Chapter V Financial Management

Article 32 The department of finance under the State Council shall establish a financial and accounting system for the specialized farmers cooperatives in accordance with relevant laws and administrative regulations of the State. The specialized farmers cooperatives shall carry out their accounting according to the said financial and accounting system.

Article 33 The director-general or the board of directors of a specialized farmers cooperative shall, according to the stipulations in the charter, organize efforts to prepare the annual business report, plans for profit distribution and for disposition of losses, and financial statements, and shall, 15 days prior to the convening of the membership assembly, make them available in the office for the members to consult.

Article 34 Accounting for the transactions effected between a specialized farmers cooperative and its members shall be separated from the ones effected between the cooperative and the non-members that make use of the services provided by the cooperative.

Article 35 A specialized farmers cooperative may draw common reserve funds from the profits of the year in accordance with the stipulations in the charter or the decision made by the membership assembly. The common reserve funds shall be used for making up for losses, expanding production and operation or be converted into members’ capital contributions.

The common reserve funds drawn every year shall be quantified as shares of each member according to the stipulations of the charter.

Article 36 A specialized farmers cooperative shall start an account for each member, in which shall mainly be recorded the following:

(1) the amount of capital contributions of the member;

(2) the quantified common reserve funds as shares of the member; and

(3) the volume (amount) of transactions effected between the member and the cooperative.

Article 37 The profits of the year left after the losses are made up for and the common reserve funds are drawn shall be the distributable profits of a specialized farmers cooperative.

The distributable profits shall be returned or distributed to the members according to the following provisions, and the specific measures for distribution shall be decided according to the stipulations in the charter or the resolution of the membership assembly:

(1) to return the profits in proportion to the volume (amount) of the transactions effected between the members and the cooperative, and the total amount returned shall not be less than 60 percent of the distributable profits; and

(2) to distribute pro rata to the members of the cooperative the rest of the profits left after the return according to the provisions in the preceding subparagraph, on the basis of the capital contributions and shares of common reserve funds recorded in the members’ accounts and the members’ average quantified shares of the assets accumulated from subsidies directly given by the government and donations made by other persons to the cooperative.

Article 38 Where there is an executive supervisor or a board of supervisors in a specialized farmers cooperative, the executive supervisor or the board of supervisors shall be responsible for the internal financial auditing of the cooperative and shall report the auditing results to the membership assembly.

The membership assembly may also entrust an auditing body with the financial auditing of the cooperative.