Determination of legal, economic and organizational bases for credit consumers’ cooperatives establishment and operation in Russia

Federal Law dated July 18, 2009 No. 190-FZ "On credit cooperation» which actually replaced the Federal Law dated August 7, 2001 No. 117-FZ “On credit consumers’ cooperatives" determines legal, economic and organizational bases for establishment and operation in the Russian Federation of credit consumers’ cooperatives of different types and levels, unions (associations) and other communities of credit consumer cooperatives.

This law shall be a legal basis for establishment and operation of credit cooperatives and (or) legal entities. Before a special law regulated only credit cooperation of individuals, but there was established no possibility of credit cooperation of legal entities, neither was there a possibility for organizations to participate in credit cooperation of individuals.

Besides, there was no special regulation of a legal status of credit cooperatives of the second level which at present are established by at least five credit cooperatives based on membership according to a territorial (regional, interregional, federal) or other principle.

In accordance with the new Law credit cooperation is a form of legal entities’ incorporation with particular legal capacity, type of credit cooperatives, the main goal of which is to provide mutual financial support of credit cooperation members (shareholders) by means of:

1. Joining shares and attracting monetary funds of credit cooperative (shareholders) members and other monetary funds according to the procedure as established by the Law, other federal laws and charter of a credit cooperative.

In particular, a credit cooperative attracts monetary funds of its members based on:

• loan agreements concluded with legal entities;
• contracts of transfer of personal savings concluded with individuals according to the procedure established by the Law.

2. Placing of shares and monetary funds attracted by granting loans to credit cooperation members (shareholders) for satisfaction of their financial needs.

Thus, by encouraging credit cooperative development in Russia which is to enhance business relations and to become an alternative to a system of bank crediting, the legislator has significantly reinforced supervisory functions of state bodies (statutory requirements have been established, additional regulations, control of separate credit cooperatives as well as self-regulating organizations of credit cooperatives have been added) and obligated credit cooperatives to join self-regulating organizations of credit cooperatives.

The Law entered into force on August 04, 2009. The provisions on statutory financial requirements of credit cooperatives enter into force upon expiry of one year as of the date when the Law is officially published and the provision on mandatory membership of credit cooperatives in relevant self-regulating companies - upon expiry of 2 years.