Framework Act On Cooperatives

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CHAPTER Ⅰ GENERAL PROVISIONS
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 Article 1 (Purpose)   print
The purpose of this Act is to facilitate independent, self-supportive, and autonomous activities of cooperatives, thereby contributing to social integration and balanced development of the national economy by providing for basic matters regarding the establishment and operation of cooperatives.
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 Article 2 (Definitions)   print
The terms used in this Act shall be defined as follows:
1. The term "cooperative" means a business organization that intends to enhance its partners' rights and interests, thereby contributingto local communities by being engaged in the cooperative purchasing, production, sales, and provision of goods or services;
2. The term "federation of cooperatives" means a federation of cooperatives established pursuant to subparagraph 1 in order to promote common interests of the cooperatives;
3. The term "social cooperative" means a cooperative that carries out business activities related to the enhancement of rights, interests, and welfare of local residents or provides social services or jobs to disadvantaged people, among cooperatives under subparagraph 1, but that is not run for profit;
4. The term "federation of social cooperatives" means a federation of social cooperatives established pursuant to subparagraph 3 in order to promote common interests of the social cooperatives.
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 Article 3 (Naming)   print
(1) Each cooperative shall include the word "cooperative" in its name, each federation of cooperatives the words "federation of cooperatives", each social cooperative the words "social cooperative", and each federation of social cooperatives the words "federation of social cooperatives" respectively.
(2) No cooperative nor federation of cooperatives established pursuant to this Act (hereinafter referred to as "cooperative or federation of cooperatives") or no social cooperative nor federation of social cooperatives established pursuant to this Act (hereinafter referred to as "social cooperative or federation of social cooperatives") shall use any name identical or confusable with another cooperative, federation of cooperatives, social cooperative, or federation of social cooperatives, as prescribed by Presidential Decree.
(3) No person, other than a cooperative, federation of cooperatives, social cooperative, or federation of social cooperatives established pursuant to this Act shall include the words specified in paragraph (1) in its name.
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 Article 4 (Legal Personality and Domicile)   print
(1) Each cooperative or federation of cooperatives shall be a legal entity.
(2) Each social cooperative or federation of social cooperatives shall be a legal entity.
(3) Each cooperative, federation of cooperatives, social cooperative, or federation of social cooperatives shall have a principal place of business as its domicile and may have branch offices at places wherever necessary, as stipulated by its articles of association.
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 Article 5 (Objectives of Establishment)   print
Each cooperative, federation of cooperatives, social cooperative, or federation of social cooperatives shall pursue the enhancement of welfare of its partners or members (referring to partners in cases of a cooperative or members in cases of a federation; hereinafter referred to as "members") and mutual help and aid between members and shall meet economic, social, and cultural requests from members.
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 Article 6 (Basic Principles)   print
(1) Each cooperative, federation of cooperatives, social cooperative, or federation of social cooperatives shall apply its best endeavors to serve its members in carrying out its business activities.
(2) Each cooperative, federation of cooperatives, social cooperative, or federation of social cooperatives shall be voluntarily organized, shall own property in common, and shall be operated democratically.
(3) No cooperative, federation of cooperatives, social cooperative, nor federation of social cooperatives shall conduct any business activity for speculative investment or shall be engaged in any business affair or activity only for interests of some of members.
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 Article 7 (Responsibilities of Cooperatives and Federations of Cooperatives)   print
Each cooperative, federation of cooperatives, social cooperative, or federation of social cooperatives shall carry out its activities actively for providing educational and training programs to its members, as well as information, in order to enhance rights and interests of its members.
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 Article 8 (Cooperation with other Cooperatives or Federations)   print
(1) Each cooperative, federation of cooperatives, social cooperative, or federation of social cooperatives shall endeavor to cooperate reciprocally with other cooperatives, cooperatives under other Acts, foreign cooperatives, and related international organizations, promote mutual understanding with them, and develop joint projects.
(2) When it is necessary to achieve the purposes prescribed by paragraph (1), a cooperative, federation of cooperatives, social cooperative, or federation of social cooperatives may organize and operate a council with other cooperatives or cooperatives or federations under other Acts.
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 Article 9 (Prohibition of Involvement in Election of Public Officials)   print
(1) No cooperative, federation of cooperatives, social cooperative, nor federation of social cooperatives shall commit an act to support or oppose a specific political party in an election of public officials or an act to have a specific person elected or lost.
(2) No one shall commit an act under paragraph (1) by taking advantage of a cooperative, federation of cooperatives, social cooperative, or federation of social cooperatives.
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 Article 10 (Cooperation by Central Government and Public Organizations)   print
(1) The central government or a public organization shall not encroach the autonomy of a cooperative, federation of cooperatives, social cooperative, or federation of social cooperatives.
(2) The central government and public organizations shall cooperate actively with a cooperative, federation of cooperatives, social cooperative, or federation of social cooperatives in its business activities and may subsidize it as necessary for its business.
(3) The central government and public organizations shall hear opinions from cooperatives, federations of cooperatives, social cooperatives, and federations of social cooperatives and shall endeavor to have their opinions reflected.
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 Article 11 (Policies on Cooperatives)   print
(1) The Minister of Strategy and Finance shall administer policies on cooperatives and shall establish a master plan for facilitating autonomous activities of cooperatives.
(2) In administering policies on cooperatives and establishing a master plan pursuant to paragraph (1), the Minister of Strategy and Finance shall consult with the heads of related central administrative agencies and may request the Special Metropolitan City Mayor or the competent Metropolitan City Mayor, Special Self-Governing City Mayor, Do Governor, or Special Self-Governing Province Governor (hereinafter referred to as "competent Mayor/Do Governor") to present his/her opinion.
(3) Matters necessary for the consultation and coordination on matters regarding the administration of policies on cooperatives, the establishment of a master plan, authorization therefor, and the supervision thereof shall be prescribed by Presidential Decree.
(4) In order to ascertain the actual status of activities, funds, human resources, and management of cooperatives, the Minister of Strategy and Finance shall conduct a fact-finding survey every three years, announce the results thereof, and then report the results to the competent standing committee of the National Assembly.
(5) The head of a related central administrative agency or the competent Mayor/Do Governor shall submit data necessary for the fact-finding survey under paragraph (4) to the Minister of Strategy and Finance.
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 Article 12 (Cooperatives Day)   print
(1) In order to raise the awareness of cooperatives and encourage activities of cooperatives, the central government shall designate the first Saturday of July each year as Cooperatives Day and shall designate one week immediately before Cooperatives Day as Week of Cooperatives.
(2) The central government and each local government shall endeavor to hold events and conduct programs appropriate for the purposes of Cooperatives Day.
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 Article 13 (Relationship to other Acts)   print
(1) This Act shall not apply to cooperatives that were or are established pursuant to any other Act.
(2) Other Acts and subordinate statutes enacted or amended in regard to the establishment and fostering of cooperatives shall conform to the purposes and principles of this Act.
(3) The Monopoly Regulation and Fair Trade Act shall not apply to activities of a cooperative, federation of cooperatives, social cooperative, or federation of social cooperatives that meets the requirements prescribed by Presidential Decree: Provided, That the same shall not apply to cases where competition is unfairly restricted in a specific business area, such as unfair trade practices.
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 Article 14 (Application Mutatis Mutandis of other Acts)   print
(1) Except as otherwise provided for in this Act, the general provisions in Part Ⅰ of the Commercial Act, the provisions regarding commercial activities in Part Ⅱ of said Act, and provisions regarding limited liability companies in Chapter Ⅲ-2 of Part Ⅲ of said Act shall apply mutatis mutandis to cooperatives and federations of cooperatives under Article 4 (1). In such cases, the term "merchant" shall be construed as "cooperative or federation of cooperatives", and the term "partner" as "member".
(2) Except as otherwise provided for in this Act, the provisions regarding legal entities in Chapter Ⅲ of Part Ⅰ of the Civil Act shall apply mutatis mutandis to social cooperatives and federations of social cooperatives under Article 4 (2). In such cases, the term "incorporated association" shall be construed as "social cooperative or federation of cooperatives", the term "partner" as "member", and the term "permission" as "authorization".
CHAPTER Ⅱ COOPERATIVES
SECTION 1 Establishment
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 Article 15 (Reporting on Establishment, etc.)   print
(1) When it is intended to establish a cooperative, five or more promoters qualified for membership shall prepare articles of association, table the articles of association at the inaugural general meeting for adoption, and shall report the articles of association to the competent Mayor/Do Governor having jurisdiction over its principal place of business.
(2) A resolution at the inaugural general meeting shall be passed with the attendance of a majority of persons who have submitted a letter of consent to establishment to promoters before the opening of the inaugural general meeting and by an affirmative vote of not less than two-thirds of persons present at the meeting.
(3) Immediately upon receiving a report on the establishment of a cooperative pursuant to paragraph (1), the competent Mayor/Do Governor shall notify the Minister of Strategy and Finance therof.
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 Article 16 (Articles of Association)   print
(1) The articles of association of a cooperative shall include the following matters:
1. Objectives:
2. Name and the principal place of business;
3. Qualification for members and proxies;
4. Matters regarding admission to, and withdrawal and expulsion from, a cooperative;
5. The value of a contribution unit, the method and timing of payment of contributions, and the limit on the number of contribution units per member;
6. Matters regarding rights and obligations of members;
7. Matters regarding the appropriation of a surplusand the disposition of deficits;
8. Matters regarding the method of accumulating reserves and the use of reserves;
9. Matters regarding the scope of business and accounting;
10. Matters regarding organs and executives;
11. Matters regarding the method of giving public notification;
12. Matters regarding dissolution;
13. Matters regarding the transfer of contributions;
14. Other matters necessary for the operation of the general assembly and the board of directors.
(2) An amendment to the articles of association of a cooperative shall become effective only when it is reported to the competent Mayor/Do Governor with whom the report on establishment has been filed.
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 Article 17 (Bylaws or Regulations)   print
Except as stipulated in articles of association, matters necessary for the operation of a cooperative and its performance of business activities may be prescribed by bylaws or regulations.
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 Article 18 (Transfer of Administrative Affairs for Establishment and Payment of Contributions)   print
(1) Upon completing the report on the establishment of a cooperative pursuant to Article 15 (1), promoters shall transfer administrative affairs therefor to its president without delay.
(2) Upon having administrative affairs transferred pursuant to paragraph (1), the relevant president shall set the deadline for the payment of contribution and shall require persons who intend to become members to pay their contributions by the deadline.
(3) Each in-kind contributor shall transfer an asset as the subject matter of his/her contribution by the deadline prescribed under paragraph (2), prepare documents necessary for the registration or recordation of such asset and the transfer of rights, and submit the documents to the cooperative.
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 Article 19 (Establishment of Cooperatives)   print
(1) A cooperative shall be duly formed when it completes registration for establishment under Article 61 with the registry office having jurisdiction over its principal place of business.
(2) The provisions of Article 328 of the Commercial Act shall apply mutatis mutandis to the annulment of the establishment of a cooperative.
SECTION 2 Members
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 Article 20 (Qualification for Membership)   print
To become a member of a cooperative, a person shall consent to the objectives of establishment of the cooperative and shall be willing to fulfill his/her obligations as a member.
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 Article 21 (Admission)   print
(1) No cooperative shall reject a person's application for joining the cooperative as a member without a justifiable reason, if the person is qualified for the membership, nor attach any condition more unfavorable than conditions for other members in admitting a person as a member.
(2) Notwithstanding the provisions of paragraph (1), a cooperative may restrict the qualification for its membership to persons who meet the objectives of establishment of the cooperative and its characteristics, as stipulated by articles of association.
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 Article 22 (Contribution and Liability)   print
(1) A member shall contribute at least one unit, as stipulated by articles of association: Provided, That a member may make his/her contribution in kind, if necessary, as stipulated by articles of association.
(2) The number of contribution units per member shall not exceed 30 percent of the total number of contribution units.
(3) No contribution paid by a member shall be a subject matter of a pledge right.
(4) No contribution payable to a cooperative shall be off set against claims against the cooperative.
(5) No member's liability shall exceed the amount of contributions paid by him/her.
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 Article 23 (Voting Rights on Resolution or Election)   print
(1) Each member shall have one vote on a resolution or election, irrespective of the number of his/her contribution units.
(2) A member may exercise his/her voting right on a resolution or election by proxy. In such cases, the member shall be deemed to be present at the meeting.
(3) A proxy under paragraph (2) shall be another member or a family member who cohabits with the principal (referring to the spouse of a member, a lineal ascendent or descendent or a sibling of a member or his/her spouse, or the spouse of a lineal ascendent or descendent or a sibling of a member; hereinafter the same shall apply), and the number of members for whom a person can act as proxy shall be limited to one person.
(4) A proxy under paragraph (2) shall submit a document certifying his/her power of proxy to the cooperative, as stipulated by articles of association.
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 Article 24 (Withdrawals)   print
(1) A member of a cooperative may withdraw from the cooperative by notifying the cooperative of his/her intention to withdraw, as stipulated by articles of association.
(2) If a member of a cooperative falls under any of the following subparagraphs, he/she shall be withdrawn automatically from the cooperative:
1. If a member is found disqualified;
2. If a member is deceased;
3. If a member is bankrupt;
4. If a member is declared incompetent;
5. If an incorporated member is dissolved;
6. If any other cause specified by articles of association occurs.
(3) The transfer of the status as a member or the transfer of the share of a member shall be subject to a resolution by the general assembly.
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 Article 25 (Expulsion)   print
(1) If a member of a cooperative falls under any of the following subparagraphs, the cooperative may expel the member:
1. If a member has not used the business of the cooperative for a period not less than the period specified in its articles of association;
2. If a member fails to pay his/her contribution or expenses or fails to perform any of his/her obligations to the cooperative;
3. If any other cause specified in articles of association occurs.
(2) When a cooperative intends to expel a member pursuant to paragraph (1), it shall notify the member of the reason of expulsion by not later than ten days before opening a general meeting and shall givethe member an opportunity to express his/her opinion at the general meeting.
(3) No cooperative shall have any valid defense to protest against a member expelled in accordance with a resolution passed at a general meeting to expel the member without givingthe member an opportunity to express his/her opinion under paragraph (2).
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 Article 26 (Right to Claim Refund of Share and Suspension of Refund)   print
(1) A member who withdraws from a cooperative (including an expelled member; hereafter the same shall apply in this Article and Article 27) may claim for refund of his/her share from the fiscal year immediately subsequent to the fiscal year in which he/she withdraws (including the time when expelled; hereafter the same shall apply in this Article and Article 27), as stipulated by articles of association.
(2) The share under paragraph (1) shall be determined on the basis of assets and liabilities of the cooperative as of the end of the fiscal year in which a member withdraws.
(3) The right to claim under paragraph (1) shall be extinguished by prescription, unless it is exercised within two years.
(4) A cooperative may suspend the refund of the share under paragraph (1) until a member fully performs his/her obligations to the cooperative.
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 Article 27 (Withdrawing Member's Share of Deficits)   print
If a cooperative is unable to fully repay its debts with its assets, it may claim a withdrawing member to pay his/her apportionment of deficits, as stipulated by articles of association, when it calculates the amount of the share that shall be refunded pursuant to Article 26. The provisions of Article 26 (3) shall apply mutatis mutandis to such cases.
SECTION 3 Organs
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 Article 28 (General Assembly)   print
(1) A cooperative shall have the general assembly.
(2) The general assembly shall be comprised of the president and members.
(3) The president shall convene general meetings and shall preside over such general meetings.
(4) An annual general meeting shall be convened once a year at the time specified by articles of association, while a special general meeting may be convened whenever deemed necessary, as stipulated by articles of association.
(5) The president shall determine the purposes, agenda items, date, time, and venue of a general meeting by not later than seven days before opening the general meeting and shall give notice that the general meeting is convened by the method stipulated by articles of association.
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 Article 29 (Matters subject to Resolutions by General Assembly)   print
(1) The following matters shall be subject to a resolution by the general assembly:
1. Amendment of articles of association;
2. Establishment, amendment, or repeal of bylaws;
3. Election and dismissal of executives;
4. Approval of business plans and budgets;
5. Approval of reports on settlement of accounts;
6. Approval of audit reports;
7. Merger, division, or dissolution of the cooperative, or temporary suspension of the cooperative's business;
8. Expulsion of members;
9. Matters specified by articles of association as being subject to a resolution by the general assembly;
10. Other matters that the president or the board of directors deems it necessary to bring to the general assembly for resolution.
(2) A resolution on matters under paragraph (1) 1, 7, or 8 shall be passed with the attendance of a majority of all members and by an affirmative vote of not less than two-thirds of members present at the meeting, while a resolution on other matters shall be passed with the attendance of a majority of all members and by an affirmative vote of a majority of members present at the meeting.
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 Article 30 (Minutes of General Meetings)   print
(1) Minutes of a general meeting shall be taken in regard to proceedings of the meeting.
(2) Minutes of a general meeting shall contain the proceedings and results of the meeting, on which the president and three or more members elected at the general meeting shall print their names and affix their seals or signatures.
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 Article 31 (General Assembly of Representatives)   print
(1) If the number of members of a cooperative exceeds the number specified by Presidential Decree, the cooperative may establish a general assembly of representatives as a substitute for the general assembly.
(2) A general assembly of representatives shall be comprised of representatives elected from among members.
(3) No representative shall authorize a proxy to exercise his/her voting right on a resolution or election.
(4) The provisions regarding a general assembly shall apply mutatis mutandis to a general assembly of representatives, and the term "member" shall be construed as "representative" in such cases: Provided, That the general assembly of representatives shall not adopt any resolution on matters regarding the merger, division, or dissolution of the cooperative.
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 Article 32 (Board of Directors)   print
(1) A cooperative shall have the board of directors.
(2) The board of directors shall be comprised of the president and directors.
(3) The president shall convene board of directors' meetings and shall presided over such meetings.
(4) The board of directors shall adopt a resolution with the attendance of a majority of members and by an affirmative vote of a majority of members present at the meeting, and other necessary matters regarding the opening of a board of directors' meeting, the method of passing resolutions, and the operation of the board of directors shall be stipulated by articles of association.
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 Article 33 (Matters subject to Resolution by Board of Directors)   print
The following matters shall be subject to a resolution by the board of directors:
1. Matters regarding property of the cooperative and the execution of business affairs;
2. Convening of a general meeting and agenda items to be tabled before the general meeting;
3. Establishment, amendment, or repeal of regulations;
4. Preparation of proposed business plans and budgets;
5. Matters specified as being subject to a resolution by the board of directors by an Act, subordinate statute, or articles of association;
6. Other important matters for the operation of the cooperative or matters brought by president for resolution.
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 Article 34 (Executives)   print
(1) A cooperative shall have three or more directors, including one president, and one or more auditors as its executives.
(2) The full number of directors and the method of electing directors and auditors shall be stipulated by articles of association.
(3) The president shall be elected from among directors at a general meeting, as stipulated by articles of association.
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 Article 35 (Term of Office of Executives, etc.)   print
(1) The term of office of executives shall be stipulated by articles of association within the limit of four years.
(2) Executives may be reappointed for consecutive terms: Provided, That a president may be reappointed for one further term only once.
(3) The term of office of an executive elected to fill a vacancy shall expire at the end of the term of office of his/her predecessor.
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 Article 36 (Disqualification of Executives)   print
(1) No person who falls under any of the following subparagraphs shall be qualified for an executive of a cooperative:
1. An incompetent person;
2. A quasi-incompetent person;
3. A person adjudicated bankrupt but not yet reinstated;
4. A person in whose case three years have not passed since the date on which a sentence of imprisonment without prison labor or heavier punishment imposed upon him/her was completely executed (including cases where it is deemed that such sentence was completely executed) or discharged;
5. A person who is still in the suspension period of a sentence of the suspension of execution of imprisonment without prison labor or heavier punishment or a person in whose case two years have not passed since the date on which the suspension period of such sentence expired;
6. A person for whom sentencing imprisonment without prison labor or heavier punishment was suspended and is still in the sentence suspension period;
7. A person who has his/her qualification relinquished of or suspended by judgment by a court or by operation of any other Act.
(2) If any subparagraph of paragraph (1) is applicable to an executive, the executive shall be automatically dismissed from his/her office.
(3) An act in which an executive who is dismissed pursuant to paragraph (2) has been involved before his/her dismissal shall remain effective and valid.
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 Article 37 (Restrictions on Election Campaign)   print
(1) No person shall commit any of the following acts with intent to have him/herself or any specific person elected or fail in an election for executive or representative of a cooperative:
1. Any of the following acts committed in relation to a member (including a person who has filed an application for membership with the cooperative; hereafter the same shall apply in this Article) or any of his/her family members or an institution, organization, facility established and operated by a member or any of his/her family members:
(a) Offering money, goods, entertainment, or any other interest in property;
(b) Providing a government or private job;
(c) Expressing his/her intention to offer money, goods, entertainment, or any other interest in property or to provide a government or private job, or promising to offer such favor;
2. Committing an act under any item of subparagraph 1 against a person who intends to become a candidate or who is a candidate with intent to have the person fail to become a candidate or to have the person resign from the candidate;
3. Obtaining a benefit or a job under subparagraph 1 or 2, accepting the manifestation of the intent to offer such benefit or job, or demanding or arranging the offer of such benefit or job.
(2) No person who intends to become an executive or a representative shall visit members door to door or solicit members to gather in a specific place for election campaign during the period stipulated by articles of association.
(3) No person shall slander a candidate by publishing a false fact in relation to an election of executives or representatives of a cooperative or by stating a fact publicly by public speech, poster, or any other means.
(4) No person shall conduct an election campaign by any means other than those stipulated by articles of association, among the following means, in connection with an election of executives or representatives:
1. Posting propaganda posters;
2. Distributing official election bulletins;
3. Distributing printed leaflets;
4. Holding joint speeches or public forums;
5. Appealing for support by telephone or via computer communications networks.
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 Article 38 (Organization and Operation of Election Committee)   print
(1) A cooperative may organize and operate an election committee in order to ensure the fair management of an election of executives or representatives.
(2) Necessary matters regarding the functions, organization, and operation of the election committee may be stipulated by articles of association.
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 Article 39 (Duties and Liability of Executives)   print
(1) An executive shall observe this Act, any order issued pursuant to this Act, articles of association, bylaws, regulations, and resolutions by the general assembly and by the board of directors and shall perform his/her duties conscientiously for the cooperative.
(2) If an executive inflicts any loss or injury on a cooperative by violating any Act, subordinate statute, or any provision of articles of association or by neglecting his/her duties, he/she shall jointly and severally compensate the cooperate for such loss or injury.
(3) If an executive inflicts any loss or injury on a third party by neglecting his/her duties by an intentional act or by gross negligence, he/she shall jointly and severally compensate the third party for such loss or injury.
(4) If an act under paragraph (2) or (3) is committed as a consequence of a resolution passed by the board of directors, executives who agreed on the resolution shall take the liability under paragraph (2) or (3).
(5) Any person who participated in a resolution under paragraph (4), but failed to express his/her dissent clearly, shall be deemed to have agreed to the resolution.
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 Article 40 (Dismissal of Executives)   print
(1) Members may demand the dismissal of an executive at a general meeting with consent from not less than one-fifth of all members.
(2) In order to pass a resolution on dismissal of an executive, the executive shall be notified of the grounds of such dismissal and shall be provided with an opportunity to express his/her opinion at the general meeting.
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 Article 41 (Duties of President and Directors)   print
(1) A president shall represent a cooperative and shall execute business affairs of the cooperative, as stipulated by articles of association.
(2) Directors shall execute business affairs of a cooperative, as stipulated by articles of association, and shall act on behalf of a president in the order stipulated by articles of association, when the president is unable to attend to such affairs.
(3) Except the cases under paragraph (2) and where a president delegates his/her authority, a director, other than the president, shall not represent the cooperative.
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 Article 42 (Duties of Auditors)   print
(1) Auditors shall audit the current status of business execution and property of the cooperative and its accounting books and documents and shall report the results thereof to the general assembly.
(2) Auditors may inspect and examine accounting books and documents of the cooperative without notice.
(3) If it is discovered that a president or directors have executed business affairs in contravention of this Act, any order issued pursuant to this Act, articles of association, bylaws, regulations, or a resolution by the general assembly, auditors shall demand the board of directors to take corrective measures.
(4) Auditors may attend a general meeting or a board of director's meeting to express their opinions.
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 Article 43 (Auditors' Authority to Represent)   print
In a lawsuit between a cooperative and its president or director, its auditor shall represent the cooperative.
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 Article 44 (Prohibition of Concurrent Office of Executives and Employees)   print
(1) No president of a cooperative shall concurrently hold office as the president of any other cooperative.
(2) No president, director, or employee of any cooperative shall concurrently serve as its auditor.
(3) No executive of a cooperative shall concurrently work for the cooperative as its employee: Provided, That a person may work for a cooperative concurrently as an executive and an employee, taking into consideration the nature of its business and the composition of members, as prescribed by Presidential Decree.
SECTION 4 Business
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 Article 45 (Business Activities)   print
(1) A cooperative shall autonomously stipulate its business activities necessary for fulfilling its objectives of establishment by articles of association, but the following business activities shall be included therein:
1. Programs for counselling, education, training of members and employees and for providing information to them;
2. Business activities for cooperation between cooperatives;
3. Advertisement of the cooperative and business activities for local communities.
(2) A cooperative shall conduct its business activities lawfully and fairly in accordance with the purposes, requirements, procedures, and methods provided for in relevant Acts and subordinate statutes.
(3) Notwithstanding the provisions of paragraphs (1) and (2), no cooperative shall be engaged in any financial or insurance business defined in the Korea Standard Industrial Classification Code publicly announced by the Commissioner of the Korea National Statistical Office pursuant to Article 22 (1) of the Statistics Act.
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 Article 46 (Use of Business Services)   print
(1) No cooperative shall allow a non-member to use its business services.
(2) Notwithstanding the provisions of paragraph (1), a cooperative may allow a non-member to use its business services to the extent that his/her use does not cause any trouble to its members' use, as prescribed by Presidential Decree.
SECTION 5 Accounting
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 Article 47 (Fiscal Year, etc.)   print
(1) A cooperative's fiscal year shall be stipulated by articles of association.
(2) A cooperative's accounts shall be divided into general accounts and special accounts, and the business sector for each account shall be stipulated by articles of association.
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 Article 48 (Business Plans and Budget for Revenue and Expenditure)   print
A cooperative shall prepare a business plan and a budget for revenue and expenditure for each fiscal year and shall table them at the general assembly for approval.
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 Article 49 (Transparency of Operation)   print
(1) A cooperative shall give public notice of the results of settlement of accounts and shall make the current status of its operation public actively.
(2) A cooperative shall keep its articles of association, bylaws, regulations, minutes of general meetings and board of directors' meetings, accounting books, and the list of members in its principal place of business.
(3) A creditor or a member of a cooperative may inspect the documents under paragraph (2) or demand copies thereof.
(4) A cooperative of a scale equivalent to, or larger than, that specified by Presidential Decree shall disclose its major business data subject to disclosure via the web-site of the Special Metropolitan City, Metropolitan City, Special Self-Governing City, Do, or Special Self-Governing Province, with which it has filed a report on establishment, or of the federation of cooperatives.
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 Article 50 (Legal Reserves and Voluntary Reserves)   print
(1) When a cooperative has a surplus after the settlement of accounts for a fiscal year, it shall set aside not less than 10 percent of the surplus (hereinafter referred to as "legal reserve") until the amount reaches three times its equity capital.
(2) A cooperative may set aside business reserves and other reserves (hereinafter referred to as "voluntary reserves"), as stipulated by articles of association.
(3) Except where the legal reserve is appropriated for the set off of losses or where a cooperative is dissolved, no cooperative shall use the legal reserve.
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 Article 51 (Compensation for Losses and Distribution of Surplus)   print
(1) When a cooperative has a loss after the settlement of accounts for a fiscal year (referring to a loss for the term), it shall appropriate the unappropriated carry-over, voluntary reserves, and the legal reserve for the set off of such loss in the order stated above, but shall carry over the balance of such loss to the following fiscal year, if a balance remains after offsetting the loss.
(2) A cooperative may distribute a surplus to members, as stipulated by articles of association, after it appropriates the earnings for the compensation for the loss under paragraph (1) and sets aside the legal reserve and voluntary reserves under Article 50.
(3) When a cooperative distributes a surplus pursuant to paragraph (2), the dividends of earnings from the use of the cooperative's business shall not be less than 50 percent of the total amount of dividends, but the dividends of paid-in contributions shall not exceed 10 percent of the paid-in contributions.
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 Article 52 (Approval of Report on Settlement of Accounts)   print
(1) Each cooperative shall submit a report on the settlement of accounts (referring to a business report, a balance sheet, an income statement, and a plan for appropriation of retained earnings or a plan for disposition of deficits) to its auditor by not later than seven days before the opening date of an annual general meeting.
(2) Each cooperative shall submit a report on the settlement of accounts under paragraph (1) along with auditors' letter of opinion to an annual general meeting for approval.
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 Article 53 (Resolutions on Reduction of Contributions)   print
(1) When a cooperative passes a resolution on reduction of the value for each contribution unit, it shall prepare a balance sheet within 14 days from the date of resolution.
(2) Each cooperative shall give peremptory notice individually to known creditors simultaneously when it gives public notice during the period under paragraph (1) to require them to file an objection within a specified period if they have an objection.
(3) A period for filing an objection under paragraph (2) shall not be less than 30 days.
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 Article 54 (Creditors' Objection against Reduction of Contributions)   print
(1) If no creditor files an objection during a period for filing an objection under Article 53 (2), it shall be deemed that the reduction of the value per contribution unit has been approved.
(2) If a creditor files an objection, the cooperative shall repay debts or offer equivalent security to the creditor.
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 Article 55 (Prohibition of Acquisition of Share of Contributions)   print
No cooperative shall acquire a member's share of contributions nor take such share as the subject matter of a pledge right.
SECTION 6 Merger, Division, Dissolution, and Liquidation
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 Article 56 (Merger and Division)   print
(1) A cooperative may initiate a merger or a division with a resolution thereon by the general assembly after it prepares a merger agreement or a division plan.
(2) When cooperatives are merged, the cooperative surviving the merger shall file a report on merger, the cooperative newly established after the division shall file a report on establishment, and the cooperative dissolved after the merger shall file a report on dissolution respectively with the registry office having jurisdiction over each cooperative's place of business.
(3) The cooperative surviving or newly established as a consequence of a merger or division shall succeed to the rights and obligations of the cooperative dissolved as a consequence of the merger or division.
(4) The provisions of Articles 15 through 17 shall apply mutatis mutandisto cooperatives established pursuant to paragraph (1).
(5) No cooperative shall merge with any legal entity, organization, or cooperative other than cooperatives under this Act nor be split off into any legal entity, organization, or cooperative other than cooperatives under this Act.
(6) The provisions of Articles 53 and 54 shall apply mutatis mutandis to the merger and division of cooperatives.
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 Article 57 (Dissolution)   print
(1) Each cooperative shall be dissolved when any of the following events occurs:
1. When an event specified as a ground for dissolution by articles of association occurs;
2. When the general assembly resolves to dissolve it;
3. When it is merged, divided, or insolvent.
(2) Except where a cooperative is dissolved due to its insolvency, when a cooperative is dissolved, the liquidator shall report the dissolution within 14 days after his/her inauguration to the competent Mayor/Do Governor with whom the report on its establishment has been filed.
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 Article 58 (Liquidators)   print
(1) Except where a cooperative is dissolved due to its insolvency, when a cooperative is dissolved, its president shall serve as the liquidator: Provided, That any person, other than its president, may be appointed as the liquidator by the general assembly, if the general assembly passes a resolution thereon.
(2) The liquidator shall inspect the current status of the cooperative's property without delay after his/her inauguration, prepare a list of property and a balance sheet, determine the methods of disposing of property, and obtain approval thereof from the general assembly.
(3) When administrative affairs for liquidation are complete, the liquidator shall prepare a report on the settlement of accounts without delay and shall obtain approval thereof from the general assembly.
(4) If a cooperative fails to hold a general meeting even after it has convened the general meeting on two or more occasions in cases falling under paragraph (2) or (3), it shall be deemed that the general assembly approves relevant matters, even where not less than two-thirds of members present at the meeting approve them.
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 Article 59 (Disposal of Residual Property)   print
If there is residual property left over after repaying debts when a cooperative is dissolved, such property shall be disposed of in the manner stipulated by articles of association.
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 Article 60 (Application Mutatis Mutandis of the Civil Act, etc.)   print
The provisions of Articles 79, 81, 87, 88 (1) and (2), 89 through 92, and 93 (1) and (2) of the Civil Act and the provisions of Article 121 of the Non-Contentious Case Litigation Procedure Act shall apply mutatis mutandis to the dissolution and liquidation of a cooperative.
SECTION 7 Registration
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 Article 61 (Registration for Establishment)   print
(1) Each cooperative shall file for registration for its establishment with the registry office having jurisdiction over its principal place of business within 14 days from the date on which contributions are fully paid in.
(2) The following matters shall be described in an application for registration for establishment:
1. Matters under Article 16 (1) 1 and 2;
2. The total number of contribution units and the total value of paid-in contributions;
3. The date the report on establishment is filed;
4. Names, resident registration numbers, and addresses of executives.
(3) In filing for registration for establishment, the president shall be the applicant.
(4) An application for registration for establishment under paragraph (2) shall be accompanied by copies of a report on establishment, minutes of the inaugural general meeting, and articles of association.
(5) A report on establishment of a cooperative as a consequence of a merger or division shall be accompanied by all the following documents:
1. Documents under paragraph (4);
2. A document proving that public notice or peremptory notice has been given pursuant to Article 53;
3. A document proving that debts have been repaid to creditors who have filed an objection or that security has been provided to such creditors pursuant to Article 54.
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 Article 62 (Registration for Establishment of Branch Offices)   print
When a cooperative establishes a branch office, it shall file for registration therefor with the registry office having jurisdiction over its principal place of business within 21 days and with the registry office having jurisdiction over the branch office within 28 days, respectively.
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 Article 63 (Registration for Relocation)   print
(1) When a cooperative relocates its place of business, it shall file for registration for relocation with the registry offices having jurisdiction over its previous and new places of business respectively within 21 days.
(2) In filing for registration under paragraph (1), the president shall be the applicant.
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 Article 64 (Registration for Change)   print
(1) If there is a change in a matter under any subparagraph of Article 61 (2), the cooperative shall file for registration for the change with the registry offices having jurisdiction over its principal place of business and the relevant branch office, respectively, within 21 days.
(2) Notwithstanding the provisions of paragraph (1), a change in the matter under Article 61 (2) 2 shall be registered as at the end of the pertinent fiscal year within one month after the end of the fiscal year.
(3) In filing for registration for a change under paragraphs (1) and (2), the president shall be the applicant.
(4) An application for registration under paragraph (3) shall be accompanied by documents proving the change in the relevant registered matter.
(5) An application for registration for a change as a consequence of the reduction of contributions, a merger, or a division shall be accompanied by all the following documents:
1. Documents under paragraph (4);
2. Documents proving that public notice or peremptory notice has been given pursuant to Article 53;
3. A document proving that debts have been repaid to creditors who have filed an objection or that security has been provided to such creditors pursuant to Article 54.
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 Article 65 (Registration for Merger)   print
(1) When cooperatives are merged, the cooperative surviving the merger shall file for registration for the change, the cooperative dissolved as a consequence of the merger shall file for registration for dissolution, and the cooperative established as a consequence of the merger shall file for registration for establishment under Article 61 respectively with the registry office having jurisdiction over the place of business of each cooperative respectively within 14 days from the date on which the report on merger is filed.
(2) In filing for registration for dissolution under paragraph (1), the president of the cooperative dissolved as a consequence of the merger shall be the applicant.
(3) In cases falling under paragraph (2), an application for registration shall be accompanied by documents proving the ground for dissolution.
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 Article 66 (Registration for Dissolution)   print
(1) Except where a cooperative is dissolved due to a merger or insolvency, when a cooperative is dissolved, it shall file for registration for dissolution with the registry office having jurisdiction over its principal place of business within 14 days and with the registry office having jurisdiction over the relevant branch office within 21 days.
(2) In filing for registration for dissolution under paragraph (1), the liquidator shall be the applicant.
(3) An application for registration for dissolution shall be accompanied by documents proving the ground for dissolution.
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 Article 67 (Registration for Liquidator)   print
(1) Each liquidator shall register his/her name, resident registration number, and address with the registry office having jurisdiction over the principal place of business within 14 days from the date of his/her inauguration.
(2) If the liquidator is not the president, an application for registration shall be accompanied by documents proving qualification of the applicant to file for registration under paragraph (1).
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 Article 68 (Registration for Closing of Liquidation)   print
(1) When liquidation is complete, the liquidator shall file for registration for closing of liquidation with the registry office having jurisdiction over the principal place of business within 14 days and with the registry office having jurisdiction over the relevant branch office within 21 days.
(2) An application for registration under paragraph (1) shall be accompanied by documents proving the approval of the report on the settlement of accounts under Article 58 (3).
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 Article 69 (Registers)   print
Each registry office shall keep the register of cooperatives.
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 Article 70 (Application Mutatis Mutandis of the Non-Contentious Case Litigation Procedure Act, etc.)   print
The provisions regarding registration in the Non-Contentious Case Litigation Procedure Act and the Commercial Registration Act shall apply mutatis mutandis to the registration of a cooperative, except as otherwise provided for in this Act.
CHAPTER Ⅲ FEDERATION OF COOPERATIVES
SECTION 1 Establishment
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 Article 71 (Reporting on Establishment, etc.)   print
(1) When it is intended to establish a federation of cooperatives (hereinafter referred to as "federation"), three or more cooperatives qualified for membership shall prepare articles of association as promoters, table the articles of association at the inaugural general meeting for resolution, and then file a report thereon with the Minister of Strategy and Finance.
(2) The resolution at the inaugural general meeting shall be passed with the attendance of a majority of the cooperatives that have submitted a letter of consent to establishment to promoters until before the opening of the inaugural general meeting and by an affirmative vote of not less than two-thirds of persons present at the meeting.
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 Article 72 (Provisions Applicable Mutatis Mutandis)   print
The provisions of Articles 16 through 19 shall apply mutatis mutandisto the establishment of a federation. In such cases, the term "cooperative" shall be construed as "federation", the term "member" as "member cooperative", the term "competent Mayor/Do Governor" as "Minister of Strategy and Finance", and the term "members and proxies" in Article 16 (1) 3 as "member cooperatives".
SECTION 2 Member Cooperatives
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 Article 73 (Qualification for Membership)   print
(1) Member cooperatives of a federation shall be cooperatives that consent to the objectives of the establishment of the federation and that are willing to fulfill their obligations as member cooperatives.
(2) A federation may place restrictions on qualification for membership, as stipulated by articles of association.
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 Article 74 (Withdrawals)   print
(1) A member cooperative may withdraw from a federation by notifying the federation of its intention to withdraw, as stipulated by articles of association.
(2) If a member cooperative falls under any of the following subparagraphs, it shall be withdrawn from the federation automatically:
1. If a member cooperative is disqualified;
2. If a member cooperative is dissolved or insolvent;
3. If any other ground specified by articles of association occurs.
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 Article 75 (Voting Rights on Resolutions or Elections)   print
A federation may grant its member cooperatives unequal voting rights on a resolution or election according to the number of members of member cooperatives, the level of participation in business activities of the federation, and the number of contribution units, as stipulated by articles of association.
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 Article 76 (Provisions Applicable Mutatis Mutandis)   print
The provisions of Articles 21, 22, and 25 through 27 shall apply mutatis mutandis to member cooperatives of a federation. In such cases, the term "cooperative" shall be construed as "federation", the term "member" as "member cooperative", the term "per member" in Article 22 (2) as "per member cooperative", and the term "30 percent" in the aforesaid provision as "40 percent".
SECTION 3 Organs
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 Article 77 (General Assembly)   print
(1) Each federation shall have a general assembly.
(2) The general assembly shall be comprised of a chairperson and member cooperatives.
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 Article 78 (Executives)   print
Executives shall be elected at a general meeting from among members who belong to any of member cooperatives, as stipulated by articles of association.
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 Article 79 (Provisions Applicable Mutatis Mutandis)   print
The provisions of Articles 28 (3) through (5) and 29 through 44 shall apply mutatis mutandis to organs of a federation. In such cases, the term "cooperative" shall be construed as "federation", the term "president" as "chairperson", the term "member" as "member cooperative", the term "one-fifth" in Article 40 (1) as "one-third", the term "member" in Articles 29, 30, and 40 (1) as "representative" respectively, the term "member" in Article 37 as "representative or a member who belongs to a member cooperative", and the term "person who has filed an application for membership" in Article 37 as "member who belongs to a cooperative that has filed an application for membership", respectively.
SECTION 4 Business
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 Article 80 (Business Activities)   print
(1) Each federation shall stipulate business activities necessary for fulfilling its objectives of establishment by articles of association, but include the following business activities therein:
1. Programs for guidance, support, communication, and coordination of member cooperatives;
2. Programs for counselling, education, training of members and employees who belong to member cooperatives and for providing information thereto;
3. Programs for survey, research, and advertisement of the business of member cooperatives.
(2) Each federation shall conduct its business activities lawfully and fairly in accordance with the purposes, requirements, procedures, and methods provided for in relevant Acts and subordinate statutes.
(3) Notwithstanding the provisions of paragraphs (1) and (2), no federation shall be engaged in any financial or insurance business defined in the Korea Standard Industrial Classification Code publicly announced by the Commissioner of the Korea National Statistical Office pursuant to Article 22 (1) of the Statistics Act.
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 Article 81 (Use of Business Services)   print
(1) No federation shall allow a non-member cooperative to use its business services: Provided, That the foregoing shall not apply in cases specified by Presidential Decree for the smooth operation of business, such as advertisement and the disposal of goods in stock.
(2) Where a member of a member cooperative uses the federation's business services, the member cooperative shall be deemed to usethem.
SECTION 5 Accounting
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 Article 82 (Provisions Applicable Mutatis Mutandis)   print
The provisions of Articles 47 through 55 shall apply mutatis mutandis to a federation's accounting. In such cases, the term "cooperative" shall be construed as "federation", and the term "member" as "member cooperative", respectively.
SECTION 6 Merger, Division, Dissolution, and Liquidation
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 Article 83 (Provisions Applicable Mutatis Mutandis)   print
The provisions of Articles 56 through 60 shall apply mutatis mutandisto the merger, division, dissolution, and liquidation of a federation. In such cases, the term "cooperative" shall be construed as "federation", the term "member" as "member cooperative", the term "competent Mayor/Do Governor" as "Minister of Strategy and Finance", the term "Articles 15 through 17" in Article 56 (4) as "Articles 71 and 72", and the term "member" in Article 58 (4) as "representative", respectively.
SECTION 7 Registration
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 Article 84 (Provisions Applicable Mutatis Mutandis)   print
The provisions of Articles 61 through 70 shall apply mutatis mutandis to the registration of a federation. In such cases, the term "cooperative" shall be construed as "federation", and the term "president" as "chairperson", respectively.
CHAPTER Ⅳ SOCIAL COOPERATIVES
SECTION 1 Establishment
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 Article 85 (Authorization for Establishment, etc.)   print
(1) When it is intended to establish a social cooperative, five or more persons qualified for membership shall prepare articles of association as promoters, table the articles of association at the inaugural general meeting for a resolution, and then obtain authorization therefor from the Minister of Strategy and Finance.
(2) A resolution at the inaugural general meeting shall be passed with the attendance of a majority of persons who have submitted a letter of consent to establishment to promoters before the opening of the inaugural general meeting and by an affirmative vote of not less than two-thirds of persons present at the meeting.
(3) Upon receiving an application for authorization for establishment pursuant to paragraph (1), the Minister of Strategy and Finance shall authorize the establishment within 60 days from the date the application is filed, except the following cases: Provided, That the period may be extended only once by not more than 60 days if it is difficult to process the application due to an exceptional circumstance within the period specified for processing:
1. If documents required for authorization for establishment are inadequately prepared;
2. If the proceedings for establishment, articles of association, or any content of a business plan contravenes an Act or subordinate statute;
3. If an application fails to meet the criteria for authorization for establishment, otherwise.
(4) Detailed matters regarding the procedure for filing an application for authorization for establishment under paragraphs (1) and (3), the number of members, the amount of contribution, other criteria necessary for authorization, and the method of authorization shall be prescribed by Presidential Decree.
(5) The authority of the Minister of Strategy and Finance under paragraphs (1) and (3) may be delegated to the head of a related central administrative agency, taking into consideration details and the nature of specific business activities conducted by social cooperatives and other relevant matters, as prescribed by Presidential Decree.
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 Article 86 (Articles of Association)   print
(1) The articles of association of a social cooperative shall include the following matters:
1. Objectives:
2. Name and the principal place of business;
3. Qualification for members and proxies;
4. Matters regarding admission to, and withdrawal and expulsion from, a cooperative;
5. The value of a contribution unit, the method and timingfor payment, and the limit on the number of contribution units of each member;
6. Matters regarding rights and obligations of members;
7. Matters regarding the appropriation of a surplus and the disposal of deficits;
8. Matters regarding the method of accumulating reserves and the use of reserves;
9. Matters regarding the scope of business and accounting;
10. Matters regarding organs and executives;
11. Matters regarding the method of giving public notification;
12. Matters regarding dissolution;
13. Matters regarding the transfer of contributions;
14. Other matters necessary for the operation of the general assembly and the board of directors.
(2) An amendment to articles of association of a social cooperative shall become effective only when it is authorized by the Minister of Strategy and Finance.
(3) The authority of the Minister of Strategy and Finance under paragraph (2) may be delegated to the head of a related central administrative agency, as prescribed by Presidential Decree.
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 Article 87 (Transfer of Administrative Affairs for Establishment and Payment of Contributions)   print
(1) Upon obtaining authorization for the establishment of a social cooperative pursuant to Article 85 (1), promoters shall transfer administrative affairs therefor to its president without delay.
(2) Upon having administrative affairs transferred pursuant to paragraph (1), the president shall set a deadline for the payment of contributions and shall require persons who intend to become members to pay their contributions by such deadline.
(3) Each in-kind contributor shall deliver an asset as the subject matter of his/her contribution by the deadline under paragraph (2), prepare documents necessary for the registration or recordation of such asset and the transfer of rights, and submit the documents to the cooperative.
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 Article 88 (Provisions Applicable Mutatis Mutandis)   print
The provisions of Articles 17 and 19 shall apply mutatis mutandis to the establishment of a social cooperative. In such cases, the term "cooperative" shall be construed as "social cooperative", and the term "registration for establishment under Article 61" in Article 19 (1) as "registration for establishment under Article 106", respectively.
SECTION 2 Members
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 Article 89 (Right to Claim Refund of Contributions and Suspension of Refund)   print
(1) A member who withdraws from a cooperative (including an expelled member; hereafter the same shall apply in this Article and Article 90) may claim a refund of his/her contribution from the fiscal year immediately subsequent to the fiscal year in which he/she withdraws (including the time when expelled; hereafter the same shall apply in this Article and Article 90), as stipulated by articles of association.
(2) A right to claim under paragraph (1) shall be extinguished by prescription, unless it is exercised within two years.
(3) A social cooperative may suspend the refund of contributions under paragraph (1) until a member who withdraws from a cooperative fully performs his/her obligations to the social cooperative.
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 Article 90 (Withdrawing Member's Share of Deficits)   print
If a social cooperative is unable to fully pay its obligations with its assets, it may claim a withdrawing member to pay his/her apportionment of deficits, as stipulated by articles of association, when it calculates the refundable amount of contribution that shall be refunded pursuant to Article 89. The provisions of Article 89 (2) shall apply mutatis mutandis to such cases.
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 Article 91 (Provisions Applicable Mutatis Mutandis)   print
The provisions of Articles 20 through 25 shall apply mutatis mutandis to members of a social cooperative. In such cases, the term "cooperative" shall be construed as "social cooperative".
SECTION 3 Organs
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 Article 92 (Provisions Applicable Mutatis Mutandis)   print
The provisions of Articles 28 through 44 shall apply mutatis mutandis to organs of a social cooperative. In such cases, the term "cooperative" shall be construed as "social cooperative".
SECTION 4 Business
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 Article 93 (Business Activities)   print
(1) Each social cooperative shall be engaged in one or more business activities as its main business among the following business activities:
1. Programs for contributing to the renewal of local communities, the invigoration of the local economy, the enhancement of rights, interests, and welfare of local residents, and the resolution of other problems that local communities face;
2. Programs for providing disadvantaged people with social services or jobs in the areas of welfare, medical service, or environment;
3. Projects entrusted by the central government or a local government;
4. Other projects for contributing the enhancement of public interest.
(2) The term "main business" in paragraph (1) means where the principal business activities occupy not less than 40 percent of the entire business activities of a cooperative.
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 Article 94 (Small Loans to Members and Mutual Aid Programs)   print
(1) Notwithstanding the provisions of Article 45 (3), a social cooperative may lend small loans and provide mutual aid programs to members as its business activities in addition to its main business within the limit of the total amount of its paid-in contributions in order to enhance mutual welfare, as stipulated by articles of association: Provided, That small loans shall not exceed two-thirds of the total amount of paid-in contributions.
(2) Further necessary details, such as the interest rate of small loans in the business activities under paragraph (1), the loan ceiling, the scope of mutual aid, the amount of mutual aid, the mutual aid agreement, and the membership fee for mutual aid, shall be prescribed by Presidential Decree.
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 Article 95 (Use of Business Services)   print
(1) No social cooperative shall allow anynon-member to use its business services.
(2) Notwithstanding the provisions of paragraph (1), a social cooperative may allow non-members to use its business services to the extent that their use does not cause any trouble to its members' use, as prescribed by Presidential Decree: Provided, That the foregoing shall not apply to business activities under Article 94.
(3) Notwithstanding the provisions of paragraph (1), a social cooperative engaged in health or medical services as its business may provide health or medical services to non-members within the limit of 50 percent of the total amount of supply. In such cases, further details regarding the guidelines for the calculation of the amount of supply, the scope of non-members but to whom health or medical services may be provided shall be prescribed by Presidential Decree.
SECTION 5 Accounting
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 Article 96 (Transparency of Operation)   print
(1) Each social cooperative shall give public notice of the results of settlement of accounts and shall make the current status of its operation public actively.
(2) Each social cooperative shall keep its articles of association, bylaws, regulations, minutes of general meetings and board of directors' meetings, accounting books, and the list of members in its principal place of business.
(3) A creditor or a member of a cooperative may inspect the documents under paragraph (2) or demand copies thereof.
(4) Each social cooperative shall disclose its major business data subject to disclosure via the web-site of the Minister of Strategy and Finance or of the federation of social cooperatives.
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 Article 97 (Legal Reserves and Voluntary Reserves)   print
(1) When a social cooperative has a surplus after the settlement of accounts for a fiscal year, it shall set aside not less than 30 percent of the surplus for the legal reserve until the amount reaches three times its equity capital.
(2) A social cooperative may set aside a business reserve and other reserves (hereinafter referred to as "voluntary reserves"), as stipulated by articles of association.
(3) Except where a legal reserve is appropriated for the set off of losses or where a social cooperative is dissolved, no social cooperative shall use the legal reserve.
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 Article 98 (Compensation for Losses and Distribution of Surplus)   print
(1) When a social cooperative has a loss after the settlement of accounts for a fiscal year (referring to a loss for the term), it shall appropriate the unappropriated carry-over, voluntary reserves, and the legal reserve for the set off of such loss in the order stated above, but shall carry over the balance of such loss to the following fiscal year, if a balance remains after off setting the loss.
(2) Each social cooperative shall set aside a surplus accruing after off setting a loss under paragraph (1) and setting aide the legal reserve under Article 97 for a voluntary reserve, but shall not distribute the surplus to members.
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 Article 99 (Exemption from Charges)   print
The business and property of a social cooperative shall be exempt from charges except taxes imposed by the central government and local governments.
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 Article 100 (Provisions Applicable Mutatis Mutandis)   print
The provisions of Articles 47, 48, and 52 through 55 shall apply mutatis mutandis to a social cooperative's accounting. In such cases, the term "cooperative" shall be construed as "social cooperative".
SECTION 6 Merger, Division, Dissolution, and Liquidation
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 Article 101 (Merger and Division)   print
(1) A social cooperative may initiate a merger or a division with the resolution thereon by the general assembly after it prepares a merger agreement or a division plan.
(2) A merger or division of a social cooperative shall be subject to authorization by the Minister of Strategy and Finance.
(3) A social cooperative surviving or newly established as a consequence of a merger or division shall succeed to the rights and obligations of the social cooperative dissolved as a consequence of the merger or division.
(4) The provisions of Articles 85, 86, and 88 shall apply mutatis mutandis to social cooperatives established pursuant to paragraph (1).
(5) The authority of the Minister of Strategy and Finance under paragraph (2) may be delegated to the head of a related central administrative agency, taking into consideration details and the nature of specific business activities conducted by social cooperatives and other relevant matters, as prescribed by Presidential Decree.
(6) No social cooperative shall merge with any legal entity, organization, or cooperative other than social cooperatives under this Act nor be split off into any legal entity, organization, or cooperative other than social cooperatives under this Act.
(7) The provisions of Articles 53 and 54 shall apply mutatis mutandis to the merger and division of social cooperatives.
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 Article 102 (Dissolution)   print
(1) A social cooperative shall be dissolved when any of the following events occurs:
1. When an event specified as a ground for dissolution by articles of association occurs;
2. When the general assembly passes a resolution on dissolution;
3. When it is merged, divided, or insolvent;
4. When authorization for establishment is revoked.
(2) Except where a social cooperative is dissolved due to its insolvency, when a social cooperative is dissolved pursuant to any of the provisions of paragraph (1) 1 through 3, the liquidator shall report the dissolution within 14 days after his/her inauguration to the Minister of Strategy and Finance.
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 Article 103 (Liquidators)   print
(1) Except where a social cooperative is dissolved due to its insolvency, when a cooperative is dissolved, its president shall serve as the liquidator: Provided, That any person, other than its president, may be appointed as the liquidator by the general assembly, if the general assembly passes a resolution thereon.
(2) The liquidator shall inspect the current status of the social cooperative's property without delay after his/her inauguration, prepare a list of property and a balance sheet, determine the methods of disposing of property, and shall obtain approval thereof from the general assembly.
(3) When administrative affairs for liquidation are complete, the liquidator shall prepare a report on the settlement of accounts without delay and obtain approval thereof from the general assembly.
(4) If a social cooperative fails to hold a general meeting even after it has convened the general meeting on two or more occasions in cases falling under paragraph (2) or (3), it shall be deemed that the general assembly approves relevant matters, even where not less than two-thirds of members present at the meeting approve them.
(5) The Minister of Strategy and Finance shall supervise administrative affairs for liquidation of a social cooperative.
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 Article 104 (Disposal of Residual Property)   print
If there is residual property left over after repaying debts and contributions when a social cooperative is dissolved, the ownership of such property shall be vested to any of the following persons in the manner stipulated by articles of association:
1. The higher federation of social cooperatives;
2. A social cooperative for similar purposes;
3. A non-profit corporation or a public-service corporation;
4. The National Treasury.
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 Article 105 (Application Mutatis Mutandis of the Civil Act, etc.)   print
The provisions of Articles 79, 81, 87, 88 (1) and (2), 89 through 92, and 93 (1) and (2) of the Civil Act and Article 121 of the Non-Contentious Case Litigation Procedure Act shall apply mutatis mutandis to the dissolution and liquidation of a social cooperative.
SECTION 7 Registration
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 Article 106 (Registration for Establishment)   print
(1) A social cooperative shall file for registration for its establishment with the registry office having jurisdiction over its principal place of business within 14 days from the date on which the establishment is authorized. The authorization shall become ineffective, if it fails to complete the registration within the period.
(2) The following matters shall be stated in an application for registration for establishment:
1. Matters under Article 86 (1) 1 and 2;
2. The total number of contribution units and the total amount of paid-in contributions;
3. The date of authorization for establishment;
4. Names, resident registration numbers, and addresses of executives.
(3) In filing for registration for establishment, the president shall be the applicant.
(4) An application for registration for establishment under paragraph (2) shall be accompanied by copies of the letter of authorization for establishment, minutes of the inaugural general meeting, and articles of association.
(5) An application for registration for establishment of a social cooperative as a consequence of a merger or division shall be accompanied by all the following documents:
1. Documents under paragraph (4);
2. A document proving that public notice or peremptory notice has been given pursuant to Article 53;
3. A document proving that debts have been repaid to creditors who have filed an objection or security has been provided to such creditors pursuant to Article 54.
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 Article 107 (Registration for Merger)   print
(1) When social cooperatives are merged, the cooperative surviving the merger shall file for registration for the change, the cooperative dissolved as a consequence of the merger shall file for registration for dissolution, and the cooperative established as a consequence of the merger shall file for registration for establishment under Article 106 with the registry office having jurisdiction over the place of business of each cooperative, respectively, within 14 days from the date on which the merger is authorized.
(2) In filing for registration for dissolution under paragraph (1), the president of the social cooperative dissolved as a consequence of the merger shall be the applicant.
(3) In cases falling under paragraph (2), an application for registration shall be accompanied by documents proving the ground for dissolution.
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 Article 108 (Registration for Dissolution)   print
(1) Except where a social cooperative is dissolved due to a merger or insolvency, when a social cooperative is dissolved, it shall file for registration for dissolution with the registry office having jurisdiction over its principal place of business, within 14 days and with the registry office having jurisdiction over the relevant branch office, within 21 days.
(2) In filing for registration for dissolution under paragraph (1), the liquidator shall be the applicant, except for cases falling under paragraph (4).
(3) An application for registration for dissolution shall be accompanied by documents proving the ground for dissolution.
(4) The Minister of Strategy and Finance shall make a request for registration for dissolution when he/she revokes authorization for establishment.
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 Article 109 (Start Date of Period for Registration)   print
Where it is required to obtain authorization or a similar disposition from the Minister of Strategy and Finance with regard to a matter subject to registration, the period for registration shall be counted from the date on which the document for authorization or a similar disposition arrives.
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 Article 110 (Provisions Applicable Mutatis Mutandis)   print
The provisions of Articles 62 through 64 and 67 through 70 shall apply mutatis mutandis to registration of a social cooperative. In such cases, the term "cooperative" shall be construed as "social cooperative".
SECTION 8 Supervision
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 Article 111 (Supervision)   print
(1) The Minister of Strategy and Finance shall respect the autonomy of social cooperatives and supervise their business affairs and may issue an order necessary for supervision, as provided for in this Act.
(2) In any of the following cases, the Minister of Strategy and Finance may require a social cooperative (including a cooperative in the process of establishment; hereafter the same shall apply in this Article) to report matters regarding its business and property or may assign public officials under his/her control to inspect the current status of the business affairs of a social cooperative, its accounting books, documents, and other necessary matters:
1. Where it is necessary to ascertain whether or not it complies with the authorization and the procedure for establishment under Article 85;
2. Where it is necessary to ascertain whether or not it violates this Act, any order under this Act, or its articles of association;
3. Where it is necessary to ascertain whether or not its business violates a relevant Act or subordinate statute.
(3) A public official who conducts an inspection under paragraph (2) shall carry with him/her an identification card indicating his/her authority and shall produce it to persons involved.
(4) Where the Minister of Strategy and Finance discovers as a result of supervision under paragraph (1) that a social cooperative has violated this Act, any order under this Act, or its articles of association, he/she may order it to take measures necessary to correct such violation.
(5) If necessary to efficiently enforce this Act and to establish policies on social cooperatives, the Minister of Strategy and Finance may demand the head of a related central administrative agency to investigate, inspect, or examine a social cooperative, to require a social cooperative to submit data, or to take necessary corrective measures.
(6) The authority of the Minister of Strategy and Finance under paragraphs (1) and (5) may be delegated to the head of a related central administrative agency or the competent Mayor/Do Governor, taking into consideration details and the nature of specific business activities conducted by social cooperatives and other relevant matters, as prescribed by Presidential Decree.
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 Article 112 (Revocation of Authorization for Establishment)   print
(1) If a social cooperative falls under any of the following subparagraphs, the Minister of Strategy and Finance may revoke authorization for its establishment:
1. Where a social cooperative fails to commence its business within one year from the date on which its establishment is authorized or fails to continue its business for not less than one year without a justifiable reason;
2. Where a social cooperative fails to take a corrective measure in compliance with a disposition made pursuant to Article 111 (5) on two or more occasions;
3. Where a social cooperative fails to meet any criteria prescribed by Presidential Decree for authorization for establishment pursuant to Article 85 (4);
4. Where it is discovered that a social cooperative has obtained authorization for establishment by fraud or other wrongful means.
(2) When the Minister of Strategy and Finance revokes authorization for establishment of a social cooperative pursuant to paragraph (1), he/she shall give public notice thereof immediately.
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 Article 113 (Hearings)   print
When the Minister of Strategy and Finance intends to revoke authorization for establishment pursuant to Article 112, he/she shall hold a hearing.
CHAPTER Ⅴ FEDERATION OF SOCIAL COOPERATIVES
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 Article 114 (Authorization for Establishment, etc.)   print
(1) When it is intended to establish a federation of social cooperatives, three or more cooperatives qualified for membership shall prepare articles of association as promoters, table the articles of association at the inaugural general meeting for resolution, and then obtain authorization therefor from the Minister of Strategy and Finance.
(2) A resolution at the inaugural general meeting shall be passed with the attendance of a majority of the social cooperatives that have submitted a letter of consent to establishment, to promoters until before the opening of the inaugural general meeting and by an affirmative vote of not less than two-thirds of persons present at the meeting.
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 Article 115 (Provisions Applicable Mutatis Mutandis)   print
(1) The provisions of Articles 17, 19, 21, 22, 25, 28 (3) through (5), 29 through 44, 47, 48, 52 through 55, 62 through 64, and 67 through 70 in Chapter Ⅱ shall apply mutatis mutandis to a federation of social cooperatives. In such cases, the term "cooperative" shall be construed as "federation of social cooperatives", the term "president" as "chairperson", the term "member" as "member cooperative", the term "registration for establishment under Article 61" in Article 19 (1) as "registration for establishment under Article 106", the term "per member" in Article 22 (2) as "per member cooperative", the term "30 percent" in the aforesaid provision as "40 percent", the term "member" in Articles 29, 30, and 40 (1) as "representative" respectively, the term "one-fifth" in Article 40 (1) as "one-third", the term "member" in Article 37 as "member cooperative to whom a representative or a member belongs", and the term "person who has filed an application for membership" as "member who belongs to a cooperative that has filed an application for membership", respectively.
(2) The provisions of Articles 73 through 75, 77, 78, 80, and 81 in Chapter Ⅲ shall apply mutatis mutandis to a federation of social cooperatives. In such cases, the term "federation" shall be construed as "federation of social cooperatives."
(3) The provisions of Articles 86, 87, 89, 90, 96 through 99, 101 through 109, and 111 through 113 in Chapter IV shall apply mutatis mutandisto a federation of social cooperatives. In such cases, the term "social cooperative" shall be construed as "federation of social cooperatives", the term "member" as "member cooperative", and the term "members and proxies" in Article 86 (1) 3 as "member cooperatives", the term "Articles 85, 86, and 88" in Article 101 (4) as "Articles 114 and 115", and the term "member" in Article 103 (4) as "representative", respectively.
CHAPTER Ⅳ SUPPLEMENTARY PROVISIONS
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 Article 116 (Delegation of Authority)   print
The authority of the Minister of Strategy and Finance under this Act as provided for in Articles 11, 71, 96, 102, 103, 108, 112, 114, and 119 may be partially delegated to the head of a related central administrative agency or the competent Mayor/Do Governor, as prescribed by Presidential Decree.
CHAPTER Ⅶ PENAL PROVISIONS
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 Article 117 (Penal Provisions)   print
(1) If an executive, employee or liquidator of a cooperative, federation of cooperatives, social cooperative or federation of social cooperatives inflicts an injury or a loss upon the cooperative, federation of cooperatives, social cooperative, or federation of social cooperatives by any of the following acts, he/she shall be punished by imprisonment with prison labor for not less than ten years or by a fine not exceeding 30 million won. In such cases, imprisonment with prison labor and a fine may be imposed concurrently:
1. If he/she uses funds for any purpose other than the purposes of the cooperative, federation of cooperatives, social cooperative, or federation of social cooperatives;
2. If he/she disposes of or uses assets of the cooperative, federation of cooperatives, social cooperative or federation of social cooperatives for speculative investment.
(2) If an executive, employee or liquidator of acooperative, federation of cooperatives, social cooperative or federation of social cooperatives commits any of the following acts, he/she shall be punished by imprisonment with prison labor for not less than three years or by a fine not exceeding 20 million won:
1. If he/she violates any of the provisions of Articles 45 (3), 50 (1) and (3), 51 through 53, 55, 58, 80 (3), 97 (1) and (3), 98, 103 and 104 (including cases to which Article 82, 83, 100, or 115 shall apply mutatis mutandis);
2. If it is discovered that he/she has filed for registration by fraud or other wrongful means;
3. If he/she executed an affair subject to resolution by the general assembly without such resolution.
(3) Any person who falls under any of the following subparagraphs shall be punished by imprisonment with prison labor for not less than two years or by a fine not exceeding ten million won:
1. A person who participates in an election of public officials, in violation of Article 9 (2);
2. A person who violates Article 37 (including cases to which Article 79, 92, or 115 shall apply mutatis mutandis).
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 Article 118 (Joint Penal Provisions)   print
If an executive, employee or liquidator of a cooperative, federation of cooperatives, social cooperative or federation of social cooperatives commits a violation under Article 117 (1) or (2) in the scope of the business of the cooperative, federation of cooperatives, social cooperative, or federation of social cooperatives, not only shall such offender be punished accordingly, but the cooperative, federation of cooperatives, social cooperative, or federation of social cooperatives shall also be punished by the fine provided for in the relevant provisions: Provided, That the foregoing shall not apply to cases where the cooperative, federation of cooperatives, social cooperative, or federation of social cooperatives has not neglected reasonable care and supervision over the business to prevent such violation.
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 Article 119 (Fines for Negligence)   print
(1) Any person who violates Article 3 (3) shall be punished by a fine for negligence not exceeding two million won.
(2) If a cooperative, federation of cooperatives, social cooperative, or federation of social cooperatives falls under any of the following subparagraphs, it shall be punished by a fine for negligence not exceeding two million won:
1. If the number of contribution units per member or member cooperative exceeds the limit on number of contribution units, in violation of Article 22 (2) (including cases to which Article 76, 91, or 115 (1) shall apply mutatis mutandis);
2. If unequal voting rights on a resolution or election are granted to members, in violation of Article 23 (1) (including cases to which Article 91 shall apply mutatis mutandis);
3. If it allows a non-member or non-member cooperative to use its business services, in violation of Article 46, 81, or 95 (including cases to which Article 115 (2) shall apply mutatis mutandis);
4. If it lends small loans or provides mutual aid programs in excess of the gross ceiling of small loans or mutual aid, the restriction on the interest, the loan ceiling, the scope of mutual aid, or the restrictions on the amount of mutual aid, the mutual aid contract or the membership fee for mutual aid, in violation of Article 94.
(3) If an executive, employee or liquidator of a cooperative, federation of cooperatives, social cooperative or federation of social cooperatives falls under any of the following subparagraphs, he/she shall be punished by a fine for negligence not exceeding one million won:
1. If he/she neglects reporting or registration;
2. If he/she negligently fails to keep documents under Article 49 (2) (including cases to which Article 82 shall apply mutatis mutandis) or 96 (2) (including cases to which Article 115 (3) shall apply mutatis mutandis);
3. If he/she negligently fails to disclose details of its operation in accordance with Article 49 (3) or (4) (including cases to which Article 82 shall apply mutatis mutandis) or 96 (3) or (4) (including cases to which Article 115 (3) shall apply mutatis mutandis);
4. If he/she makes a false statement or submits a false report to a supervisory agency or the general assembly or conceals a fact;
5. If he/she refuses, interferes with, or evades an inspection of a supervisory agency.
(4) Fines for negligence under paragraphs (1) through (3) shall be imposed and collected by the Minister of Strategy and Finance or the competent Mayor/Do Governor, as prescribed by Presidential Decree.
ADDENDA
Article 1 (Enforcement Date)
This Act shall enter into force on December 1, 2012.
Article 2 (Transitional Measures concerning Cooperatives, etc.)
(1) If a business entity or legal entity already established for purposes similar to those of a cooperative before this Act enters into force intends to become a cooperative under this Act, it shall meet the minimum criteria for establishment under Article 15 within two years from the date this Act enters into force and shall obtain registration for establishment under Article 61 after adopting a resolution thereon at its general meeting with the attendance of a majority of its members and by an affirmative vote of not less than two-thirds of members present at the meeting and by undergoing the procedure under Articles 15 through 19. In such cases, the business entity or legal entity before registration for establishment and the cooperative after registration for establishment shall be deemed one and the same legal entity.
(2) If an incorporated association already established for purposes similar to those of a federation of cooperatives before this Act enters into force intends to become a federation of cooperatives under this Act, it shall meet the requirements provided for in Article 71 for the establishment of a federation of cooperatives within one year from this Act enters into force and shall obtain registration for establishment under Article 84 after adopting a resolution thereon at its general meeting with the attendance of a majority of its member cooperatives and by an affirmative vote of not less than two-thirds of member cooperatives present at the meeting and by undergoing the procedure under Articles 71 and 72. In such cases, the incorporated association before registration for establishment and the federation of cooperatives after registration for establishment shall be deemed one and the same legal entity.
(3) If a business entity or non-profit corporation already established for purposes similar to those of a social cooperative before this Act enters into force intends to become a social cooperative under this Act, it shall meet the minimum criteria provided for in Article 85 for establishment of a social cooperative within two years from the date this Act enters into force and shall obtain registration for establishment under Article 106 after adoptinga resolution thereon at its general meeting with the attendance of a majority of its members and by an affirmative vote of not less than two-thirds of members present at the meeting and by undergoing the procedure under Articles 85 and 88. In such cases, the business entity or corporation before registration for establishment and the social cooperative after registration for establishment shall be deemed one and the same non-profit legal entity.
(4) If an incorporated association already established for purposes similar to those of a federation of social cooperatives before this Act enters into force intends to become a federation of social cooperatives under this Act, it shall meet the requirements provided for in Article 114 for the establishment of a federation of cooperatives within one year from the date this Act enters into force and shall obtain registration for establishment under Article 115 (3) after adopting a resolution thereon at its general meeting with the attendance of a majority of its member cooperatives and by an affirmative vote of not less than two-thirds of member cooperatives present at the meeting and by undergoing the procedures under Articles 114 and 115 (1) and (2). In such cases, the incorporated association before registration for establishment and the federation of social cooperatives after registration for establishment shall be deemed one and the same non-profit legal entity.
Article 3 (Transitional Measure concerning Names)
As to an organization that was not established pursuant to this Act, but performs the same functions as those of a cooperative as at the time this Act enters into force, Article 3 shall not apply for two years from the date this Act enters into force.