Legal reforms \u2013 updated by the people they impact \u2013 could soon unlock cooperative potential across multiple sectors. Laura Bonnici speaks to Malta Cooperative Federation\u2019s president, John Mallia, to find out how new cooperative law makes this \u2018third option\u2019 both relevant to today and ready for tomorrow.<\/p>\n
Cooperatives are already a lifeblood in Malta, keeping many of the nation\u2019s essential services operational. Today, the sector stands on the brink of significant legal reform \u2013 representing values-driven, democratic businesses that should become an economic pillar in its own right.<\/p>\n
The cooperative model developed in the 1800s, when workers sought a \u2018third option\u2019 beyond traditional, \u2018hired hands\u2019 employment and passive service users, to one where the wealth they generated went to their families and towards their own community.\u00a0<\/p>\n
Following Malta\u2019s first coop laws in 1947 and 1978, new legal reforms came about in 2001 \u2013 but this time with the sector\u2019s various stakeholders co-writing the legislation. Nearly 25 years later, much of this legislation is still applicable. Yet Malta, in the interim, has changed.<\/p>\n
\u201cMalta\u2019s business landscape looks completely different today,\u201d points out John Mallia, President of the Malta Co-operative Federation, who is spearheading efforts, together with other stakeholders, to modernise cooperative law.<\/p>\n
\u201cMalta has since joined the EU, creating different realities for coops. Much like in 2001, we are setting a standard in the way legislation should be written, with the people updating it again from a social, economic and legal perspective. This gives everyone ownership of the process \u2013 in keeping with the core principles of cooperatives themselves.\u201d<\/p>\n
Cooperative membership revolves around seven core principles: voluntary membership that is open to all; democratic member control in which members enjoy \u2018one person, one vote\u2019; member economic participation, whereby members contribute to, and democratically control, the coop\u2019s capital, and benefit directly from its surpluses; coop autonomy and independence; education, training and information availability for members; cooperation among cooperatives; and concern for community, in which coops work for the sustainable development of communities.<\/p>\n
There\u2019s never been a better time to recognise and incentivise the cooperative model \u2013 legislation is just a facilitator; it\u2019s about people knowing the huge potential in working together- John Mallia<\/p>\n
Meanwhile, Malta\u2019s constitution recognises the social benefit of cooperatives. Cooperative tax regime recognises this social benefit through a five per cent contribution to the Central Cooperative Fund upon surplus declaration, with a final withholding tax of 15 per cent upon distribution. Undistributed surpluses remain tax free, to incentivise further investment in the cooperative.<\/p>\n
Of the many proposed reforms, Mallia advocates reducing the minimum membership for a cooperative from five to three people, allowing associations to become cooperative members and enabling companies to form cooperatives while maintaining democratic principles. \u201cFor example, you could have different media houses coming together as a cooperative, sharing information and jointly selling their services, while still respecting the \u2018one entity, one vote\u2019 principle,\u201d he illustrates.<\/p>\n
Updated cooperative law could also help safeguard Malta against future economic threats, with the sector already having proven its resilience through COVID-19 and financial crises, Mallia notes: \u201cThe beauty of cooperatives is that you\u2019re sharing risk. Instead of individual mechanics each buying separate machinery and facing individual bankruptcy risk, three could collaborate and have an equal say, with shared equipment and expertise.\u201d<\/p>\n
The legislation aims to reduce barriers for entrepreneurs and facilitate emerging business models \u2013 particularly platform cooperatives, where members make use of online platforms and apps ensuring fair working conditions and a share in the surpluses they generate.\u00a0<\/p>\n
Mallia envisions community-owned renewable energy projects becoming easier to establish, with simplified membership processes replacing current bureaucratic barriers. \u201cRight now, if you want membership changes, the Co-operatives Board\u00a0 needs to know exactly who each person is and conduct background checks. Imagine having to do that for 15,000 people \u2013 we need to make it easy for people to buy into cooperatives.\u201d<\/p>\n
The reforms also target worker buyouts, where employees could purchase their workplace to avoid closure, he explains: \u201cCompanies have approached us to transition to cooperatives because their investors are uninterested in continuing the business, while the workers themselves want to keep on working the business and sharing in its success.\u201d<\/p>\n
Social cooperatives represent another innovation, where surplus profits benefit communities rather than individual members. \u201cIn one case, educators work to provide employment for people with intellectual disabilities, reinvesting any surplus into expanding that programme instead of distributing profits.\u201d<\/p>\n
Other legal barriers continue hindering growth. For example, Banking law precludes the formation of cooperative banks. \u201cSometimes we fall through the cracks because policymakers don\u2019t know whether cooperatives are voluntary organisations, charities or companies,\u201d he observes. \u201cWe\u2019re none of these. We\u2019re democratic businesses, organised according to cooperative principles and values.\u201d<\/p>\n
However, Mallia notes a cultural shift, with growing awareness among young people seeking alternatives to traditional employment structures. \u201cOur educational system prepares you for employment, not entrepreneurship. But no matter which path you choose, there\u2019s always risk \u2013 the beauty of cooperatives is sharing that risk together \u2013 it\u2019s an intelligent option.\u201d<\/p>\n
International developments support Malta\u2019s timing, as it shapes its Vision 2050. Last year, the UK Labour Party pledged to double the country\u2019s mutual and cooperative sector, while Germany digitises cooperative registration and Dubai creates cooperative incentives, reflecting global recognition of the model\u2019s value.<\/p>\n
\u201cThere\u2019s never been a better time to recognise and incentivise the cooperative model,\u201d Mallia concludes. \u201cLegislation is just a facilitator. It\u2019s about people knowing there\u2019s huge potential in working together rather than remaining individual hired hands or passive consumers. People and communities can become protagonists in the social and economic wealth they generate.\u201d<\/p>\n