s administrative and control organs; and to submit proposals for improving the cooperative’s activity and eradicating shortcomings in the work of its organs and officials;

To obtain a share of the income (profit) distributed among cooperative members in accordance with their labor input and also, in cases stipulated by the statutes, in accordance with their contribution of property to the cooperative;

To use the cooperative’s property and to enjoy the benefits and privileges envisaged for cooperative members;

And to obtain from cooperative officials information on any question concerning the cooperative’s activity.

Furthermore, members of production cooperatives are entitled:

To obtain work at the cooperative, including the right to choose their trade and type of activity in accordance with their vocation, abilities, vocational training, and education, bearing in mind the needs of the cooperative;

To leisure guaranteed by days off and annual paid leave lasting not less than the period laid down for corresponding categories of workers and employees;

To social insurance and social security;

And to cultural and consumer services and the satisfaction of other needs as laid down by the general meeting of cooperative members.

2. Members of all kinds of cooperatives are obliged:

To observe the statutes of the cooperative and to carry out the decisions of the cooperative’s general meeting and elected management and control organs;

To carry out their commitments to the cooperative linked with their labor participation or property contribution to its activity;

To actively participate in the administration of the cooperative’s affairs;

To safeguard and strengthen state and cooperative property and prevent a negligent and remiss attitude toward public property.

Furthermore, members of production cooperatives are obliged:

To use advanced forms and methods of work within the cooperative, to be responsible for the results of their work, to observe production and labor discipline and labor protection and equipment safety regulations, and to improve their qualifications;

And rationally to utilize and safeguard the natural resources allocated to the cooperative. 3. Cooperative members also have other rights and are subject to the obligations stipulated in the cooperative’s statutes.

Art. 14. The Running of the Cooperative

1. Cooperatives are run on the basis of socialist self-management, extensive democracy, glasnost, and the active participation of their members in the resolution of all questions of cooperatives’ activity.

2. A cooperative’s supreme administrative organ is its general meeting, which elects a chairman to manage day-to-day affairs and also elects a board in large cooperatives. Each member of the cooperative, including the collective members, has one vote, irrespective of his property contribution.

Citizens working in the cooperative under a labor agreement participate in the general meeting on a consultative basis.

3. The general meeting:

Adopts the cooperative’s statutes and makes changes and amendments to them;

Elects the cooperative’s chairman, board, and auditing commission (auditor) and hears the reports of their activity;

Resolves questions of admissions to cooperative membership, expulsion from it, and also questions connected with withdrawal from the cooperative;

Adopts and amends the rules governing the cooperative’s internal procedures, the regulations on pay and on material liability for damage caused to the cooperative’s property, and other of the cooperative’s internal acts;

Determines the size of initial and regular subscriptions as laid down by the cooperative’s statutes;

Ratifies the plans for the cooperative’s activity and the reports on their execution;

Establishes the procedure for distribution of income (profits), the type and size of the cooperative’s assets and the areas into which they are channeled, and examines questions of price setting;

And resolves questions of the reorganization and ending of the cooperative’s activity and its entry into and withdrawal from unions (associations).

Decisions on the aforesaid questions come under the exclusive purview of the cooperative’s general meeting. In accordance with the cooperative’s statutes or by decision of the general meeting its exclusive purview may also include other questions of the cooperative’s organizational, economic, and social activity.

Large cooperatives may convene meetings of agents to resolve questions pertaining to the holding of the general meeting.

4. The cooperative board (the chairman of a cooperative with no board) directs current matters for the cooperative and adopts decisions on questions that do not come under the sole authority of the general assembly (agents’ assembly). The chairman of the cooperative is the chairman of the board.

The chairman of the cooperative carries out the decisions of the general assembly (agents’ assembly) and the board and represents the cooperative in dealings with state bodies, enterprises, organizations, institutions and other cooperatives, concludes contracts, and carries out other actions.

The auditing commission (auditor) checks the board’s financial and economic activity.

Art. 15. Terminating the Activity of a Cooperative

1. Reorganization (merger, amalgamation, division, separation, transformation) and termination of the activity (liquidation) of a cooperative are a decision for its general assembly.

2. A cooperative’s activity can be terminated also by a decision of a soviet ispolkom if it is making a loss or is not viable and in cases where the cooperative, despite being warned, has repeatedly or grossly violated legislation. A decision to terminate the activity of a cooperative can be appealed against within 3 months, the appeal being made to the ispolkom of a superior soviet, autonomous republic council of ministers, or council of ministers of a union republic without oblast divisions, or to the court.

3. The property left after the liquidation of the cooperative is used in accordance with the procedure established by civil legislation, unless the present Law envisages a different procedure.

Art. 16. Unions (Associations) of Cooperatives

1. Cooperatives may on a strictly voluntary basis merge into activity-specific unions (associations) or territorial unions (associations) in raions, oblasts (krais), and autonomous and union republics, and in the country as a whole.

2. The main tasks of unions (associations) of cooperatives are:

To develop cooperative democracy and collective discussion of the most important questions of cooperatives’ activity; to generalize experience and draw up recommendations aimed at ensuring the fullest utilization of existing reserves and potential; and to propagandize the cooperative movement;

To promote improvements in production specialization; to coordinate cooperative activity; and to organize production sharing ties, material and technical supply, and output processing, storage, and sales;

To study the state of and prospects for developing the market for goods (jobs and services) in whose production and sale the cooperatives specialize;

To protect cooperatives’ rights; to give them legal assistance; and to represent their interests at the appropriate state and other organs, and in international organizations;

And to give the necessary assistance to cooperatives in improving production, introducing the achievements of scientific and technical progress, advertising their products (jobs and services), training their cadres, and improving their cadres’ qualifications.

As a result of a decision by cooperatives’ congresses or delegates’ (agents’) assemblies, unions (associations) of cooperatives can be tasked with the centralized fulfillment of certain production and economic functions.

3. Unions (associations) of cooperatives shall be set up at congresses or meetings of cooperatives’ delegates (agents), the frequency of these assemblies to be determined by these congresses and meetings.

Unions (associations) of cooperatives operate on the basis of their statutes as adopted by congresses and meetings of cooperatives’ delegates (agents). The statutes of unions (associations) need not be registered with state organs. A union (association) of cooperatives is regarded as established and is considered a legal entity the moment its statutes are adopted.

Congresses and assemblies of delegates (agents) of cooperatives can adopt model cooperative statutes.

Unions (associations) may own the property they need in order to fulfill their statutory tasks and carry out other kinds of activity.

The expense of maintaining the unions (associations) and their administrative staffs shall be met out of the income of the corresponding cooperatives and out of the income of the economic activity of the unions (associations) themselves.

III. THE ECONOMIC FOUNDATIONS OF THE ECONOMIC MECHANISM IN THE COOPERATIVE SYSTEM

Art. 17. The Foundations of Cooperatives’ Economic Activity

1. The activity of the cooperative system in the USSR is based on the principles of socialist economic management, self-financing, and the extensive utilization of commodity-money relations. Moreover, the cooperative form of production and distribution of products and income conditions the features of the economic mechanism in the cooperative system: in planning, price setting, pay, relations with the state budget and banks, and in material and technical backup.

2. Production cooperatives are economically independent collective socialist producers of goods. Operating on the principles of full economic accountability and self-financing, they define the thrust of their own activity and the scale and structure of production, implement production planning and organization, and sell output (jobs and services). Consumer cooperatives enjoy complete economic independence in implementing their activity and cover their costs through the dues of cooperative members and income from the cooperative’s economic activity.

3. A cooperative’s economic and production relations with state, cooperative and other social enterprises, organizations, customers for its output (jobs and services), and suppliers of material and technical resources, and all its economic operations are implemented solely on a contract basis. The contract is the only legal and economic document that regulates all the cooperative’s aforesaid economic and production relations.

The observance of contractual commitments and complete consideration for customers’ interests are a most important demand on a cooperative’s activity and a fundamental criterion by which the quality and efficiency of its work can be assessed. If contractual commitments are not observed the cooperative shall, under the procedure laid down, be materially liable and make good the damage incurred by the customer. State, cooperative, and other public enterprises, organizations, and citizens who fail to observe their contractual commitments to cooperatives shall be materially liable under the prescribed procedure and make good the damage incurred by the cooperative.

The conclusion of contracts, including the choice of contract partners, is the exclusive domain of the cooperative and corresponding enterprises, organizations, and citizens. Interference by state and cooperative administrative organs or officials in the establishment and implementation of contractual relations between a cooperative and other enterprises, organizations, or citizens is not permitted.

Art. 18. Planning

1. A cooperative independently plans the production and financial activity and social development of the cooperative. Plans (or estimates of income and expenditure) are ratified by a general meeting of cooperative members.

A cooperative when drawing up its plans (or estimates of income and expenditure) proceeds on the basis of effective demand for its output, goods, work, and services and on the opportunities for generating the income necessary for production and social development and labor remuneration. Envisaged here are the effective use of land, other natural resources, and existing capacities, the application of progressive techniques, economical consumption of raw and other materials, energy, and fuel, a search for local and secondary resources and their introduction into economic circulation, a reduction in production and turnover costs, and growth in labor productivity.

Contracts concluded with consumers of goods (jobs and services) and suppliers of material and technical resources form the basis of the plans.

2. A cooperative has the right to voluntarily undertake to execute state orders, including those that involve competition with state and other enterprises and organizations. To execute a state order, economic contracts are concluded with the relevant consumers of goods (jobs and services) and suppliers of material and technical resources.

Cooperatives play an active part in economic competition with state and other enterprises and organizations to win state orders, seeking to enhance the quality of their goods (jobs and services) and to reduce prime cost and prices (tariffs).

Cooperatives and their unions (associations) can participate in wholesale trade fairs and conclude contracts with consumers for the supply of goods and with suppliers for the purchase of material and technical resources.

3. When drawing up its plans, a cooperative utilizes the long-term economic norms set by the state: the price (tariff) levels for goods (jobs and services) produced and sold under contracts for the execution of a state order, tax rates, the interest rate on bank loans, the norms for payment for natural resources, payments for discharging pollutants into the environment, and the norms for deductions paid into the state social insurance fund. No other economic norms or initial planning data are prescribed for cooperatives. On questions concerning the use of natural resources and the conservation of the environment, cooperatives must coordinate their plans with local soviet ispolkoms.

4. To ensure comprehensiveness in the drawing up of plans for the production of goods (jobs and services) and the coordination of its activity with other enterprises and organizations on its territory or in its sector a cooperative reports to the relevant organ of administration, or enterprise (organization, institution) under which it has been set up, the volumes of projected production and sale of goods (jobs and services), and income and expenditure.

In so doing a cooperative is able to resolve with the relevant management organs, enterprises, and organizations questions concerning the provision of material and technical resources and contracted construction and installation work for the production of goods (jobs and services). The management organ together with the cooperatives operating on the territory (in the sector) in question ensures comprehensive coordination of cooperatives’ proposals and takes them into account in the plans for the economic and social development of the relevant region (sector).

5. To produce more scientifically validated and balanced plans central economic organs and their republic-based organs, ministries, departments, union and autonomous republic councils of ministers, and local soviet ispolkoms provide for cooperatives, at their request, every possible assistance in the utilization of normative documents on the organization of production, labor, and capital construction and the implementation of measures designed to make economical use of material and financial resources and measures affecting other areas of cooperatives’ activity.

Art. 19. Prices and Price Formation

1. Prices and tariffs for a cooperative’s goods (jobs, services) must reflect the socially necessary cost involved in producing and selling goods and take account the customer appeal and quality of the goods, (jobs and services), and consumer demand. They must be based on the mutual interests of cooperatives, consumers, and the national economy as a whole and must help promote the development of economic accountability and self-financing.

2. A cooperative sells its own output and goods, carries out work, and provides services at prices and tariffs set by the cooperative by agreement with consumers or independently. The prices (tariffs) set in trade relations between cooperatives and the consumers of their goods (jobs and services) are intended to influence the economic interests of cooperatives and provide incentives to enhance product (job and service) quality, improve production techniques and organization, and lower production costs. Competition in the goods (jobs and services) market should help reduce the cost of goods (jobs and services) and cut prices (tariffs).

3. Goods (jobs and services) produced in accordance with contracts to fill a state order and also goods manufactured from raw materials or materials supplied to the cooperative out of state resources are sold to procurement and other enterprises (organizations) and citizens at centrally prescribed prices (tariffs), or in cases where this is authorized, to state enterprises at contractually agreed prices (tariffs). Retail prices for goods allocated to cooperatives out of state market funds, and prices and markups for goods acquired by cooperatives in the state and cooperative retail trade network for sale to the population are set according to the same procedure.

In applying the centrally fixed wholesale prices a cooperative agrees with a consumer (purchaser) on any additional charge (discount) to these prices for carrying out extra requirements to enhance the consumer qualities, hatching of goods, or to meet delivery deadlines, or other conditions.

4. State monitoring of prices (tariffs) is carried out in cases where a cooperative’s goods (jobs and services) are sold to enterprises and organizations under a contract to fill a state order or are manufactured from raw materials or materials supplied to the cooperative out of state resources and also where a cooperative sells goods allocated out of state market funds or acquired by the cooperative in the retail trade network. If in cases of this kind a cooperative raises the prices (tariffs) of its goods (jobs and services) excessively, income unjustifiably derived thereby is forfeited to the budget. The cooperative that has charged excessive prices (tariffs) also has to pay a fine into the budget, equal to the sum of the illegally acquired additional income. If a cooperative raises the prices (tariffs) for goods (jobs and services) excessively, the consumer is entitled to cancel the contract concluded with the cooperative.

Art. 20. Income and its Distribution

1. A cooperative by virtue of its socioeconomic nature is a self-capitalizing enterprise (organization). Loss-making work is incompatible with its nature.

A cooperative’s income is based on its receipts from the sale of goods (jobs and services). Material expenditure is paid for out of the receipts from the sale of the cooperative’s goods (jobs and services). Gross income is used by the cooperative to meet its budgetary and banking obligations and is channeled toward increasing output, carrying out social measures, and remunerating labor.

The allocation of gross income for production and social development and labor remuneration is the exclusive right of the general meeting of cooperative members. Here special attention must be paid to ensuring an economically validated correlation between the resources directed toward production development and labor remuneration.

A cooperative independently determines the kinds and size of funds and reserves and the procedure for setting them up and using them. State and cooperative organs do not set the cooperative norms for the formation of funds.

2. Deductions are paid into the centralized funds and reserves of unions (associations) of cooperatives according to long-term stable norms. The norms for deductions are fixed on a democratic basis by meetings of representatives of cooperatives. It is they who determine the procedure for utilizing the resources in the aforementioned funds and reserves and where they are to be used.

Interference by organs of state and economic management in the formation and use of the centralized funds and reserves of cooperative unions (associations) is prohibited.

Art. 21. Taxation of Income in Cooperatives

1. A cooperative participates in the formation of the state budget by paying taxes and making other payments in accordance with legislative provisions. Taxation provides an incentive to a cooperative to choose effective areas of activity, production structure and techniques, and ways of earning income, and ensures that the principle of social justice is exercised in their determination.

The taxation system must provide for a differentiated approach to fixing taxes dependent on the kinds of cooperatives and the aims of their activity.

2. A cooperative’s income (profit) and the personal income of cooperative members and people working in it under a labor contract are liable to tax.

To increase a cooperative’s interest in boosting output, its income (profit) is taxed at fixed rates set, as a rule, for a period of at least 5 years.

To ensure an economically expedient correlation between the resources a cooperative directs toward production and social development and labor remuneration the taxation rates for the personal incomes of members of a cooperative and people working in it under a labor contract are fixed on a progressive scale.

In cases where cooperatives sell their goods (jobs and services) at centrally prescribed prices (tariffs, rates) the taxation of members of the cooperative and people working in it under a labor contract takes place at rates fixed for workers and employees of state enterprises (organizations).

To provide incentives for the production of goods (jobs and services) needed by the population and the national economy and the reduction of their prices and (tariffs), local soviets and other state organs can establish income tax benefits for cooperatives, their members, and people working in them under a labor contract in accordance with the procedure laid down by USSR legislation. If part of the income (profit) of a cooperative is contributed to the Soviet Children’s Fund named for V. I. Lenin, the Soviet Peace Fund, or the Soviet Culture Fund, or put to other charitable purposes, it is exempt from tax.

3. A cooperative engaged in providing services to its members while simultaneously producing goods (jobs and services) generating a monetary income is taxed on that income on the terms fixed for production cooperatives.

4. To increase local soviets’ interest in boosting cooperatives’ activity, arranging new jobs, and improving the population’s supply of consumer goods and services the taxes on the income of a cooperative, its members, and people working in it under a labor contract are wholly paid into local budgets and are used for the economic and social development of the relevant territories.

5. The cooperative shall strictly observe tax discipline. In the event of concealment or understatement of taxable income the whole sum of the concealed income is confiscated from the cooperative into the local budget and a fine is also levied on a scale fixed by USSR legislation.

On repeated concealment (understating) of income the relevant financial organ is entitled to refer the question of the cessation of the cooperative’s activity to the local soviet ispolkom.

IV. THE STATE AND THE COOPERATIVE SYSTEM

Art. 29. Relations Between State Organs and Cooperatives

1. The right proclaimed by the USSR Constitution of citizens to form cooperative organizations is guaranteed by the political and economic systems of the USSR, by the recognition of the right of cooperatives to the ownership of the means of production arid other property necessary for the performance of their statutory duties, and by comprehensive assistance from the state for the development of cooperative ownership.

2. The state guarantees the observance of the rights and legitimate interests of cooperatives and their members and ensures the correct correlation of the interests of cooperatives and the people as a whole.

State organs must give the maximum help in developing and strengthening the economic independence of cooperatives and increasing the effectiveness of their activity and must not allow any restrictions on the creative activity and initiative of cooperatives’ members. State leadership of cooperatives is exercised in the interests of all the people by soviets of people’s deputies and other state organs in strict accordance with the present law.

3. In the event of the cessation of the activity of industrial, agricultural, construction, and other enterprises (organizations) through unpredictability, insolvency, or lack of demand for their output (jobs and services) or for other reasons envisaged by Article 23 of the USSR Law “On the State Enterprise (Association),” the state organs under whose jurisdiction they fall help to create cooperatives for the production of output (jobs and services) on the basis of small and medium enterprises. They are empowered to sell, transfer or lease to the newly created cooperatives as well as existing ones the property of the liquidated enterprises (associations) on terms to be agreed upon by the sides.

4. The state, using the mass media and other forms, creates the most favorable ideological preconditions for cooperatives’ activity and ensures everywhere the kind of moral and psychological climate in which each cooperative member is aware that by working in it he or she is performing important and socially useful work and is helping the state to resolve the tasks of the country’s economic development and to satisfy the population’s demand for goods and services …

Source: Foreign Broadcast Information Service, Daily Report (10 June 1988), pp. 64-88.

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