Requirements Eased for Establishing SME Cooperative Associations: 30 Members for Nationwide, 20 for Local Associations

Amendment to the SME Cooperative Association Act Passes National Assembly Plenary Session
Federation Establishment Requirements for Wholesale and Retail Sectors Eased from 10 to 5 Associations

The minimum requirements for establishing a Small and Medium Enterprise (SME) Cooperative Association will be eased: the nationwide association requirement will be reduced from 50 to 30 members, and for local associations, from 30 to 20 members.

The Korea Federation of SMEs announced on April 27 that an amendment to the "Small and Medium Enterprise Cooperative Association Act," which relaxes the number of promoters required to establish an SME cooperative association, passed the National Assembly plenary session on April 23.

With this amendment, the minimum number of promoters needed to establish an SME cooperative association has been reduced. In addition, the requirements to establish a federation of cooperatives in the wholesale and retail sectors have been eased from 10 associations to 5. This amendment was identified as a key task in the "4th Three-Year Plan for the Revitalization of SME Cooperative Associations" announced by the Ministry of SMEs and Startups in October last year.

SME cooperative associations have served as a representative platform for intercompany collaboration, sharing a history of more than 60 years with small and medium-sized enterprises. They have contributed to enhancing the competitiveness of individual SMEs by promoting joint business initiatives in areas that are difficult for individual companies to pursue alone, such as joint purchasing and sales, establishing shared production facilities and logistics systems, and collaborative R&D. Currently, around 900 associations have been established and are promoting a variety of collaborative projects tailored to each industry's characteristics.

However, in new industries and among regional SMEs, where the number of companies in each sector is not large, there have been numerous cases where organizations have given up or delayed forming cooperatives due to requirements such as the minimum number of promoters and minimum capital contributions. Under the Framework Act on Cooperatives, general cooperatives can be established with only five promoters, leading to ongoing criticism that the entry barriers for establishing SME cooperative associations are too high in terms of fairness between systems.

The Korea Federation of SMEs expects that this amendment will facilitate the establishment of new cooperatives, especially among SMEs in emerging industries and regional key sectors. As conditions for pursuing joint business through cooperatives improve, positive effects are anticipated for regional SMEs, including cost reduction, enhanced bargaining power, and improved market responsiveness.

Seo Jaeyoon, Head of the Cooperative Association Division at the Korea Federation of SMEs, stated, "The passage of this amendment to the Small and Medium Enterprise Cooperative Association Act is a very meaningful achievement, as it resolves the long-standing difficulties faced by SMEs on the ground, who were unable to establish cooperatives due to stringent requirements. With this amendment, we expect the establishment of new cooperatives to be promoted in future-oriented and regional key industries, and the increased activation of joint business to further strengthen the competitiveness and sustainability of regional SMEs."

This content was produced with the assistance of AI translation services.