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Amending the Agricultural Co-ops La

Amending the Agricultural Co-ops Law
On 21 December, 2014, a law was issued by Presidential Decree introducing key amendments to the 1980 Agricultural Co-ops Law which had not seen any significant changes since its original proclamation.[1] Introducing several important amendments to a legal form of organization – the co-operation – that affects an estimated 4-5 million Egyptian farmers, the new law is expected to have a significant social effect. Moreover, the new amendments are also likely to have important consequences on the market and the economy in general, since they introduce key changes to an important sector: agriculture. The new law introduces several structural amendments to the old system, most notably allowing agricultural co-ops to establish stock companies between themselves and to become involved in investment projects. Furthermore, the amendments allow legal persons (including banks or companies) to contribute up to 25% of the capital to projects which Agricultural Co-ops will engage in.
Background
In general,  an agricultural co-operation is a legal form that allows farmers (usually with small amounts of land) to pool their resources together to achieve several advantages such as introducing new farming technology (mechanization), attaining credit and insurance, and unifying packaging and marketing efforts. As such, small farmers use the form of the co-operation to allow them to make use of economies of scale. While agricultural co-operations may vary, it is common for a co-operation to have a developmental role in addition to its economic role, which is reflected in Law No 122/1980 which states that the goal of a co-operation is to improve the economic and social living standards of its members as well as others. In Egypt, there are two main types of agricultural co-operations. The first are the basic agricultural co-operations, which are formed according to the needs of its own members on the level of the village, the governorate, or in some cases multiple governorates. Such units can have one or more of the purposes found on the list of legal purposes which are agricultural production, livestock production, and reclamation of land. The second type of co-operations is the Central Agricultural Co-operations Union, which stands at the pinnacle of the organizational chart of agricultural co-operations and is composed of representatives of all agricultural co-operations in Egypt.
A Bigger Role for the Private Sector
One of the most important changes introduced by the new law is the amendment of Article No 8 of Law No 122/1980, which had prevented legal persons (other than the public sector) to contribute to agricultural co-operations or any of their projects. The new amendments permit contribution by the private sector in any project undertaken by agricultural co-ops but cap such capital contribution at 25% of the project’s value. Permitting capital contributions, however, will not give the private sector any voting rights and will not allow them to join the agricultural co-operation as members. Moreover, the amendments add a key provision to the same Article No 8, allowing agricultural co-operations – after obtaining the permission of their general assembly and after consultation – to form a for-profit stock cooperation with other agricultural co-ops and to undertake investment projects. This may only be done, however, if the purpose of these projects is to develop agricultural or livestock production or for land reclamation. While the above changes indicate that the private sector will play a larger role in the future of agricultural co-ops, the amendments also introduce some measures which aim to provide a social safety net. The new law requires agricultural co-ops to set aside 5% of their annual surplus to be placed in a bank account dedicated for the welfare of agricultural workers and workers in the agricultural co-ops.
A Limited Reduction of the Role of the State
The new amendments also indicate that the State may be scaling back its traditionally heavily-involved role in administering agricultural co-ops. The amendments repeal the authority of the Ministry of Agriculture to call a general assembly meeting of its own volition, handing such authority to the Central Agricultural Co-ops Union. Furthermore, the new law requires the Minister of Agricultural and the relevant Governor to consult the Central Union before temporarily suspending or disqualifying a board member of an agricultural co-op. The amendments also bestow greater powers to the Central Union, as can be seen from the fact that it is now tasked with agreeing with the State on the provision of livestock production supplies. In a more telling and significant step, the new amendments explicitly state that agricultural co-operations and their boards cannot be permanently suspended without a court order. This puts the law within the scope of constitutional protections with regards to freedom of associations.
Conclusion
As soon as they were released, the latest amendments were subject to wide criticism by various players. The criticism was centred on one provision published in the first version of the amendments that came out on the 21st of December, 2014. According to this version, small farmers (who own or rent 10 feddans or less) must be represented in agricultural co-ops’ boards of directors by no less than 8%. This stands in clear contrast with not only the older version but more importantly Article 42 of the Egyptian Constitution, which puts such representation at a minimum of 80%. The amendment turned out to have been caused by a print error and a new version corrected this mistake, placing the minimum representation back at 80%, in a version published on 15 January 2014. In general, the amendments suggest that the government will have a relatively smaller role in administering agricultural co-ops. And while such change is still very limited, it gives a positive indication about the willingness to give agricultural co-ops a wider margin of freedom. On the other hand, it seems that any space relinquished by the government will be assigned directly to the Central Union – ultimately a central organisation. This suggests that there is no real movement to a more decentralized system of agricultural co-ops. However, the most important change introduced by the new law is clearly the expansion of the role of the private sector, whether through permitting them to participate in projects, or through allowing co-ops to form private sector for-profit companies. These changes may be seen as positive, especially given the fact that the private sector is still not allowed to have any voting rights – which suggests that the farmers will be able to tap the resource of the private sector as an equity partner rather than a lender, without relinquishing control over their co-ops. On the other hand, some voices suggest that such changes undermine the central reason for the existence of co-ops as a legal form, namely giving complete control to farmers and focusing on agricultural production with an eye on improving farmers’ living standards, rather than profits.   [1] Presidential Decree-Law No. 204/2014 amending certain provisions of the Agricultural Co-ops Law, Official Gazette, Issue No. 51 (bis) (a), 21 December 2014.
On 21 December, 2014, a law was issued by Presidential Decree introducing key amendments to the 1980 Agricultural Co-ops Law which had not seen any significant changes since its original proclamation.[1] Introducing several important amendments to a legal form of organization – the co-operation – that affects an estimated 4-5 million Egyptian farmers, the new law is expected to have a significant social effect. Moreover, the new amendments are also likely to have important consequences on the market and the economy in general, since they introduce key changes to an important sector: agriculture. The new law introduces several structural amendments to the old system, most notably allowing agricultural co-ops to establish stock companies between themselves and to become involved in investment projects. Furthermore, the amendments allow legal persons (including banks or companies) to contribute up to 25% of the capital to projects which Agricultural Co-ops will engage in.
Background
In general,  an agricultural co-operation is a legal form that allows farmers (usually with small amounts of land) to pool their resources together to achieve several advantages such as introducing new farming technology (mechanization), attaining credit and insurance, and unifying packaging and marketing efforts. As such, small farmers use the form of the co-operation to allow them to make use of economies of scale. While agricultural co-operations may vary, it is common for a co-operation to have a developmental role in addition to its economic role, which is reflected in Law No 122/1980 which states that the goal of a co-operation is to improve the economic and social living standards of its members as well as others. In Egypt, there are two main types of agricultural co-operations. The first are the basic agricultural co-operations, which are formed according to the needs of its own members on the level of the village, the governorate, or in some cases multiple governorates. Such units can have one or more of the purposes found on the list of legal purposes which are agricultural production, livestock production, and reclamation of land. The second type of co-operations is the Central Agricultural Co-operations Union, which stands at the pinnacle of the organizational chart of agricultural co-operations and is composed of representatives of all agricultural co-operations in Egypt.
A Bigger Role for the Private Sector
One of the most important changes introduced by the new law is the amendment of Article No 8 of Law No 122/1980, which had prevented legal persons (other than the public sector) to contribute to agricultural co-operations or any of their projects. The new amendments permit contribution by the private sector in any project undertaken by agricultural co-ops but cap such capital contribution at 25% of the project’s value. Permitting capital contributions, however, will not give the private sector any voting rights and will not allow them to join the agricultural co-operation as members. Moreover, the amendments add a key provision to the same Article No 8, allowing agricultural co-operations – after obtaining the permission of their general assembly and after consultation – to form a for-profit stock cooperation with other agricultural co-ops and to undertake investment projects. This may only be done, however, if the purpose of these projects is to develop agricultural or livestock production or for land reclamation. While the above changes indicate that the private sector will play a larger role in the future of agricultural co-ops, the amendments also introduce some measures which aim to provide a social safety net. The new law requires agricultural co-ops to set aside 5% of their annual surplus to be placed in a bank account dedicated for the welfare of agricultural workers and workers in the agricultural co-ops.
A Limited Reduction of the Role of the State
The new amendments also indicate that the State may be scaling back its traditionally heavily-involved role in administering agricultural co-ops. The amendments repeal the authority of the Ministry of Agriculture to call a general assembly meeting of its own volition, handing such authority to the Central Agricultural Co-ops Union. Furthermore, the new law requires the Minister of Agricultural and the relevant Governor to consult the Central Union before temporarily suspending or disqualifying a board member of an agricultural co-op. The amendments also bestow greater powers to the Central Union, as can be seen from the fact that it is now tasked with agreeing with the State on the provision of livestock production supplies. In a more telling and significant step, the new amendments explicitly state that agricultural co-operations and their boards cannot be permanently suspended without a court order. This puts the law within the scope of constitutional protections with regards to freedom of associations.
Conclusion
As soon as they were released, the latest amendments were subject to wide criticism by various players. The criticism was centred on one provision published in the first version of the amendments that came out on the 21st of December, 2014. According to this version, small farmers (who own or rent 10 feddans or less) must be represented in agricultural co-ops’ boards of directors by no less than 8%. This stands in clear contrast with not only the older version but more importantly Article 42 of the Egyptian Constitution, which puts such representation at a minimum of 80%. The amendment turned out to have been caused by a print error and a new version corrected this mistake, placing the minimum representation back at 80%, in a version published on 15 January 2014. In general, the amendments suggest that the government will have a relatively smaller role in administering agricultural co-ops. And while such change is still very limited, it gives a positive indication about the willingness to give agricultural co-ops a wider margin of freedom. On the other hand, it seems that any space relinquished by the government will be assigned directly to the Central Union – ultimately a central organisation. This suggests that there is no real movement to a more decentralized system of agricultural co-ops. However, the most important change introduced by the new law is clearly the expansion of the role of the private sector, whether through permitting them to participate in projects, or through allowing co-ops to form private sector for-profit companies. These changes may be seen as positive, especially given the fact that the private sector is still not allowed to have any voting rights – which suggests that the farmers will be able to tap the resource of the private sector as an equity partner rather than a lender, without relinquishing control over their co-ops. On the other hand, some voices suggest that such changes undermine the central reason for the existence of co-ops as a legal form, namely giving complete control to farmers and focusing on agricultural production with an eye on improving farmers’ living standards, rather than profits.   [1] Presidential Decree-Law No. 204/2014 amending certain provisions of the Agricultural Co-ops Law, Official Gazette, Issue No. 51 (bis) (a), 21 December 2014.