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Catalyzing worker co-ops & the solidarity economy

Cooperatives and Worker Buyouts in France

In 2014, the Law on the Social and Solidarity Economy (ESS) was enacted. It acknowledges the importance of social economy organisations – cooperatives, mutuals, associations and foundations – in producing wealth and contributing to social and environmental needs. The social economy represents 230,000 enterprises and 10% of GDP. In 2014, this was 2.38 million of employees and 12% of employment in the private sector. Within this, there are 23,000 cooperatives employing one million people and active in all sectors of the economy. Coops represent 40% of the food and agricultural sector, 60% of retail banking and 30% of retail shops. The ESS Law intends on creating a cooperative “shock” with the view to create a multiplier effect.

The law is not unique – it is consistent with existing legislations in Italy, Quebec and Spain. However, it is substantial in length (more than 80 pages) and scope, affecting all sectors of the social economy. Beside the collaboration with the social and solidarity movement in its elaboration, 11 Ministries and 15 Heads of Administration were involved in drafting the law. The fact that one third of the legislation is dedicated to cooperatives alone reflects the strength and commitment of the cooperative movement to this collaboration. The law enumerates the characteristics of the social and solidarity economy as consisting in the not-for-profit purpose (not excluding profit as such but rejecting it as the sole purpose of the enterprise), democratic governance, transparency and participation, sustainable management and the requirement of an asset lock. The exclusion of social criteria per se in favour of the democratic governance characteristic is interesting here and differs from social entrepreneurship approaches. This was particularly critical for the cooperative movement, which had never accepted until then a review of the 1947 legislation, the legal text acquiring a somehow sacred status as the protector of cooperative and solidarity principles in an increasingly liberal economy. The ESS Law reaffirms cooperative principles, referring to the International Cooperative Alliance definition. It stipulates tailored audits for all cooperatives every five years that will focus on the compliance with cooperative principles and legal provisions (rather than conventional financial audits).

Yet, it is in the dispositions towards the facilitation of worker buy-outs and provisions for worker cooperatives that the law is the most ambitious, for example in trying to remedy the lack of access to capital for workers. First, the ESS creates transitional cooperatives, whereby external members (who are not co-operator) can own over 50% of the cooperative’s capital for a period of 7 years in the case of a company being transformed into a cooperative. Workers have seven years to obtain the majority of the capital. If necessary, they can access the indivisible reserves to that effect. In exchange, external members are bound to sell their shares for workers to reach the 50% ownership. This provision is in direct response to the difficulty to access capital during takeovers. It has been implemented once since the passing of the law. In 2015, the two directors of Delta Meca, a company producing machining and industrial tools, decided to transform their company in a worker cooperative by enabling their 32 employees to become members. Workers invested €5,000 to become members, most of them investing the money that had been saved over the years in the company’s employee saving scheme. They will have seven years to obtain the majority of the capital.

Read the rest at Co-operative Business Consultants

 

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