Speaker Notes: Eleonore Perrin (University of Liverpool)

Cooperatives and Worker Buyouts in France – The Benevolent Gaze of the Law?

Eleonore Perrin

Over the last decade, worker buyout successes such as Fralib have received great media attention in France. The possibility for workers to take over their enterprise in the face of bankruptcy or relocation and recapitalisation strategies by multinational corporations has opened up alternatives to mass job losses. In 2010, Fralib, a tea company in the South of France, faced closure after the food giant Unilever decided to relocate its production to Poland. The result, 336 days of social conflict, factory occupation, negotiation with public authorities and finally the creation of a worker cooperative by 58 of the employees. The new cooperative Scop-TI now operates with a €1.6 million turnover (2016). The members are unapologetic about their intention to employ all those who fought for their jobs despite the financial impact on the cooperative. A previous union leader in Fralib declared “with the struggle, we would have liked to take capitalism down, but we did not succeed! Now we have to work with it, but we keep our values”[1].


In 2016, there were 2298 worker cooperatives and 627 social cooperative in France, representing 53,850 jobs and a turnover of €4.6 billion. Over the last four years, worker cooperatives have increased by 22%, 15% in employment[3]. In 2014 only, 277 worker cooperatives were created, 20% of those being as a result of a takeover[4]. Overall, this accounted for 2800 new and saved jobs (an increase of 40% compared to the previous year[5]. Cooperatives have several advantages that enable them to overcome difficulties faced by conventional enterprises. They remunerate labour fairly and emphasise training, research and innovation instead of distributing profits disproportionately to shareholders. Being committed to safeguarding jobs and to the success of the cooperative, workers are more likely to find alternatives to redundancies, adjusting wages or working hours when confronted by economic crises. As a result, the five-year survival rate of worker cooperatives is of 65% compared to 50% for conventional enterprises[6]. Moreover, there are a number of contexts in which a business might face closure or redundancy. Failing profitability is not the only one as relocations and sales by multinational companies to maximise assets are becoming more frequent. Finally, many enterprises (especially family businesses) are faced with an absence of obvious successor. It is evaluated that in France 50,000 enterprises will be sold or transferred within the next decade[7].

Beyond their governance specificities, worker cooperative benefit from undeniable assets provided by the law in terms of structure, taxation, networks, funding and support which facilitate worker takeovers[8].

Worker cooperative – legal framework

Worker cooperatives are businesses that are owned and managed by workers. Worker-owners must own 51% of the capital of the cooperative and 65% of the voting rights.  Worker cooperatives obey to the principle of one member one vote and no single member can own more than half of the capital.

The 1947 Law on cooperatives prevents over-remuneration and encourages profit reinvestment in the business by guaranteeing the cooperative’s capital structure. Profit distribution obeys strict rules:

  • At least 25% of profit must be distributed to employees (whether they are members or not). This is known as participation and is a form of profit-sharing compulsory for most companies employing over 50 employees[9]. This profit-sharing mechanism is exempt from corporation tax for the cooperative and income tax for the workers[10].
  • At least 15% of the profit must be distributed to an indivisible reserve i.e. an asset lock. No member is entitled to this reserve, they cannot sell it off or be granted part of it – in the case of closure, the reserve is redistributed to the cooperative movement. The asset lock guarantees the sustainability of the cooperative and ensures that cooperatives are not sold off.
  • Members are entitled to dividends – provided they represent less than the share of profit going to employees[11].

In practice, worker cooperatives on average distribute 45% of their profits to the indivisible reserve and 45% in participation. As a result, worker cooperatives enjoy an equity capital four to five times higher than that of a similar sized SME[12].

This unusual profit distribution is partly the result of tax exemption under French Law. This includes a full exemption of corporation tax (33.3%, 28% by 2020) when profit is distributed half in participation for the workers and half in reserves.

Tax emptions for worker cooperatives also include the Company Real Estate Contribution (Cotisation Fonciere des Entreprises) which is a real estate local business tax and the Corporate Value Added Tax (Cotisation sur la Valeur Ajoutée des Entreprises)[13].

Finally, there are tax rebates and exemptions for workers’ instalment subscriptions to the capital of the cooperative and other equity investment into the cooperative[14].

Aside from a beneficial tax regime, it is worth noting that worker cooperatives have priority over public procurement by local authority[15].

Furthermore, the legislation specifically addresses and facilitates worker buyouts. Employment contracts are maintained during the takeover. The workers buying out the company cannot be dismissed and in cases of liquidation are entitled to redundancy payments[16]. A 25% income tax rebate on the capital invested by workers in the takeover also applies[17] and for employees who take on a loan to buy out their company, interests are deductible from taxes[18]. Despite those existing legal provisions, the promotion and assistance of worker buyouts is the specific focus of the 2014 Law on the Social and Solidarity Economy.

The 2014 Law on the Social and Solidarity Economy

In 2014, the Law on the Social and Solidarity Economy (ESS) was enacted. It acknowledges the importance of social economy organisations – cooperatives, mutuals, associations and foundations – in producing wealth and contributing to social and environmental needs. The social economy represents 230,000 enterprises and 10% of GDP[19]. In 2014, this was 2.38 million of employees and 12% of employment in the private sector[20]. Within this, there are 23,000 cooperatives employing one million people and active in all sectors of the economy[21]. Coops represent 40% of the food and agricultural sector, 60% of retail banking and 30% of retail shops[22]. The ESS Law intends on creating a cooperative “shock” with the view to create a multiplier effect.

The law is not unique – it is consistent with existing legislations in Italy, Quebec and Spain. However, it is substantial in length (more than 80 pages) and scope, affecting all sectors of the social economy[23]. Beside the collaboration with the social and solidarity movement in its elaboration, 11 Ministries and 15 Heads of Administration were involved in drafting the law. The fact that one third of the legislation is dedicated to cooperatives alone reflects the strength and commitment of the cooperative movement to this collaboration. The law enumerates the characteristics of the social and solidarity economy as consisting in the not-for-profit purpose (not excluding profit as such but rejecting it as the sole purpose of the enterprise), democratic governance, transparency and participation, sustainable management and the requirement of an asset lock. The exclusion of social criteria per se in favour of the democratic governance characteristic is interesting here and differs from social entrepreneurship approaches. This was particularly critical for the cooperative movement, which had never accepted until then a review of the 1947 legislation, the legal text acquiring a somehow sacred status as the protector of cooperative and solidarity principles in an increasingly liberal economy. The ESS Law reaffirms cooperative principles, referring to the International Cooperative Alliance definition. It stipulates tailored audits for all cooperatives every five years that will focus on the compliance with cooperative principles and legal provisions (rather than conventional financial audits)[24].

Yet, it is in the dispositions towards the facilitation of worker buy-outs and provisions for worker cooperatives that the law is the most ambitious, for example in trying to remedy the lack of access to capital for workers[25]. First, the ESS creates transitional cooperatives, whereby external members (who are not co-operator) can own over 50% of the cooperative’s capital for a period of 7 years in the case of a company being transformed into a cooperative. Workers have seven years to obtain the majority of the capital. If necessary, they can access the indivisible reserves to that effect. In exchange, external members are bound to sell their shares for workers to reach the 50% ownership. This provision is in direct response to the difficulty to access capital during takeovers. It has been implemented once since the passing of the law. In 2015, the two directors of Delta Meca, a company producing machining and industrial tools, decided to transform their company in a worker cooperative by enabling their 32 employees to become members. Workers invested €5,000 to become members, most of them investing the money that had been saved over the years in the company’s employee saving scheme. They will have seven years to obtain the majority of the capital[26].


Second, the law obliges employers to inform their employees of the sale of their business at least two months before the sale (for enterprises of less than 250 employees). This right to information, inscribed in the ESS Law as a mean to facilitate worker buyouts, faced fierce opposition from members of the government (including Emmanuel Macron) and employers’ associations[28]. Initially, the law provided the cancellation of the sale by tribunal for non-compliance with the information requirement. The Constitutional Council (the legal institution with assess the compliance of legislations with the constitution) found the sanction anti-constitutional as infringing on the freedom of entrepreneurship and property right[29]. The fine for non-compliance with the information right of employees is now capped at 2% of the selling price. The law was further “toned down” as applying only to the sale of the entire business rather than transfers, mergers, raising of capital and intra-group transactions as initially envisaged[30]. The two-month notice is also optional when the company has a Work council and simply entails a training on worker buyouts every 3 years in enterprises over 250 employees[31].

The ESS law provides other beneficial dispositions for worker cooperatives with the possibility to create a cooperative consortium where one of the cooperatives or its workers own the majority of the capital or voting rights of another cooperative in the group. This disposition enables subsidiaries to function cooperatively within a group as employees in subsidiaries become members of the parent cooperative. Recently, the cooperative consortium Calice was created after buying the steelwork company Sefard and transforming it into a cooperative[32]. Business and Employment Cooperatives were also created enabling entrepreneurs to become members while developing an economic activity with two aims: benefiting from the support of the Employment Cooperative and benefiting from the status of employee-entrepreneur which guarantees employment rights. Although the status was integrated in French Labour Law, current labour law reforms under Macron’s presidency might affect the scope of this disposition. Nonetheless, in 2017 there were 5000 employee-entrepreneurs, 71% of whom were previously job-seekers[33].

Finance and support institutions

At the heart of the government’s endorsement and recognition of the social and solidarity economy through the 2014 Law was an attempt to help its actors access capital. The Caisse des Dépôts[34] collaborated with social finance institutions to manage a €100 million State Grant for the social and solidarity economy[35].

Organisations that comply with the definition of the social and solidarity economy have access to a solidarity employee saving funds. They can also access the Social Innovation Fund managed by the Public Investment Bank (BPIFrance) jointly financed by the state and local authorities for €40 million (in 2014) to facilitate investment in assets. The Public Investment Bank in partnership with conventional banks and solidarity finance institutions also provides loans equivalent to €20,000 to €50,000, or up to €100,000 if the regional public authority intervenes – representing in total €50 millions (i.e. 100 millions in co-funding) in 2015/16[36].

These funding mechanisms complement existing instruments managed by the cooperative movement itself. The General Confederation of Worker Cooperatives (CG SCOP), representative body of all worker and social cooperatives, provides networking, lobbying, funding solutions and support for projects. It successfully campaigned to raise awareness about worker cooperatives, resulting in now 82% of CEOs and 67% of French people knowing what a worker cooperative is and how it operates[37]. The Confederation partnered with APERE (Association for the Promotion of Enterprise and Takeover of Enterprise) to specifically support workers and employers in the transition process of takeover by providing tailored consultancy. CG SCOP also owes 30 million in equity capital and benefits from its own financial support mechanisms. One third of the contributions made by cooperatives to CGSCOP goes to financial guarantees. Another portion of the contributions from cooperatives to CGSCOP goes to the creation of a mutual guarantee fund. SOCODEN, the financial holding company of the worker cooperative movement, provides participative loans for members with a fixed interest and a variable interest depending on the cooperative’s success to help recapitalise  cooperatives. The Guarantee Society SOFISCOP vouches for converted cooperatives in their financial commitments with banks for up to 50% of the value of the loan. Finally, personal loans can also be allocated to worker-owners for the constitution of their capital and are issued by the cooperative bank Crédit Coopératif[38].

As those financial instruments are supported by the social economy, their attitude to cooperatives is more open than conventional banks. The impact on a worker buyout may be considerable, as in the case of CERALEP. In 2004 an American pension fund decided to close down the insulator producer CERALEP and transfer the production to another European Centre. The workers decided to buyout the company and invested €51,000 from their own pocket. Yet, that proved to represent only 5.7% of the total cost as the working capital needed totalled €900,000. The rest primarily came from the cooperative movement’s loans. Today, CERALEP is a leader in the market for ceramic insulators[39].


In France, it is the intersection of a benevolent legislative framework and infrastructural support that facilitates worker buy-outs. “The most essential reason for a successful takeover as a cooperative is probably what is called the network effect.  This network effect consists of the existence of an advisory environment and substantial financial arrangements”[41]. In 2003, the ILO pointed out that:

“the core tools cooperatives need in order to flourish are advice on capacity building, entrepreneurship development, leadership training, market research, accessing loan finance and grant aid, inter-cooperative networking and federation building. For such grass-roots support to work effectively, cooperatives need a secure legal framework governing their status”[42].

Although the 2014 ESS Law may fall short of offering the same provision and endure as long as its Italian counterpart (it remains to be seen whether it will survive Macron’s presidency), it offers an ambitious modernisation of French cooperative law and reflects the regained strength of the cooperative movement. With 700,000 jobs to be replaced in the sector by 2025, the social and solidarity economy in general and cooperatives more specifically have a long future ahead.

Considering converting your enterprise into a worker coop?

For advice and support in the United Kingdom, you can contact:

CBC Consultancy,

Jo Bird, jobird@cooptel.net

For advice and support in Northern Ireland and the Republic of Ireland, please contact:

Trademark Belfast,

Alice McLarnon,

NG2 North Building, Twin Spires Centre

155 Northumberland Street


BT13 2JF


[1] Quote translated by the author. Harounyan S, Ex-Fralib : «Notre nouveau combat, c’est la pérennité de la scop», Libération, 6 September 2017, http://www.liberation.fr/futurs/2017/09/06/ex-fralib-notre-nouveau-combat-c-est-la-perennite-de-la-scop_1594611, Accessed 8 February 2018

[2] Picture by Olivier Mong. Myop for Libération. Ibid.

[3] CG SCOP, Les Chiffres Clefs, Available from: http://www.les-scop.coop/sites/fr/les-chiffres-cles/, Accessed 5 February 2018

[4] Voinea A, The path to worker buyouts: Does the UK need its own ‘Marcora Law’?, Coop News, 7 September 2015, https://www.thenews.coop/97306/sector/retail/path-worker-buyouts-uk-need-marcora-law/, Accessed 9 January 2018

[5] Gouvernement.fr, L’économie sociale et solidaire, http://www.gouvernement.fr/action/l-economie-sociale-et-solidaire, Accessed 9 January 2018

[6] Megglé C, ESS –  Quelles perspectives pour les groupements de Scop ?, Localtis,  Website of Caisse des Dépôts des Territoires, 4 May 2017, https://www.caissedesdepotsdesterritoires.fr/cs/ContentServer?pagename=Territoires/Articles/Articles&cid=1250278871243, Accessed 9 January 2018 ; Gouvernement.fr, L’économie sociale et solidaire Op. Cit.

[7] Zapalski E. Economie sociale et solidaire – Scop d’amorçage, prêt ESS : deux mesures fortes pour l’économie sociale Localtis  Website of Caisse des Dépôts des Territoires 12 June 2015 https://www.caissedesdepotsdesterritoires.fr/cs/ContentServer?pagename=Territoires/LOCActu/ArticleActualite&cid=1250269069478 Accessed 9 January 2018

[8] Garcia L. and Beltramini V, SCOP et reprise d’entreprise en difficultés : perspectives pour une efficacité renforcée, La revue des Sciences de Gestion, Direction et Gestion, n° 269-270, September-December 2014

[9] This is also referred to as the De Gaulle Law on participation which makes profit-sharing compulsory for enterprises over 50 employees whose profit exceeds 5% of capital equity. The calculation formula is provided by the legislation but enterprises can offer a different formula provided it is more advantageous than the law. The participation is often frozen for 5 years and invested in an employee saving scheme. It cannot exceed a certain value, for example €29,799 per year in 2018. It benefits over 5 million workers across France. Macron has announced his intention to review this disposition. References : Service Public.fr, Participation, 2017, https://www.service-public.fr/particuliers/vosdroits/F2141, Accessed 5 February 2018 ; Zevi et al, Op. Cit ; Macron veut “revisiter” l’intéressement et la participation salariale : De quoi s’agit-il ?, France Soir, 16 October 2017,  http://www.francesoir.fr/tendances-eco-france/macron-veut-revisiter-interessement-et-la-participation-salarial-de-quoi-agit-epargne-salariale-benefice-salaires-primes-argent-investissement-entreprise-debat, Accessed 17 January 2018

[10] Marcel V, Les principaux avantages fiscaux et sociaux d’une SCOP, Pyxis Avocats, 2 May 2017, https://pyxis-avocats.fr/principaux-avantages-fiscaux-sociaux-dune-scop/, Accessed 17 January 2018

[11] Service Public.fr Société coopérative de production (Scop) https://www.service-public.fr/professionnels-entreprises/vosdroits/F31328 Accessed 5 february 2018 ; Justice.fr, Société coopérative de production (Scop), 2018 https://www.justice.fr/fiche/societe-cooperative-production-scop, Accessed 17 January 2018

[12] Zevi et al. Op. Cit.

[13] Garcia L. and Beltramini V, SCOP et reprise d’entreprise en difficultés : perspectives pour une efficacité renforcée, La revue des Sciences de Gestion, Direction et Gestion, n° 269-270, September-December 2014

[14] CG SCOP Actualité Juridique Droit Fiscal Les Scop Info 6-12 April 2017 http://www.les-scop.coop/sites/fr/_media/docs-les-scop-info/2017_06_LesScopinfo_Juridique.pdf Accessed 17 January 2018

[15] Garcia and Beltramini, Op. Cit. ; Marcel, Op. Cit.

[16] Service Public.fr, Société coopérative de production (Scop)

[17] Within the limit of €12,000.

[18] Marcel V. Op. Cit.

[19] Peyrical J.M, Ce que la loi sur l’économie sociale et solidaire va changer, Les Echos, 8 November 2014, https://www.lesechos.fr/08/10/2014/LesEchos/21788-374-ECH_ce-que-la-loi-sur-l-economie-sociale-et-solidaire-va-changer.htm, Accessed 9 January 2018

[20] Gouvernement.fr L’économie sociale et solidaire Op. Cit.

[21] Latest figures reflect the effect of the “cooperative shock” which the government intended on creating through the passing of the Law. There were over 26,000 cooperatives in 2015 according to the CNCRES, and over 27,000 according to l’INSEE (equivalent of Office of National Statistics). CNCRES, Panorama de l’économie sociale et solidaire, Edition 2015 ; ; INSEE (Website), Nombre d’établissements employeurs de l’économie sociale par famille de l’économie sociale et par secteur d’activité, available here https://www.insee.fr/fr/statistiques/3202384?sommaire=2506122, accessed on 14 February 2018.

[22] Naett C, L’élaboration de la loi ESS du point de vue du mouvement coopératif, Revue Internationale de l’économie sociale, n°335:41-52, January 2015.

[23] Hiez D., La loi dur l’économie sociale et solidaire : un regard juridique bienveillant, Revue internationale de l’économie sociale et solidaire, Erudit, n°334:44-56, October 2014

[24] Hiez D, Ibid. ; Naett C, Op. Cit

[25] Especially when previous legislations (192) had failed in their attempts to provide additional external funding. Garcia and Beltramini, Op. Cit

[26]  Zapalski, Op. Cit ; CG SCOP, Qu’est-ce qu’une SCOP, Available from: http://www.les-scop.coop/sites/fr/les-scop/qu-est-ce-qu-une-scop.html, Accessed 9 January 2018

[27]  Delta Meca. Photo from E.gui, Delta Meca reste l’unique Scop d’amorçage de France, Les Echos, 1 March 2017, https://www.lesechos.fr/01/03/2017/LesEchos/22394-099-ECH_delta-meca-reste-l-unique-scop-d-amorcage-de-france.htm, Accessed 12 February 2018

[28] Landré M, Macron veut en finir avec la loi Hamon, Le Figaro, 9 March 2015 http://www.lefigaro.fr/conjoncture/2015/03/09/20002-20150309ARTFIG00002-macron-veut-en-finir-avec-la-loi-hamon.php, Accessed 17 January 2018 Accessed 17 January 2018; Porier J, Le Patronat critique le project de loi sur l’économie sociale et solidaire, Le Monde, 24 July 2013, http://www.lemonde.fr/economie/article/2013/07/24/le-projet-de-loi-de-benoit-hamon-sur-l-economie-sociale-et-solidaire-provoque-une-levee-de-boucliers_3453119_3234.html Accessed 17 January 2018; Siraud M, Entre Macron et Hamon, une rivalité de circonstance, Le Figaro, 22 April 2017, http://www.lefigaro.fr/elections/presidentielles/2017/04/22/35003-20170422ARTFIG00044-entre-macron-et-hamon-une-rivalite-de-circonstance.php, Accessed 17 January 2018.

[29] Cession d’entreprise: le Conseil constitutionnel censure la loi Hamon, L’Express, 17 July 2015, https://lentreprise.lexpress.fr/creation-entreprise/reprendre-entreprise/cession-d-entreprise-le-conseil-constitutionnel-censure-la-loi-hamon_1699638.html, Accessed 17 January 2018

[30] Rey M, Cession d’entreprise: la loi Hamon modifiée depuis le 1er Janvier, L’Express, 30 December 2015, https://lentreprise.lexpress.fr/creation-entreprise/reprendre-entreprise/cession-d-entreprise-la-loi-hamon-modifee-au-1er-janvier-2016_1749619.html, Accessed 17 January 2018

[31] Lucas J, Deux limites à la mise en œuvre de la loi Hamon, LEXplicite, 19 September 2017, http://www.lexplicite.fr/deux-limites-a-la-mise-en-oeuvre-de-la-loi-hamon/, Accessed 8 February 2018

[32] Megglé C, ESS –  Quelles perspectives pour les groupements de Scop ?, Localtis,  Website of Caisse des Dépôts des Territoires, 4 May 2017 ; Hiez D, Op. Cit

[33] Gouvernement.fr L’économie sociale et solidaire Op. Cit.

[34]  It translates in Deposit Fund. It is a public sector financial institution which carries out missions of public interest in support of the implementation of public policies and supports the development of enterprises.

[35] Gouvernement.fr L’économie sociale et solidaire Op. Cit.

[36] Zapalski, Op. Cit.

[37] Megglé C, Pour pouvoir recruter massivement, l’ESS a encore du travail, Localtis,  Website of Caisse des Dépôts des Territoires, 10 March 2017, https://www.caissedesdepotsdesterritoires.fr/cs/ContentServer?pagename=Territoires/Articles/Articles&cid=1250278772501, Accessed 9 January 2018

[38] CG SCOP, Outils Financiers, http://www.les-scop.coop/sites/fr/le-reseau/accompagnement/outils-financiers.html Accessed 5 February 2018; Garcia and Beltramini Op. Cit.

[39] http://www.ceralep.com/; Borrits, SCOP : des outils de financement qui préfigurent un dépassement de la propriété, Association AutoGestion, https://autogestion.asso.fr/scop-des-outils-de-financement-qui-prefigurent-un-depassement-de-la-propriete/, Accessed 8 February 2018

[40] From CG SCOP’s campaign on worker cooperatives. Accessed http://www.les-scop.coop/sites/fr/campagne-des-scop-2012/ceralep on 12 February 2018

[41]  Zevi et al. Op. Cit.188

[42]  Working out of Poverty, Report of the Director General, International Labour Conference, 91st Session, 2003, p.52.

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