Registering social.coop as a legal entity under Maltese law. Pros and cons.

Michele Kipiel Public Seen by 402

Hi all,

in the light of the planned expansion of offered services, I took the liberty to reach out to the Malta Cooperative Federation ( http://maltacooperativefederation.coop/ ) to inquire about the pros and cons of registering a cooperative on the island. Below are the most relavant information I gathered during the meeting I attended with the president and the chief accountant of the federation earlier today.

Legal requirements
- According to Maltese law, cooperatives need to have a stated "business model" (ie. a demonstrable income stream).
This can be solved by presenting our membership fee as a subscription.
- Cooperatives registered in Malta are expected to contribute to the Cooperative Solidarity Fund with a mandatory donation worth 5% of the surplus monetary reserves left at the end of each year
- Each cooperative is expected to inform the Government yearly concerning the number and the identity of the new memebers acquired during the previous 12 months

Pros
- Cooperatives registered in Malta are granted the exempt tax status if they do not pay any dividend (ie. if the surplus monetary reserves are not paid out to the members a the end of each year)
- Payments made among the cooperative's own members are never taxable (ie. paying members for their efforts doesn't count as "paying dividends")
- The Cooperative Solidarity Fund helps emerging cooperatives with loans, investments etc..

Cons
- Non-EU citizens will need to be scrutinized by the government (ie. will need to provide actual documents or whatever the government sees fit), but the procedure technically does not exist since none of the cooperatives registered so far has non-EU members.
- EU citizens will need to provide just an ID card number

Additional info
- ICA principles are protected by law in Malta, as stated in the latest legislation on cooperatives approved in 2000
- The legislation does not differentiate cooperatives by type which makes it easier for social.coop to be registered

Feel free to ask questions and comment on the above, as the information I asked for is very high level and I might have missed something relevant. I'd love to see the largest number of members possible taking part in this discussion, as this is a potentially very important step forward for us all.

Looking forward to your comments!

Mayel de Borniol Fri 9 Feb 2018 10:02AM

Yes but the whole point of us using OpenCollective (who takes 10% of all contributions) is that they provide us with a legal framework. We are able to reimburse bills but also pay contractors' invoices. We could even have full time freelancers simply submitting an invoice each month. (I'm just saying we already have a legal what to do so, not that it's the best way to continue doing so indefinitely.)

Guy James Thu 8 Feb 2018 9:49AM

The easiest way to do it would be to sign up with freedomcoop.eu as a collective, then use the coop's fiscal number to invoice etc.

Michele Kipiel Thu 8 Feb 2018 1:48PM

We can inquire with them, of course, but I've been told the fact we have non-EU members makes this a bit more complicated.

Guy James Thu 8 Feb 2018 9:09PM

May not be the case in fact. Part of the reason for the existence of freedom coop is to allow non-EU people (refugees etc) to be able to send legal invoices to EU companies. But I'm not sure if it works the other way around. We can find out though.

Michele Kipiel Sat 10 Feb 2018 6:02PM

I'll try getting in touch with them to have some more information

Matt Noyes Thu 8 Feb 2018 10:42PM

What about organizing as a federation or network of country or region-specific legal entities?

Sam Toland Fri 9 Feb 2018 1:33PM

As someone with a legal background, I have a general bias towards formalising/incorporating this kinds of projects. But as I work with more projects like this - I have come around to what I would call the MVO (minimum viable organisation) approach. Start with the minimum structure you need, and expand/deepen this as minimum requirements change.

I think the idea of Open Collective + Freelancers is genuinely viable for the foreseeable future - and we haven't really maxed out the possibilities of this. Have we for instance elected/appointed/sortitioned a group of co-ordinators to guide the group. We could ask them to propose a number of clear work items that could be compensated via OpenCollective?

We could even compensate them as a group for the time (I would 100% support a small core group being compensated for this!).

The next step for a group like this, if we needed some corporate identity - we could ask an existing co-op to be a sponsor organisation (see Solid Fund for example) or indeed Freedom Co-op....

The incorporation question is a very big one. As soon as you incorporate, you (i.e the directors!) take on a number of significant legal and administrative obligations and the group take on a number costs, which must be justified by the clear benefits (or requirements) to incorporate.

Maybe we are at the incorporation point now (I would love social.coop to start scaling up - and perhaps we need to adopt a more focused structure, as @flgnk mentioned) but do feel that @mayel is right that we haven't exhausted the possibilities of the current model

Poll Created Fri 9 Feb 2018 1:40PM

Social.coop structure Closed Sat 24 Feb 2018 1:01PM

I want to run a little advisory poll to see where people at more generally on the question of the groups structure. I'm hoping this will help crystalize the conversation.

There are three different strands of thought I've identified;

(1) The current model gives us certainty + a model for compensation. We haven't maxed out the current model.
(2) We should move to more formalisation - but through another organisation (IOO or Freedom Co-op)
(3) To scale up, accelerate funding and give co-ordinators/members more certainty, we should incorporate.

Feel free to edit the above. You can see the thread for my own views.

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