Every member of a cooperative must acquire shares in the cooperative in order to become co-owner and thus part of the community. Read here what members of a housing cooperative have to consider, how cooperative banks work and how cooperative shares can be used as investments.
- A cooperative is a democratic form of company in which all members have the same rights and obligations and pursue common economic interests.
- Housing cooperatives and credit unions are the most common examples of cooperatives.
- Cooperative shares can also be used as an investment. As a rule, there is a minimum and a maximum amount for the deposit in order to ensure the security and stability of the community.
What is a cooperative?
Defined by digopaul, a cooperative is founded with the aim of pursuing common economic interests. It is a democratic form of company in which all members have the same rights and duties. There are cooperative associations in a wide variety of areas, for example in agriculture, housing construction and banking. What all cooperatives have in common is that the members are both shareholders and customers. This means that all members participate in the profits of the cooperative. Dividends are paid out equally to everyone.
A strong community
The basic idea of a cooperative is that the community creates more than the individual. All members of the cooperative are treated equally. Anyone who has acquired shares in the company enjoys a right of co-determination. The members of a cooperative elect the supervisory board, which in turn determines the management board and also controls its work. The board of directors runs the cooperative; however, important decisions are made in meetings. Each member has one vote – regardless of how many shares they own in the cooperative. This is to ensure equality and prevent financially strong members from buying decision-making power.
Advantages of a housing association
Renting an apartment in a cooperative has many advantages for tenants. Because the living space is usually cheap compared to the rest of the housing market and there is no risk that the landlord will terminate at some point due to personal needs.
Acquire shares in a housing association
With the compulsory acquisition of shares in the cooperative, every tenant becomes the owner himself. In the case of housing cooperatives, the amount or quantity of the shares is generally based on the size of the apartment. With the shares, the member acquires the right to lifelong living in the cooperative. This does not necessarily mean the same apartment. If the living conditions change and more rooms or a barrier-free apartment is necessary, it is easy to move within the cooperative. The prerequisite for this, however, is free living space, which is why there can be waiting times.
Moving out of the cooperative apartment
When moving out of the cooperative apartment and leaving the cooperative, the former tenant receives the interest-bearing cooperative shares back. If there are claims due to damage to the apartment, these can be offset against the shares – as with a deposit. However, it may take a while for the shares to be repaid. The cooperative is obliged to make the repayment within two years. It is not uncommon for her to actually take so much time. For comparison: A deposit is usually repaid after three to six months, although there is no legally prescribed deadline for this.
Consumers also encounter cooperatives in the financial sector: members also acquire shares in cooperative banks. Volksbanks, Raiffeisenbanks and cooperative banks follow a basic cooperative principle, which is based on the idea of self-determination and self-administration. Every cooperative member has a say and participation rights, which can be asserted at general meetings. The cost of acquiring shares in the cooperative varies. The customer receives an annual dividend for the shares acquired.
As with living space, the sense of community also ensures security when it comes to money. Because identification with the cooperative is generally higher among members than among shareholders. Cooperative banks often offer their customers and thus their members favorable conditions. Cooperative banks are also often regionally linked. Service and proximity to the members usually play an important role, which is why they usually maintain a dense branch network.
Cooperative shares as an investment
Trading stocks is fast-paced and risky. Therefore, for many savers – especially for security-conscious investors – cooperative shares are quite attractive as a financial investment. Cooperatives have hardly suffered from the financial crises in the past. It should be noted, however, that the notice periods are sometimes long and the repayment of the shares can take some time. Renting an apartment is not compulsory for membership in a housing association.
Of course, no one can predict how high the dividend will be, even for cooperatives. The risk of losing money is lower than with many other forms of investment. However, should bankruptcy occur, the money is gone – there is no deposit insurance.
The auditing association ensures security
Every cooperative must be a member of an auditing association. This annually reviews the economic situation of the cooperative and controls the work of the management. Without the registration in the association and the founding examination, the cooperative will not even be included in the cooperative register. The regular controls are one reason why cooperatives are well protected from financial loss. The association is also available to help with all questions relating to business, legal and tax issues.