Problematic Cooperatives Get Revival Option

The government has introduced a policy that would allow problematic cooperatives to resume operations if they submit a credible management and action plan.

The federal government's Problematic Cooperative Management Committee has approved the ‘Procedure for the Restructuring and Management of Problematic Institutions and Organisations, 2083,’ paving the way for problematic cooperatives to restart operations under certain conditions.

Under the procedure, cooperatives may be allowed to restructure and resume operations if their directors and managers submit a reliable plan for repaying depositors and restoring the institution's financial viability.

Previously, the Problematic Cooperative Management Committee was solely responsible for settling the assets and liabilities of cooperatives declared problematic. The new procedure, however, gives such institutions an opportunity to rehabilitate themselves and return depositors' funds.

To obtain approval for restructuring, a problematic cooperative must submit a clear, practical and time-bound action plan detailing how and when it will repay depositors. It must also deposit into the committee's account an amount equivalent to the savings claimed by 60 percent of depositors.

Once restructuring is approved, an interim committee comprising five shareholder-members will be formed to operate the cooperative in accordance with the approved plan.

If the interim committee's performance is deemed satisfactory, the Problematic Cooperative Management Committee will convene a general assembly and facilitate the formation of a new board of directors. However, this can occur only after all depositors have been fully repaid.

The federal government has so far declared 23 cooperatives problematic and placed them under the management of the Problematic Cooperative Management Committee.