Formation of cooperative capital – Challenges, legal framework and development potential

A cooperative, as a specific form of business entity primarily focused on the joint realization of the aspirations of its members, holds a significant position in modern business flows, affirming itself as a relevant factor in the sustainable development of a social community. On a global level, cooperatives are faced with many complex challenges, among which the problem of securing adequate financial prerequisites for their functioning is especially emphasized. In that regard, the formation of cooperative capital as a basic financial resource intended for business operations, represents one of the key challenges in terms of survival and further development of the cooperative sector. Although different factors influence the availability of cooperative capital, legislative support represents a key determinant since the compliance of the legal framework with modern business tendencies and current practices within the formation of the cooperative capital area, as well as the level of its flexibility and efficiency in application, significantly determines the development potential of a cooperative. At the same time, this fact opens up space for critical consideration of existing legal solutions within the field. In this paper, we first analyze the modern business environment and the importance of cooperative capital formation, considering current solutions and development perspectives in this area. Subsequently, using a comparative method to examine the legal frameworks of Serbia and Croatia, the domestic legislation is critically assessed in the segment related to the formation of cooperative capital. The aim of this paper is: 1) to examine whether the existing model of cooperative capital formation within positive legislation enables a cooperative’s competitive market positioning and contributes to its sustainable development, and 2) to offer solutions through de lege ferenda proposals for improving the legislative framework in the field of financing cooperative business operations, in accordance with contemporary economic trends.