Recent Developments in Cooperative Law – What Cooperatives Need to Consider Now

The case law of 2025 has set several fundamental directions for cooperative practice – ranging from stricter requirements for member expulsions, to tax risks of atypical membership forms, to the limits of state supervision over auditing associations. The following overview summarizes the key decisions and provides concrete recommendations for cooperatives, their governing bodies, and auditing associations.

1. Stricter Requirements for Member Expulsions

Key point

General-clause-type grounds for expulsion in the articles of association may be invalid.

The Bad Salzungen Local Court (AG Bad Salzungen) declared an expulsion resolution void because the (widely used) articles-of-association provision – conduct that “is incompatible with the interests of the cooperative” – was too indefinite. In addition, the court criticized that the expulsion resolution’s reasoning was not sufficiently substantiated.

Recommendation

• Review your articles of association for general-clause-type expulsion provisions – these are commonly found in model articles of cooperative associations.
• Formulate grounds for expulsion as concretely and specifically as possible.
• In expulsion resolutions, the allegations must be described specifically enough that the affected member can adequately defend themselves.

2. Consumer Right of Withdrawal upon Joining a Cooperative – Open Questions

Key point

The Federal Court of Justice (BGH) has referred questions to the European Court of Justice (ECJ) concerning the scope of the right of withdrawal for distance contracts.

The question concerns whether, upon withdrawal from membership in a cooperative that is already in liquidation, the member’s capital contribution must be repaid in full – or whether the principles of the defective company (“fehlerhafte Gesellschaft”) apply, which grant only a settlement claim as of the date of withdrawal.

Recommendation

• When advertising long-term investment models (e.g., retirement provision), ensure proper withdrawal notices in accordance with the Financial Services Distance Marketing Directive.
• Monitor the ECJ’s decision – a consumer-friendly interpretation could create significant financial risks for cooperatives in liquidation.

3. Election Rules: Electoral Districts with Their Own Signature Quorums Permissible

Key point

The Munich Higher Regional Court (OLG München) confirmed that, for representative elections, establishing electoral districts each with its own signature quorum is permissible.

The statutory maximum quorum of 150 signatures (Section 43a(4) sentence 6 of the German Cooperatives Act (GenG)) applies per electoral district, not cooperative-wide.

Recommendation

• Cooperatives with large memberships may introduce election rules with electoral districts and separate quorums.
• However, due to the cooperative-law duty of loyalty, members must be given the opportunity – for example, through notices posted at branch offices – to gather supporters for election proposals.
• Where there is a legitimate interest, there is a right to a copy of the portions of the membership list concerning the members entitled to vote in the relevant electoral district.

4. Tax Risks from Atypical Membership Forms

Key point

The introduction of “solidary members” without voting rights led to the loss of corporate income tax exemption.

The Berlin-Brandenburg Fiscal Court (FG Berlin-Brandenburg) ruled that the Cooperatives Act recognizes only two forms of membership: ordinary members with full rights, and investing members under Section 8(2) GenG. A membership form entitled to promotional benefits but without voting rights is impermissible.

Recommendation

• Refrain from creating membership categories outside the statutory framework.
• For housing cooperatives, rental income from investing members exceeding 10% of total income can jeopardize the tax exemption under Section 5(1) No. 10 of the Corporate Income Tax Act (KStG).
• The Federal Fiscal Court (BFH) has allowed an appeal on points of law – a definitive ruling by the highest court is still pending.

5. Hidden Profit Distribution for Private Expenses

Key point

Expenses for members’ private living expenses (travel, entertainment, leisure activities) constitute hidden profit distributions.

The promotion of members must functionally result from the cooperative’s joint business operations. For example, at an IT services cooperative, trips to Mallorca and visits to animal parks bear no relation to the company’s business purpose.

Recommendation

• Critically review whether expenses have a functional connection to the business operations and the promotional purpose.
• Social and cultural promotion is only permissible if it takes place through a joint business operation (e.g., school cooperatives, sports cooperatives).
• The cooperative legal form offers no protection from general tax law principles.

6. State Supervision of Auditing Associations: Limits on Intervention Powers

Key point

State supervision under Section 64 GenG is purely legal supervision (“Rechtsaufsicht”) and may not issue technical/substantive directives regarding audit practice.

The Mannheim Higher Administrative Court (VGH Mannheim) clarified that detailed orders regarding future audit activity exceed the limits of legal supervision. However, the determination of legal violations, as the mildest supervisory measure, is permissible.

Recommendation for Auditing Associations

• Compliance with internal audit guidelines is monitored.
• Reviewing the promotional purpose is the main objective of every mandatory cooperative audit – formal findings alone are not sufficient.
• In cases of serious breaches of duty, the right to convene an extraordinary general meeting can become an obligation.

Conclusion for Practice

The 2025 case law makes clear: the cooperative legal form requires careful attention to the specific requirements of cooperative law. The promotional purpose and members’ rights are not mere formalities, but form the standard of review for the drafting of the articles of association, management, and tax treatment.

Do you have questions about the design of your articles of association, membership forms, or regulatory requirements under cooperative law? Dr. Thomas Kreuz, LL.M., advises cooperatives, their governing bodies, and auditing associations on all matters of cooperative law – please feel free to contact us.