Cooperatives are not ordinary companies — they operate under their own legal regime, with obligations and protections that standard business corporations don’t have, and mistakes made at formation or in governance undermine the model from the outset.
What’s at stake before you start
Consider this scenario: a group of fifteen self-employed physicians, tired of negotiating individually with health insurance operators, decides to join forces. They understand the cooperative model to be the right structure — but set up the business as a sociedade limitada (“Ltda.”, the Brazilian equivalent of a limited liability company) because “it’s simpler.” Two years later, they realize they’ve lost the tax benefits of the ato cooperativo (the special legal treatment given to transactions between a cooperative and its members), that contracts with health insurance operators don’t recognize the corporate form as a cooperative, and that the tax authority treated the distribution of sobras (the cooperative’s operating surplus, distinct from corporate profit) as a distribution of profits.
The problem wasn’t the intention. It was choosing the wrong legal vehicle.
Cooperatives have their own legal regime — and legal guidance from the moment of formation is a critical step.
The special legal regime: a cooperative is not a business corporation
The fundamental distinction lies in Article 3 of Law 5,764/1971 (the Brazilian Cooperatives Law): cooperatives are sociedades de pessoas (person-based associations, as opposed to capital-based companies), with their own legal form and nature, not subject to bankruptcy proceedings, formed to provide services to their members — not to generate profit in and of themselves.
This creates three structural differences compared to business corporations (Ltda. or S.A., the Brazilian corporation):
| Dimension | Business Corporation | Cooperative |
|---|---|---|
| Purpose | Profit for shareholders | Services provided to members |
| Capital vs. person | Capital determines power | Each member = one vote |
| Distribution of results | Dividends proportional to capital | Surplus proportional to transaction volume with the cooperative |
| Access | Closed (shares or quotas) | Open to anyone meeting the bylaws’ requirements |
| Tax regime | Corporate income tax (IRPJ) on profit | Ato cooperativo not subject to IRPJ (Art. 111, Law 5,764/71) |
| Bankruptcy | Applicable | Not applicable (extrajudicial liquidation instead) |
The ato cooperativo — the transaction between the cooperative and its members — is not taxed the same way as an ordinary commercial transaction. This is one of the model’s greatest advantages, but also one of the most commonly misunderstood. Confusion between ato cooperativo and ato não cooperativo (transactions with non-members) is a recurring source of tax assessments.
Beyond Law 5,764/1971, each cooperative sector has its own specific regulation: credit cooperatives answer to the Central Bank of Brazil (Banco Central do Brasil, BCB); the base regulation is CMN Resolution 4,434/2015 (as amended by Resolution CMN 5,051/2022), alongside the new minimum capital rules under Joint Resolution No. 14/2025 and BCB Resolution No. 517/2025 (November 2025); healthcare cooperatives are supervised by the National Supplementary Health Agency (Agência Nacional de Saúde Suplementar, ANS); agricultural cooperatives interface with the Ministry of Agriculture and with rural credit systems.
The 7 cooperative principles and their legal implications
The cooperative principles, established by the International Co-operative Alliance (ICA) and incorporated into Brazilian law, are not just a philosophical statement — they have direct legal consequences for how bylaws are drafted and governance decisions are made.
- Voluntary and open membership. The bylaws cannot create arbitrary barriers to entry — only objective criteria compatible with the activity. Non-compete exclusion clauses need to be drafted precisely so as not to violate this principle.
- Democratic member control. One member, one vote — regardless of paid-in capital. This prevents larger members from concentrating decision-making power. Bylaws that create differentiated voting classes are void.
- Member economic participation. Share capital does not earn a return — what generates a return is the member’s volume of transactions with the cooperative. The bylaws must clearly define how net surplus is calculated and distributed.
- Autonomy and independence. Externally financed cooperatives (credit lines, public subsidies) need contractual clauses that preserve internal democratic control. Watch out for agreements that give third parties veto power over general assembly decisions.
- Education, training and information. Law 5,764/1971 requires the establishment of the Technical Assistance, Educational and Social Fund (Fundo de Assistência Técnica, Educacional e Social, FATES). Failing to set it up is a bylaws violation.
- Cooperation among cooperatives. Mergers, acquisitions and the formation of federations and confederations require general assembly approval and proper registration. Agreement among boards of directors alone is not sufficient.
- Concern for community. Social impact is not a marketing differentiator — it is part of the cooperative’s legal nature. In some sectors (housing, healthcare), this principle underpins tax and regulatory benefits.
Step-by-step formation
Setting up a cooperative involves more steps than opening an Ltda., but each one has a specific legal function. Skipping steps is the fastest path to nullities and future problems.
1. Founders’ meeting and drafting of the bylaws (estatuto social)
The bylaws are the central document. They must contain, at minimum (Art. 21, Law 5,764/71):
- Name, registered office, term of duration and area of operation
- The cooperative’s purpose and sector of activity
- Conditions for admission, withdrawal, elimination and expulsion of members
- Minimum capital, value and method of paying in share quotas
- Mandatory funds: Reserve Fund (minimum 10% of surplus) and FATES (minimum 5%)
- Composition, powers and operation of the management and oversight bodies
- Conditions for dissolution and liquidation
Bylaws copied from the internet or generic templates tend to omit sector-specific particulars — which generates general assembly disputes from the very first fiscal year.
2. Founding General Assembly
The founders’ assembly approves the bylaws, elects the first officers and supervisory board members, and drafts the constitution minutes (ata de constituição). The minimum legal quorum for formation is twenty founding members (Art. 6, Law 5,764/71) — except for credit cooperatives, which have differentiated requirements set by the BCB.
The minutes must be signed by all founders present or by their proxies. Formal errors in the minutes delay registration and can prevent the start of operations.
3. Registration with the Board of Trade or with the BCB
Cooperatives in general register with the Board of Trade (Junta Comercial) of their home state. Credit cooperatives, however, depend on prior authorization from the BCB to operate — registration with the Board of Trade only comes afterward. This is one of the points where groups of professionals interested in forming a credit cooperative most often get stuck: the BCB has minimum capital requirements, governance structure requirements and a business plan that must be met before any formal act of incorporation. Minimum capital requirements were updated by Joint Resolution No. 14/2025 and BCB Resolution No. 517/2025 (November 2025) — confirm the figures in force before starting the authorization process.
4. Obtaining a CNPJ (company tax ID) and state and municipal registrations
Once registration is complete, tax registrations follow — state registration (where applicable) and municipal registration for the ISS (municipal service tax). The classification of ato cooperativo vs. ato não cooperativo must be reflected from the very first tax filing.
5. Joining the system and registering with OCB
Although not required by law, registration with the OCB system (Organização das Cooperativas Brasileiras, the Brazilian Cooperative Organization) is necessary for access to specific credit lines, sector representation benefits and sector certifications.
6. Data protection (LGPD)
Cooperatives process personal data belonging to members, employees and, depending on the sector, third parties (patients, producers, credit takers). Compliance with the General Data Protection Law (Law 13,709/2018, LGPD — similar in spirit to the GDPR, but with its own regulatory framework and enforcement authority) includes data mapping, internal policies, contracts with data processors and, when the cooperative processes data at scale, appointing a Data Protection Officer answerable to the ANPD (Autoridade Nacional de Proteção de Dados, Brazil’s national data protection authority).
Cooperative governance: where most cooperatives go wrong
Well-formed cooperatives often weaken in subsequent years due to governance failures. The three mandatory bodies have distinct functions that, in practice, overlap when the bylaws lack clarity.
General Assembly
This is the cooperative’s sovereign body. The Ordinary General Assembly (Assembleia Geral Ordinária, AGO) meets at least once a year to: approve the financial statements, decide on the allocation of surplus or the apportionment of losses, and elect or ratify officers.
The Extraordinary General Assembly (Assembleia Geral Extraordinária, AGE) can be called at any time for bylaws amendments, mergers, acquisitions, spin-offs and voluntary dissolution.
Quorum and representation: Law 5,764/71 prohibits members from being represented by proxy at assemblies (Art. 38). Each member must attend in person — which creates logistical challenges for cooperatives with a large number of geographically dispersed members, in many cases solved by appointing delegates per local unit.
Board of Directors
Responsible for the cooperative’s executive management. Its members are elected at the assembly for a term set by the bylaws (generally 2 to 4 years, with the possibility of re-election). The Board’s chairperson represents the cooperative in judicial and extrajudicial matters.
Critical point: members of the Board of Directors are themselves cooperative members — not externally hired professionals. Professionalizing management, when necessary, is done through hired executive directors (with no membership relationship to the cooperative), whose duties are clearly separated from the Board’s decisions.
Supervisory Board (Conselho Fiscal)
Oversees operations and financial statements, with its own term and independence from the Board of Directors. An adverse opinion from the Supervisory Board does not prevent a resolution from being passed at the assembly, but it must be included in the documents presented to members.
Cooperatives that leave the Supervisory Board inactive — or fill it with members unable to exercise effective oversight — create a governance liability that surfaces in tax assessments, assembly disputes and, in extreme cases, in liability claims against officers.
Frequently asked questions
What’s the difference between a cooperative and an ordinary company for tax purposes?
The main difference lies in the treatment of the ato cooperativo. When the cooperative carries out transactions with its own members — selling agricultural production, providing medical services through a member physician, extending a credit operation to a member — this transaction is called an ato cooperativo and is not included in the tax base for corporate income tax (IRPJ) or social contribution on net profit (CSLL), under Article 111 of Law 5,764/1971. The ato não cooperativo (a transaction with non-members), on the other hand, is taxed normally. Separate bookkeeping between the two categories is mandatory, and failure to comply is one of the main causes of tax assessments against cooperatives. PIS and Cofins (federal social contribution taxes) have their own regimes for each cooperative sector — credit, agriculture and healthcare are treated differently. Tax analysis needs to be done sector by sector, not generically. This is general information and does not replace consulting a lawyer for analysis of your specific case.
Can a credit cooperative be formed by any group of people?
Not without restriction. The Central Bank of Brazil (BCB) requires that credit cooperatives meet a common bond (vínculo associativo) criterion among founders — members need to share a professional activity, professional category, employer, geographic area or another bond defined in the bylaws and accepted by the regulator. Beyond the common bond, the BCB requires minimum paid-in capital (which varies by type of credit cooperative), an approved business plan, a minimum governance structure (including a compliance and internal controls function), and a fit-and-proper review of officers. The authorization process with the BCB precedes registration with the Board of Trade and can take from six months to more than a year, depending on how complete the documentation submitted is. This is general information and does not replace consulting a lawyer for analysis of your specific case.
What happens to a cooperative’s surplus (sobras) — is it the same as distributed profit?
Surplus is not profit in the corporate legal sense. It represents the excess from transactions carried out with members after the mandatory funds have been set aside (the Reserve Fund and FATES). The allocation of surplus is decided at the Ordinary General Assembly and may include: reinvestment in the cooperative, distribution to members in proportion to their transaction volume with the cooperative during the fiscal year, or capitalization into share quotas. The proportion is calculated based on each member’s transactions with the cooperative — not on the capital they paid in. This is the inverse of a business corporation, where dividend distribution is proportional to shareholding. The correct accounting and tax treatment of surplus requires separate bookkeeping between ato cooperativo and ato não cooperativo, and audited financial statements for cooperatives above the minimum size set by a resolution of the Federal Accounting Council (Conselho Federal de Contabilidade, CFC). This is general information and does not replace consulting a lawyer for analysis of your specific case.
Next step
If you’re considering forming a cooperative — or reviewing the governance of an existing one — the starting point is understanding which sector, which regulator, and which particularities apply to your situation.
Talk to a lawyer about cooperative law.
This is general information and does not replace consulting a lawyer for analysis of your specific case.
Alessandra De Paula Souza — OAB/PR 31,133 Practice focused on cooperative law, formation and governance of cooperatives.