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The relations within cooperatives in the Republic of Serbia still today are regulated by two Laws:

 The former Law on cooperatives ("Official Gazette", no. 41/96 and 12/98 and "Official Gazette RS", no.101/05 –and other Laws and 34/06) passed in 1996 as the Federal Law, and currently it is implemented as the Republic Law changed and amended in the meantime more than once;

 Republic Law on cooperatives ("Official Gazette SRS", no. 57/89 and "Official Gazette RS", no. 67/93, 46/95 and 101/05 and other Laws), passed in 1989 and changed and amended more than once.

These facts led to legal dualism and collision and overlapping of certain legal norms and it causes unequal implementation, different interpretation, ambiguity and confusion in practice and inconsistency with contemporary social economic circumstances.

Cooperatives and cooperation in RS face different types of problems and seek catering of different needs, and the current laws which govern cooperatives have demonstrated arrange of malfunctions in practice. The regulatory and real defects, the issues and the needs of cooperative sector can be summarized in the following:

 Inconsistency of the legislative norms;

 Obsolete and dysfunctional legal practices adopted within the circumstances which significantly differ from the current economic, social and political circumstances;

 Obsolete and dysfunctional legal practices adopted within the circumstances significantly different from judiciary and constitutional system of the federally organized state with two levels of legislative authorities;

 Unsettled legal property rights-legal status related to cooperative property and cooperative associations registered as social property which, above all, disables the cooperatives to use it as the collateral for the loans, and leads to the problems within privatization processes as well;

 Fragile mechanisms for capital obtaining on the part of cooperatives, without formal start up equity, accumulation of capital as well and its profitable investing. The main source of capital inflow into the cooperative, following the current legal propositions are the shares or memberships of its members and their amounts are commonly low;

 The lack of incentive power of the legal regulations pertaining to the managerial transformation of cooperatives as well as the strengthening of its market functions, which is inevitable in modern conditions as well as the need for the legal recognition and establishment of the higher level of cooperative sector autonomy within the category of legal entities, which would create a legal basis for stipulation of the appropriate incentives and exemptions within specific by-laws;

 Inconsistency of the regulatory policy in certain areas on both the formal federal and the current republic level, as well as the lack of contemporary cooperative policy, especially in terms of many regulation which in certain areas do not recognize the categories within the area of cooperatives and cooperation or are in opposition to the propositions contained within the laws which govern cooperatives (e.g. : inconsistency of the legal framework related to savings credit cooperatives and savings credit services from the Law which governs cooperatives and article 5 of the Law on banks ("Official Gazette" nos. 107/05, 91/10), which stipulates no other entity except from the bank can collect deposits(paragraph 1) and that no one except the bank can issue loans, if not otherwise authorized by the Law);

 Inefficient legal frameworks related to current Laws primarily in terms of performing public authorizations given on behalf of cooperative associations. By this law the cooperative associations were granted the right to adopt the general rules which govern the application of cooperative principles as well as other issues of importance for the activities of different types of cooperatives representing an integrated part of those cooperative associations as well as the rules which stipulate the terms and conditions to be observed by cooperative associations and auditors which perform the cooperative auditing, the contents of audit reports as well as other issues of importance for the cooperative audit of cooperatives integrated within the associations. These legal acts represent by laws for the implementation of the Law which govern the cooperatives. Since these cooperative associations are authorized for the adoption of above mentioned by laws as well as their implementation, without the efficient formal supervision of their activities by the relevant state authority, created an array of discrepancies in the everyday activities of the cooperatives and cooperative associations, especially in terms of implementation of cooperative auditing. Thus, the necessity for rearrangement emerged as well, i.e. the legal arrangement of the cooperative auditing, based on the practical experiences.

 The legal non recognition and mismanagement of certain special forms of cooperatives (e.g. social cooperatives), which disables their establishment and development;

 The need to bring into compliance the national regulations with the propositions and legal act of the EU, and within that the legislative framework within the domain of cooperatives and cooperation. The necessity for these changes stands from the need to begin with reforms of national cooperatives and cooperation in the way which would, based on the model of developed countries, rehabilitated the importance of cooperatives

and cooperation and create the conditions for it to become an important and dynamic factor of development and competitiveness of the national economy, regional and rural development, thus enabling the resolution of the accumulated economic and social issues through cooperatives, which is of great importance in the current phase of the implementation of the transition of the socio economic and the legal system of the Republic of Serbia. The new legal concept should begin with the appropriate solutions given in the Council Regulation No. 1435/2003 on the Statue for European Cooperative Society-SCE and Council Directive No. 2003/72E3 supplementing the Statue for a European Cooperative Society with regard to the involvement of employees (Nikolić, 2009, 124), as well as the assessment summarized during the General Assembly of the International Cooperative Association held in October of 2001 in Seoul. On this occasion, the document prepared by the International Cooperative Association (ICA) (Nikolić, 2009, 54) as well as the International Labor Organization (ILO) (Nikolić, 2009, 62), under the name of "Guidelines for cooperative legislature"(Madžić, 2010, 258), it was assessed that the cooperative law today is primarily conservative and that it objectively represents an obstacle to the dynamic development of cooperation. Because of this, member states of the International Cooperative Association for giving instruction, i.e. recommendation that is necessary to reform implementation regarding cooperative legislature, in order to create the environment for strengthening the market and entrepreneurial function in the everyday activities of cooperatives, given that the lack of the above mentioned would prevent the cooperatives to confirm the basic cooperative values, based on self-help, democracy and solidarity of cooperative members in resolving their economic and social issues.;

 The need for creating the appropriate legal environment for the implementation of the cooperative sector reforms by means of new contemporary propositions as well as the important assumption for support to the development of cooperation in the Republic of Serbia in line with the modern world trends, which cannot be achieved by implementing the partial amendments to the existing law.

Considering all the things that have been stated, the majority of agricultural and other manufacturers ("creators of the new value") in the Republic of Serbia today is not organized i.e. insufficiently organized and protected. Therefore, there is the need to organize, spread and promote the cooperative forms of activities which should organize the production for cooperative members, to promote their interest and guarantee certain level of security for the agricultural and other manufacturers on the market. Apart from that, the problem stems from the fact the majority of professional and general public still perceive the cooperatives as the obsolete institutional forms of doing business.

All of the above mentioned issues should be perceived within the mutual cause-effect relationship-indirect and direct, as well as historic.

THE LEGAL BASIS FOR REGULATION OF COOPERATIVES –