A comparative institutional approach to co-operative self-finance: locked assets, divisible and indivisible reserves

This paper approaches from a law and economics perspective the problem of self-financed accumulation of capital in co-operative enterprises. Different existing and past institutional systems are discussed and lessons drawn on how to improve existing institutional structures. Divisibility and indivisibility of self-financed capital reserves, as they can pave the way to improved systematic solutions, in co-operatives are used as heuristic ports of entry in the discussion. In this, institutional evolution is interpreted as a trial and error and open-ended process. National and regional institutional systems (especially the Italian, the Spanish and the former Yugoslav ones) are considered and evaluated in terms of strengths and weaknesses to extrapolate new institutional solutions that would allow to overcome well-known weaknesses in co-operatives’ financial structure. A nested system of self-financed divisible and indivisible reserves of capital is proposed. Different typologies of reserves would serve different aims and functions in the working of the capital structure of the co-operative enterprise, especially balancing patrimonial stability, allocative efficiency, members’ financial involvement and performance. Correct legal regulation plays a fundamental role in steering the survival and reproduction potential of the co-operative system