Social cooperatives

Basic act related to social entrepreneurship is Social Cooperatives Act of 27 April 2006 (Dz. U. No 94, entry 651). The adoption of this act results from belief that social cooperatives are an efficient solutions to problems of those who have difficulties in functioning in social and professional life (especially on the labour market). The act is complementary to existing regulations concerning social and occupational reintegration, ensuring conditions necessary for establishing new social and economical entities as workplace for those to be reintegrated to the society. The act is in line with Lisbon Strategy and Community Action Programme to Combat Social Exclusion.

The act determines among others:
a) persons entitled to establish social cooperatives,
b) principles of division, merger and liquidation of social cooperatives,
c) scope of activity of social cooperatives,
d) internal principles governing functioning of social cooperatives,
e) liability and rules concerning settlement of received public funding.

It is also claimed that „any issues concerning social cooperatives not settled under this act shall be subject to Cooperative Law of 16 September 1982 (Dz. U. of 2003, No 188, entry 1848 as amended).

Other useful regulations regarding social cooperatives:
1) Act of 20 April 2004 on employment promotion and labour market institutions regarding the unemployed (Dz. U. of 2004r., No 99, entry 1001 as amended);
2) Social employment act of 13 June 2003 (Dz. U. of 2003, No 122, entry 1143 as amended);
3) Act of 27 August 1997 on labour and social rehabilitation and employment of the disbled;
4) Act of 24 April 2003 Public on benefit work and voluntary service (Dz. U. of 2003, No 96, entry 873 as amended.)
5) Act of 2 July 2004 on freedom of business activity (Dz. U. of 2004, No 173, entry 1807 as amended);
6) Minister of Economy and Labour Regulation of 26 October 2004 on specimen documentation necessary to establish a social cooperative (Dz. U. No 240, entry 2412).

Labour Fund for Social Cooperatives. According to article 46 paragraph 1 subparagraph 2 of Act of 20 April 2004 on employment promotion and labour market institutions (Dz. U. of 2004, No 99, entry 1001), a staroste is entitled to grant an unemployed one-time financial aid from Labour Fund for commencement of business activity, including costs of legal assistance and respective advisory. However, the amount of aid for an unemployed can not exceed the avarage salary multipied by 5 for a typical business activity or, in case of a social cooperative - the avarage salary multipied by 3 for each charter member of a social cooperative and the avarage salary multiplied by 2 for each member of social cooperative joining it after its foundation. A beneficiary must return the amount of aid with respective interests in case of being a member of a social cooperative for less that 12 months or in case of impairing other provisions of the agreement (article 46 paragraph 2 of Act of 20 April 2004 on employment promotion and labour market institutions. Specific terms and conditions of granting aid for commencement of business activity are defined in Minister of Labour and Social Policy Regulation of 21 November 2005 on specific terms and conditions of refunding the costs of equipping a workplace for the unemployed from Labour Fund, granting financial aid for commencement of business activity for the unemployed and forms of securing return of granted aid (Dz. U. of 2005, No 236, entry 2002).

Based on paragraph 5 of the above mentioned regulation, an unemployed willing to commence business activity can apply to staroste proper for a cooperative’s seat for one-time aid from Labour Fund (for commencement of business activity, including costs of legal assistance and respective advisory). The application shall determine:
a) amount of requested aid;
b) type of business activity to be commenced;
c) calculation of costs to be borne before the date of commencement, source of financing, indication of steps taken in order to commence business activity regarding especially: renting office premises, obtaining required permits and trainings taken;
d) detailed specification of expenses for purchase of fixed assets, materials, goods, renting office premises, registration fee or contribution for social cooperative, along with expenditures schedule;
e) proposed form of securing return of granted aid;
f) expected economic effect of conducting business activity.

An unemployed willing to join existing social cooperatives includes in the application form only information mentioned in points a), d) and e).

Required attachments do the application form:
a) statement on received aid for commencement of non-agricultural or agricultural activity from Labour Fund or other public funds within 5 years before submission of application;
b) statement on meeting the requirements for obtaining financial aid for commencement of business activity or joining an existing social cooperative determined in the regulation;
c) statement confirming that an applicant has not conducted business activity within 12 months before submission of application;
d) statement on use of received aid as intended;
e) statement confirming that an applicant will not commence work within 12 months after commencement of business activity;
f) criminal record check in relation to commercial crimes as defined in Criminal Code of 6 June 1997 regarding the period of 2 years before submission of application ;
g) statement confirming that an applicant has not submitted the application for financial aid for commencement of business activity to another staroste.

An unemployed joining an existing social cooperative does not submit statement defined in e). They are obliged to attach to the application written information by the social cooperative on:
a) joining a social cooperative as its member after the fee set out in this information has been paid and other determined conditions have been fulfilled;
b) certificate on the absence of arrears in payments of social security, Labour Fund and Fund of Guaranteed Workers' Benefits contributions, as well as other public levies and civil law liabilities.

Social aspect of social cooperatives activity

Social aspect of social cooperatives activity results above all from the definition of cooperatives being association of persons, not capital. For this reason, in spite of being enterprises, social cooperatives belong to social economy sector. The income is just a device to fulfill social aims. Cultural and legal diversity in different countries result in different forms and structure of social entrepreneurship. In some countries there are separate social cooperatives acts (e.g. Poland, Italy), in others regulations concerning social cooperatives are included in other acts of law or there are no such regulations at all. The important thing is that there are common values and rules for cooperatives movement set in Cooperative Identity Declaration adopted by Jubilee International Cooperative Alliance Congress which took part in Manchester, on 20-22 September 1995.

International Cooperative Alliance is an independent non-governmental organization which unites, represents and serves cooperatives worldwide. Founded in 1895, ICA has 222 member organizations from 91 countries active in all sectors of the economy (http://www.ica.coop ).

According to the above mentioned Declaration “A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise; Cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness, social responsibility and caring for others”.

International Cooperative Alliance developed and adopted international cooperative rules being a framework for social cooperatives that shall put them into practice:

1st Principle: Voluntary and Open Membership
Cooperatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.

2nd Principle: Democratic Member Control
Cooperatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary cooperatives members have equal voting rights (one member, one vote) and cooperatives at other levels are also organized in a democratic manner.
Principle „one member, one vote is a practical confirmation of a thesis that cooperatives are association of persons not capital, because during General Meeting each member Has one vote, regardless of the number of possessed shares.

3rd Principle: Member Economic Participation
Members contribute equitably to, and democratically control, the capital of their cooperative. At least part of that capital is usually the common property of the cooperative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their cooperative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the cooperative; and supporting other activities approved by the membership.

4th Principle: Autonomy and Independence
Cooperatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organisations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their cooperative autonomy.

5th Principle: Education, Training and Information
Cooperatives provide education and training for their members, elected representatives, managers, and employees so they can contribute effectively to the development of their cooperatives.
They inform the general public – particularly young people and opinion leaders – about the nature and benefits of cooperation.

6th Principle: Co-operation among Cooperatives
Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.

7th Principle: Concern for Community
Cooperatives work for the sustainable development of their communities through policies approved by their members.

Social cooperatives are not only enterprises with social mission but also an important element of social policy which is reflected in Social Cooperatives Act of 27 April 2006. Article 2 of the Act states that “the objective of social cooperatives is to conduct a common enterprise based on work of their members”. Article 2 paragraph 2 states that “social cooperatives act to the benefit of their members, aiming at social reintegration, i.e. rebuilding the ability of participating in social life, performing social roles in working and living environment, as well as to professional reintegration, i.e. rebuilding the ability of working independently on the labour market and such activities are beyond the scope of business activity of a social cooperative”. The revenue of social cooperatives allocated for the above mentioned aims are exempt from income tax (in the part that was not recognized as tax deductible revenue).