EN

UNIDROIT Working Group on Collaborative

Legal Structures for Agricultural Enterprises

UNIDROIT 2026

Study LXXXC - Draft Master Copy

English only

July 2026

MASTER COPY OF THE DRAFT

UNIDROIT/FAO/IFAD

Legal Guide on Collaborative Legal Structures for Agricultural Enterprises

CONFIDENTIAL

TABLE OF CONTENTS

PREFACE 2

INTRODUCTION 8

CHAPTER I - MULTIPARTY CONTRACTS 22

CHAPTER II - COOPERATIVES 63

CHAPTER III - COMPANIES 97

CHAPTER IV - DIGITAL PLATFORMS IN AGRICULTURE 129

CHAPTER V - COMPARING AND CHOOSING LEGAL STRUCTURES FOR

COLLABORATION IN AGRICULTURE 152

2. UNIDROIT 2026 – Study LXXXC – Draft Preface & Introduction

DRAFT PREFACE and INTRODUCTION

TABLE OF CONTENTS

PREFACE 2

I. PURPOSE OF THE CLSAE GUIDE 3

II. RELATIONSHIP BETWEEN THE CLSAE GUIDE AND OTHER UNIDROIT INSTRUMENTS 4

III. TYPES OF AGRICULTURAL ENTERPRISES CONCERNED AND TARGET AUDIENCE 5

IV. APPROACH AND HOW TO USE THE CLSAE GUIDE 7

INTRODUCTION 8

I. OVERVIEW AND CHALLENGES POSED BY AGRIFOOD VALUE CHAINS 8

II. DRIVERS OF THE USE OF COLLABORATIVE LEGAL STRUCTURES 12

A. INTERNAL DRIVERS OF COLLABORATION 12

1. Access to markets and credit 13

2. Access to innovative technologies and techniques 15

3. Participation in decision-making 15

B. EXTERNAL DRIVERS OF COLLABORATION 15

1. Sustainability 15

2. Digitisation and digitalisation 18

III. THE COLLABORATIVE LEGAL STRUCTURES COVERED IN THE GUIDE 19

3. UNIDROIT 2026 – Study LXXXC – Draft Preface & Introduction

PREFACE

I. PURPOSE OF THE CLSAE GUIDE

1. Purpose of guidance. The UNIDROIT/FAO/IFAD Legal Guide on Collaborative Legal Structures

for Agricultural Enterprises (CLSAE) provides guidance on collaborative legal structures with a

particular focus on smallholders, producers, and agricultural micro, small and medium-sized

enterprises (“agri-MSMEs”) to support their increased participation in agrifood value chains and to

best suit their needs. Greater engagement of these actors should result in more inclusive value chains

and, in turn, transformation towards more efficient and resilient agrifood systems, sustainable

economic growth, and reduced poverty

2. Definition of collaboration. For the purposes of this Guide, collaboration is defined as a stable

form of interaction, often long-term, among two or more persons, whether natural or legal, that

pursue common objectives, while addressing overlapping needs, interrelated interests, and/or shared

risks. Common objectives may be limited (e.g., production and exchange of goods and services) or

broadly expansive to imply an engagement in one or more projects within a value chain with or

without shared resources (e.g., creation of knowledge networks, social capital, creation of economies

of scale or scope, etc). Unlike aggregation, where the participating entities lose their independence

to merge into a new legal entity, collaboration maintains legal and at least to a limited extent

economic independence of the enterprises engaged in the project.

3. Collaboration is a process. Uncertainty and a low level of mutual trust can influence the choice

of legal form and its evolutionary path. The evolution of collaboration is a function of knowledge and

common trust. It can also depend upon the availability of resources. Parties can start with a light

form of collaboration, with limited investments of financial and non-financial resources, and proceed

to a more structured project when knowledge and common trust increase. They can, for example,

start with a multiparty contract and then turn it into a company or a cooperative. But evolution can

also occur within each legal form moving from a low to a high level of organisational complexity. For

example, they could start with a simple multiparty contract without governing bodies and common

funds to be administered, and then add a board of participants, mandates for acting on behalf of the

parties, common funds aimed at supporting the collaboration, etc.

4. Drivers of collaboration. Collaborative legal structures can help address some of the needs

and overcome some of the challenges that smallholders and agri-MSMEs face in order to participate

more equitably and effectively in agrifood value chains. Collaboration can promote sustainable

agriculture and play a role in the development of new forms of agricultural enterprises. It differs

depending on the size and market power of the participants and more importantly whether it operates

within or outside a global value chain. The broadly described objectives and drivers of collaboration

listed below are generally applicable to smallholder producers and agri-MSMEs worldwide and have

informed the guidance that has been developed. However, this list should not be considered

exhaustive since this would overlook other important local context-specific realities that also must

be taken into consideration. The main drivers for the use of collaborative legal structures by

smallholders and agri-MSMEs covered in this Legal Guide include:1

(a) improved access to viable markets, market resources and inclusive financial services;

(b) Improvement of stability and security of agricultural and food supplies in global value

chains;

(c) opportunities to access innovative technologies and techniques, including those driven

by digitalisation, digitisation, digital platforms, and the use of artificial intelligence;

1 These drivers of collaboration are further elaborated in paras. […] of the Introduction to this Legal Guide.

4. UNIDROIT – Study LXXXC – Draft Preface

(d) increased participation in decision-making within agrifood value chains;

(e) deterrence of unfair commercial practices in agrifood value chains;and

(f) sustainable growth of enterprises.

5. Legal structures and digital platforms for collaboration. While recognising that a variety of

forms for collaboration exist, and many different types of business organisations and commercial

contracts may be used for carrying out activities such as production, processing and distribution in

the agricultural sector, the emphasis of the Guide is on collaboration through the use of legal

structures and digital platforms. Three categories of legal structures are considered: (i) multiparty

contracts, (ii) cooperatives, and (iii) companies. Digital platforms are considered not as a legal

structure but rather as an organisational tool that may be used for collaboration purposes by, and

thus governed through, these three different legal structures.

6. Boundary of the collaboration. The Guide also acknowledges that collaboration may take

place outside the legal structures considered, between participants within the legal structure and

third parties. Some of these “external” collaborations may be very relevant for the achievement of

common objectives (e.g., relationships with financing institutions or data service providers), but

parties may prefer to govern these relationships through separate instruments outside the bounds

of the collaborative structure. As demonstrated in this Guide, the decision on whether an enterprise

should be included in the collaborative legal structure as a participant or should remain outside it is

a strategic one, primarily linked with the objectives of collaboration and the type of governance

envisaged (see Chapter V for comparative analysis).

7. Need for the CLSAE Guide. The Guide explains how the features of selected collaborative

legal structures (i.e., multiparty contracts, cooperatives, companies) and digital platforms may help

smallholders and agri-MSMEs achieve some of the objectives noted above. The Guide does not favour

one structure over another. The Guide aims to promote a better understanding of how collaboration

may be structured so as to overcome some of the most salient and pressing needs and challenges

of smallholders and agri-MSMEs in their access to and operating in agrifood value chains and agrifood

systems. Although work has been done to assess the main opportunities and risks related to certain

business models for agricultural enterprises,2 international guidance on the private-law aspects

regarding legal structure was still considered lacking, particularly from the perspective of supporting

collaboration.

II. RELATIONSHIP BETWEEN THE CLSAE GUIDE AND OTHER UNIDROIT

INSTRUMENTS

8. Complementarity of Legal Guides. The CLSAE Guide is a natural follow-up to the

UNIDROIT/FAO/IFAD Legal Guide on Contract Farming (“Contract Farming Guide”, finalised in 2015)

and the UNIDROIT/IFAD Legal Guide on Agricultural Land Investment Contracts (“ALIC Guide”,

finalised in 2021). Whereas the Contract Farming Guide focused on bilateral agricultural production

contracts between farmers/producers and buyers, the CLSAE Guide adopts a broader scope by

focusing on the multiparty dimension of collaborative structures and by considering a range of

collaborative relationships among various actors throughout agrifood value chains. While the ALIC

Guide concerns contractual relationships involving land, the CLSAE Guide encompasses forms of

collaboration that may include contributions of land but also other inputs, such as capital, physical

and intellectual property (“know-how”), or labour. The three international legal guides are

complementary and designed to be used in conjunction.

9. Distinctive comparative approach of the CLSAE Guide. Unlike other UNIDROIT instruments in

the field of Private Law and Agricultural Development, the CLSAE Guide adopts a distinctive approach.

2 World Bank Group. Enabling the Business of Agriculture (2019); [ADD FAO and IFAD references]

5. UNIDROIT – Study LXXXC – Draft Preface

Rather than focusing on the analysis of a single legal structure (such as multiparty contracts), the

Guide expands the range to consider cooperatives, companies, and digital platforms. It introduces a

comparative analysis of these multiple entities, all examined through the lens of collaboration, with

a view to informing the selection and combination of different collaborative structures and

underscoring the capacity of their respective features to address distinct objectives and challenges.

10. Common interest. The analysis centres on the common interest underlying collaboration and

the various ways in which agricultural enterprises may pursue it, including by potentially internalising

relevant third-party interests. The common interest informs not only governance structure but also

the mechanisms for addressing supervening events and for preventing and resolving disputes.

11. Value-chain perspective. As noted above, the analysis taken in the development of the CLSAE

Guide recognises collaborative structures as embedded within broader networks of relationships

along the agrifood value chain. In this context, the interdependence of enterprise activities becomes

particularly significant, which may influence the smallholders, agri-MSMEs and other value-chain

actors in selecting one collaborative legal structure over another.

III. TYPES OF AGRICULTURAL ENTERPRISES CONCERNED AND TARGET

AUDIENCE

12. Agriculture is changing. Production technologies are significantly affecting what and how it is

produced and distributed. The relevance of input providers including technologies and know-how is

increasing. The division between production and consumption has also changed due to the reduction

of transportation costs and the introduction of technologies redefining the role of agricultural work.

Climate change and the evolution of environmental conditions are affecting the choice of agricultural

commodities and their modes of production. Finally, the transformations of the food industry have a

strong impact on the evolution of agriculture. These background changes are providing new

incentives for collaboration but require new approaches.

13. Smaller and larger agricultural enterprises. The focus of the CLSAE Guide is on the needs

and challenges faced by smallholders and agri-MSMEs, particularly those operating downstream in

agrifood value chains. At the same time, an understanding of the legal rules and principles that

govern collaborative economic activities in agriculture, particularly the practices of larger enterprises,

has been crucial in order to develop a legal guide that effectively serves the needs of smaller

enterprises operating within or aspiring to join these value chains. The vulnerability of smallholders

and agri-MSMEs in agrifood value chains, coupled with their substantial contribution to food

production and economic activity in many countries,3 has been a central impetus for the development

of the CLSAE Guide.

14. Smallholders. For the purposes of the CLSAE Guide, it should be noted that the term

“smallholders” refers to a category of agricultural producers typically defined by the scale of their

operations or resources.4 Smallholders can be defined as “small-scale farmers, pastoralists, forest

keepers, fishers who manage areas varying from less than one hectare to 10 hectares” who rely on

family labour and production activities for food security and income generation.5

3 IFAD and United Nations Environment Programme (UNEP), Smallholders, Food Security, and the Environment (IFAD, 2013). See also: Small Family Farmers Produce a Third of the World’s Food (FAO, 2021). 4 Only a few countries have a legal definition of smallholder and family farms, with varying definitions. Latin America and the Caribbean, include seven countries with national legislation explicitly defining “family farmer” or “smallholder”. These countries are Argentina (2015), The Plurinational State of Bolivia (2013), Brazil (2006), El Salvador (2021), Panama (2020), Paraguay (2019), Peru (2015)”. A legal definition not only improves targeting, recognition, and consistency, but also helps farmers gain access to essential resources and services by making eligibility clear. For more information see: FAO (2021) Legislative and regulatory frameworks for family farming; FAO (2023) Legislating to promote family farming in Latin America and the Caribbean. 5 For more information see: FAO (2013) Smallholders and Family Farmers Factsheet.

6. UNIDROIT – Study LXXXC – Draft Preface

15. Agri-MSMEs. The definition of “agri-MSMEs” varies from one country to another and among

international organisations. This diversity in definitions illustrates the adaptability needed for agri-

MSME classification across different regions, as many countries set lower thresholds to reflect the

smaller scale and often informal nature of these enterprises. The term “MSME” includes micro-

enterprises, typically low-capital, informal, and locally-oriented, operating with few fixed assets and

limited capacity for investment. Because of their micro scale, they are generally unable to perform

more advanced functions such as grading, packaging, or cold storage, or comply with stringent food

safety standards. Conversely, small and medium enterprises are usually characterised as non-home-

based, often family-run, but also employing non-family workers, formal or semi-formal, and more

frequently found in peri-urban rural towns and urban areas. Compared to micro enterprises, they are

more capitalised, more likely to adopt technology, engage in business-to-business contracts, comply

with standards, and participate in higher-value and longer value chains.6

16. Agri-entrepreneurs. The collaborative venture is meant to help smallholders and agri-MSMEs

achieve “entrepreneurial” status. For the purposes of the CLSAE Legal Guide, an “agri-entrepreneur”

is a farmer – often a smallholder or family farmer – who adopts an entrepreneurial approach seeking,

for instance, innovation, efficiency, and value addition in agriculture. “Agripreneurship” involves more

than just producing food; it includes accessing or creating markets, improving productivity, and

adopting new technologies and sustainable practices. Smallholders who commercialise production or

diversify income streams (e.g., processing products, selling to niche markets, joining digital

platforms or engaging in cooperatives, companies or multiparty contracts) practice agripreneurship.7

17. Actors seeking formalisation. Despite their substantial contribution, smallholders and agri-

MSMEs may not have a specific legal definition or formal legal status. The guidance provided herein

is aimed primarily at actors seeking formalisation and that have the potential to develop and to also

contribute to rural and urban sustainable development. Collaborative structures can provide a

pathway for these actors to gain the benefits of formalisation.

18. Actors in production and midstream segments. The Guide seeks to provide legal guidance to

overcome the challenges faced by actors involved in the production stage but also by those operating

in the midstream segment of agrifood value chains, beyond the production stage. Particular attention

has been devoted to those actors operating in low- and middle-income countries. However, the

principles, findings and recommendations in this Guide may apply and be useful for agri-

entrepreneurs all over the world.

19. Horizontal and vertical collaboration. The guidance was developed considering the differences

in horizontal and vertical collaboration. While horizontal collaboration occurs among businesses that

operate at the same level of the value chain, such as, for instance, collaboration among agricultural

producers, vertical collaboration occurs among enterprises operating at different levels of the value

chain, such as collaboration between farmers and processors or between input providers and

retailers. By focusing on how collaboration operates within value chains, one can observe that

horizontal collaboration (e.g., among producers) tends to create more egalitarian, peer-based

contractual arrangements, whereas vertical collaboration (e.g., between producers and retailers)

may involve hierarchical structures, given the differences in bargaining power and roles.

20. Targeted audience. This Guide is primarily intended for those who provide advisory and

capacity-building support to smallholders and agri-MSMEs, including those involved in drafting

contracts and internal regulations. The Guide will be useful for local associations of agricultural

entrepreneurs and organisations of producers, alongside non-legal technical experts such as

6 For more information, see Smallholder and Agri-MSME Finance and Investment Network (SAFIN) & ISF Advisors (2021), Learning Brief: Agri-SME Taxonomy, p. 2. 7 For more information, see: FAO (2013) Smallholders and family farmers; FAO and EcoVentures International (2019), Agripreneurship across Africa: Stories of inspiration.

7. UNIDROIT – Study LXXXC – Draft Preface

representatives of non-governmental organisations, international agricultural and food

conglomerates, chambers of commerce, representatives of international organisations, and

development agencies. The target audience may also include national and international legislators

and those shaping local policies.

IV. APPROACH AND HOW TO USE THE CLSAE GUIDE

21. Consistency with international and domestic law. The CLSAE Guide is designed to be used

worldwide, but it must always be applied according to the specific laws of each country. While some

variation of the three legal structures and digital platforms that are analysed in the Guide are

available in most countries, some aspects of each of them may vary considerably from one

jurisdiction to another. There may be variations even within the same country. The Guide supports

collaboration and the formation of collaborative legal structures insofar as these initiatives are

consistent with international and domestic law, and where applicable, local and customary law.

22. References for good practices. By covering key aspects of contract and organisational law

inherent to the legal structures considered, the Guide serves as a practical reference for good

practices in the agrifood sector. It is not intended to serve as a model for, or to promote the adoption

of, specific legislation, nor does it seek to interfere with mandatory domestic and/or regional rules.

The Guide provides information on private-law aspects that smallholders, agri-MSMEs, and their

advisors may use to understand which legal structure is more useful within their context. Certain

other factors, namely public-law aspects that often influence such choice − notably tax considerations

− are not taken into consideration in the analysis.

23. Functional approach. The functional approach as used in the development of this Guide

emphasises the importance of understanding how a particular collaborative legal structure operates

in practice rather than focusing solely on its formal structure, and by doing so, comparison across

different legal systems and between fundamentally different forms becomes possible. For example,

while a partnership under many common-law jurisdictions and a multiparty contract under civil law

have very different legal structure, in terms of entry and exit of members, they may function very

similarly. This approach also recognises that the collaborative legal structures considered in the Guide

are constantly evolving and adapting to changing circumstances, in particular to technologies and

factors affecting the shape and length of global chains.

24. Structure of the Guide. After presenting an overview of the role and relevance of structuring

collaboration in agrifood value chains in the Introduction, four chapters are devoted to the

collaborative legal structures and digital platforms. Multiparty Contracts are examined in Chapter I,

Cooperatives in Chapter II, Companies in Chapter III, and Digital Platforms in Chapter IV. While, in

general, any of these forms of collaboration may be used as a vehicle to maximise opportunities

within agrifood value chains, not all collaborative forms covered in the Guide are appropriate for

every situation. This is illustrated in Chapter V, which presents a comparative analysis of these forms

and explains how they also may be used at the same time to supplement each other.

8. UNIDROIT – Study LXXXC – Draft Introduction

INTRODUCTION

I. OVERVIEW AND CHALLENGES POSED BY AGRIFOOD VALUE CHAINS

25. Scope of the Legal Guide. The UNIDROIT/FAO/IFAD Legal Guide on Collaborative Legal

Structures for Agricultural Enterprises (CLSAE) aims at providing legal guidance to support the

increased participation of smallholders and agri-MSMEs in agrifood value chains and to contribute to

more efficient and resilient agrifood systems, sustainable growth, and reduced poverty. The first

section of this Introduction provides an overview of the challenges posed by agrifood value chains

and further explains the agrifood systems approach considered as the basis of the legal analysis

undertaken and recommendations proposed for each collaborative legal structure considered in the

CLSAE Legal Guide, as well as digital platforms.

26. Agrifood value chains. Agrifood value chains are part of the agrifood system.8 Generally,

“agrifood value chain” refers to the coordinated production and value-addition activities that are

involved in making agrifood products (including food and non-food items) and encompasses the

sequence of related business activities from the provision of specific inputs for primary production,

processing and marketing, up to the final sale of the product to the consumer.9 The various steps

include input activities, on-farm production and collection of food or raw materials from the farmer,

storage and warehousing, distribution to processors, distribution to wholesalers and retailers, and

distribution to institutions, restaurants and homes for final consumption.

27. Agrifood systems transformation. For the purpose of this Guide, agrifood systems

transformation is the process by which agrifood systems are adapted to achieve more sustainability,

equity, and inclusivity.10 Agrifood systems comprise three main components: (i) primary production

of food and non-food products; (ii) food distribution, linking production to consumption through food

value chains and transport networks; and (iii) household consumption.11 In addition to primary

producers, households, individuals as final consumers, and large agrifood companies, agricultural

enterprises fall into one of the following categories: providers of input supplies, post-harvest,

storage, transport and agrifood processing services or agrifood distributors, wholesalers and

retailers. Therefore, agrifood systems include the entire range of actors and their interlinked value-

adding activities. The emphasis on “agri” highlights not only food but also the wider range of

agricultural products, value chains, and rural livelihoods that are integral to these systems.

28. Domestic, regional or global value chains. There is no single global value chain but rather a

composite of multiple value chains which operate on domestic, regional and global levels that may

or may not be integrated. In regional and global value chains, where collaboration occurs among

enterprises located in different States and subject to different regulation, coordination of several

legal systems is required and, in some instances, the role of private international law may become

relevant (see para. 76).

29. Transformation of value chains. Agrifood value chains have undergone significant

transformation driven by increased international integration, technological advancements, shifts in

8 Agrifood systems encompass the journey of food from farm to table – including how it is grown, fished, harvested, processed, packaged, transported, distributed, traded, purchased, prepared, consumed, disposed of and reused. These systems also include non-food products that support livelihoods, and all the people, activities, investments and decisions involved in delivering these food and agricultural products. Agrifood systems comprise all agrifood products that originate from crop and livestock production, forestry, fisheries and aquaculture, as well as the broader economic, societal and natural environments in which these diverse production systems are embedded. For more information, see: FAO (2021), The State of Food and Agriculture 2021: Making agrifood systems more resilient to shocks and stresses. 9 IFAD (2020), Operational Guidelines on IFAD’s Engagement in Pro-poor Value Chain Development. 10 FAO (2024), The State of Food and Agriculture (SOFA): Value-driven transformation of agrifood systems. 11 FAO (2021), The State of Food and Agriculture 2021: Making agrifood systems more resilient to shocks and stresses.

UNIDROIT – Study LXXXC – Draft Introduction 9.

economic structures, and changing consumer preferences. These changes are constant and continue

to profoundly reshape the landscape of agricultural production, trade, and consumption on a global

scale. Traditional domestic chains are short; involve a small number of small-scale producers,

intermediaries and micro to small enterprises; use labour-intensive technology and rely on spot

markets; and handle locally-produced food with basic processing, storage, logistics and other post-

farm activities. Transnational chains are longer and involve many small-scale producers and small to

medium enterprises and intermediaries, such as processors, wholesalers and retailers who are

fragmented; product diversification and value-addition are relatively high; and contracts are used,

although spot market relations still prevail. Modern chains serve large urban populations; they are

short, long or very long (including transnational); dominated by supermarkets and large processors;

technology is largely capital-intensive where cold storage, packaging and private quality standards

are very common; long-term contracts prevail where spot markets are used for perishables.12

Understanding the relevance of structuring collaboration within the context of these evolving chains

is crucial for addressing challenges related to food security, access to finance, sustainability,

technology, and economic development.13 Smallholders and agri-MSMEs need to respond as these

dynamic systems continue to evolve.

30. Role of smallholders and producers. Smallholders and producers are indispensable to global

agriculture, particularly in low- and middle-income countries, where they comprise a significant share

of the agricultural sector. They also play a crucial role in value chains as they are responsible for

producing a significant portion of the world’s food supply.14 Small farms (those typically under two

hectares) comprise about 84% of all farms globally but operate only around 12% of total agricultural

land and contribute roughly 35% to global food production.15 Globally, agri-MSMEs account for over

90% of enterprises and contribute substantially to GDP, although this also varies considerably by

country.16 In recent years, governments, international organisations, and private-sector actors have

been working to improve the participation of these smaller actors in the organisation of value chains

and local and global trade.17

31. Role of agri-MSMEs in value chains. The role of agri-MSMEs has also drawn increasing

attention from investors, governments, international organisations, and development partners due

to their contribution to agrifood systems transformation, particularly in low- and middle-income

countries.18 Key drivers include urbanisation, production intensification and diversification, and

greater regional and global value chain liberalisation. Much of the investment for these drivers has

come from agri-MSMEs themselves. MSMEs have often been described as the “hidden middle” – large

enough to scale upgrading activities that drive transformation but often overlooked in policy debates

that focus either on micro enterprises, for their links to household income and poverty reduction, or

on large firms, due to their integration with capital markets.

32. Post-production functions. Agri-MSMEs perform functions central to agrifood systems in

developing countries. One of their most important roles is connecting dispersed smallholders to local,

regional, and international markets by aggregating, grading, and transporting outputs, thereby

lowering transaction costs and expanding reliable market access. MSMEs also invest in storage,

12 FAO (2021), The State of Food and Agriculture 2021: Making agrifood systems more resilient to shocks and stresses. Rome. 13 FAO and UNIDO (2024), Developing Sustainable Food Value Chains – Practical Guidance for Systems- Based Analysis and Design (SFVC Methodological Brief). 14 FAO (2012), Smallholders and Family Farmers Factsheet. 15 The largest 1% of farms, exceeding 50 hectares, control more than 70% of the world’s farmland, with farms over 1,000 hectares accounting for nearly 40% of all agricultural land. 16 FAO (2024), Small and medium enterprises and nutrition: understanding linkages, seizing opportunities – Discussion paper. For example, microenterprises make up 81%, 92%, and 62% of all SMEs in Ghana, Kenya, and Vietnam, respectively, spanning various agricultural subsectors from smallholder farms to processing and retail. 17 IFAD (2015), Sustainable inclusion of smallholders in agricultural value chains – Scaling up Note. 18 FAO (2021), The role of small and medium agrifood enterprises in food systems transformation: The case of rice processors in Senegal. FAO Agricultural Development Economics Technical Study No. 10.

10. UNIDROIT – Study LXXXC – Draft Introduction

processing, and transport infrastructure, which helps reduce post-harvest losses and stabilise food

supplies. These activities improve year-round availability, contribute to lower consumer prices, and

support dietary diversification. In addition, post-production MSMEs generate employment

opportunities in trading, logistics, warehousing, processing, retail, and food service. These are the

sectors where most new agrifood jobs for young women and men are emerging, offering alternatives

to farm wage labour and opening entry points for entrepreneurship.

33. Enabling environment. The ability of agri-MSMEs to perform these roles consistently,

however, depends on the wider environment in which they operate. Infrastructure, regulatory

frameworks, economic and social intermediaries, market conditions, and policy support shape

whether their potential contributions to agrifood transformation can be realised or remain

constrained.19 Critical to this enabling environment are mechanisms that expand access to tailored

financial services and safeguards for smaller operators, with support for continuous upgrading and

innovation.20 In the absence of these conditions, agri-MSMEs remain disproportionately exposed to

external shocks, regulatory uncertainty, and capital market volatility, constraining their

transformational potential.

34. Informality of agricultural enterprises. Many smallholders and agri-MSMEs are unregistered

and operate outside of the State’s legal system. Informality, however, is distinct from illegality.21

Informal agricultural enterprises have a crucial role to play in providing essential services carrying

out and facilitating agricultural production, processing, marketing, and distribution. They also play

an important role in supporting farmers and rural communities by providing services and resources

that may not be available through formal channels. It is difficult to accurately assess the percentage

of agricultural enterprises that are informal because their business activities are not declared or

recorded.

35. Formalisation of agricultural enterprises. Formalisation usually refers to institutional formality

(i.e., whether a business is registered under the requisite State law), but can also refer to

transactional formality, (i.e., whether an enterprise keeps a record of its business transactions and

documents its activities). Formalisation provides legal certainty, protects long-term investments and

the stability of enterprises, and can be consistent with flexibility. Formal enterprises are typically

registered with the relevant authorities and enjoy status as legally-recognised entities. Moreover,

formalisation significantly improves the ability of an enterprise to gain access to markets and access

to formal forms of credit (as discussed below). There are many forms of simplified legal entities that

can promote formalisation without increasing administrative costs. Promoting collaboration can be a

means leading towards a higher degree of formality. There are many disadvantages to businesses

that remain in the informal sector (such as falling outside the protection of the law and social

services) and disadvantages to society as a whole (informal businesses fall outside the scope of the

tax base and the regulation of business activities in terms of health and safety). However, the Guide

does not seek to persuade but rather to inform readers of the benefits of formalised collaboration so

that those who wish to pursue these advantages may do so in a mindful manner.

36. Barriers to collaboration. External and structural barriers systematically prevent smallholder

and agri-MSME collaboration across multiple dimensions. Policy and regulatory constraints include

19 FAO, (2019)The State of Food and Agriculture 2019: Moving Forward on Food Loss and Waste Reduction; World Bank Independent Evaluation Group (2022), Toward Productive, Inclusive, and Sustainable Farms and Agribusiness Firms: An Evaluation of World Bank Group Support to Enabling the Business Environment for Agribusinesses. 20 FAO, IFAD, UNICEF, WFP & WHO (2020). The State of Food Security and Nutrition in the World 2020: Transforming food systems for affordable healthy diets. 21 The informal economy refers to all economic activities by workers and economic units that are – in law or in practice - not covered or insufficiently covered by formal arrangements and does not cover illicit activities. Informal is not to be equated with illegal but is better considered as “extra-legal” activities that fall outside of the formal economy. ILO, Recommendation Concerning the Transition from the Informal to the Formal Economy (Recommendation No 204, 2015).

UNIDROIT – Study LXXXC – Draft Introduction 11.

outdated legal frameworks unfavourable to autonomous organisations,22 land ownership

requirements that exclude smallholders with small family parcels,23 and restrictive regulations that

hinder private-sector investment.24 Financial barriers encompass high transaction costs that exclude

smaller collective initiatives from accessing financing, requirements for formal collateral that

smallholder groups cannot provide,25 and financial institutions’ perception of agriculture as high-

risk.26 Infrastructure deficits include inadequate roads, storage facilities, and energy systems that

hamper collective organisation,27 while market fragmentation and power imbalances create structural

disadvantages.28 Information barriers include poor access to knowledge at local levels and

fragmented extension services,29 compounded by social barriers such as elite capture, gender-based

exclusion, and geographic isolation, all creating a “hierarchy of exclusion”.30 Institutional coordination

weaknesses, including lack of inter-agency communication and 'silo' approaches to planning,31

combined with limited political will for cooperative sector reform, create comprehensive structural

impediments that require systemic policy, institutional, and infrastructure reforms to enable effective

smallholder collective action.

37. Opportunities and challenges in participating in agrifood value chains. In developing

countries, many smallholders and agri-MSMEs already produce high-quality, diverse and locally-

adapted crops, which are an important source of food security and nutrition. However, their

heightened participation in global agrifood value chains holds the potential to transform agriculture

from subsistence-oriented systems into more market-oriented and productive models. This transition

can stimulate economic growth and contribute to sustainable development and increased food

security.32 On one hand, this interaction connects smallholders and agri-MSMEs to global markets

and opens new avenues for value creation. On the other hand, it introduces several challenges.

Traditional entrepreneurial models, which have evolved to meet local market conditions, may

struggle to adapt to the demands of larger value chains. For instance, international buyers may

necessitate formal business structures, production concentration, and compliance with strict

marketing and quality standards. While these changes can promote development in certain contexts,

global value chains may simultaneously diminish the autonomy and resilience of local actors, thereby

undermining rural economic structures.

38. Market concentration and dominance. While global agrifood value chains provide

opportunities for income generation, food security, and productivity enhancement, there are ongoing

concerns regarding market concentration and the fair distribution of benefits among stakeholders.

The dominance of certain players within the value chain can create power imbalances, potentially

marginalising smaller producers and restricting their access to markets.

39. Imbalanced bargaining power. A related challenge is asymmetrical bargaining power, which

is a key issue when large traders act as gatekeepers of the value chain. Downstream actors often

22 FAO. 2025. Stocktaking and situation analysis of FAO's work with cooperatives and other forms of collective action in the Near East and North Africa region. 23 FAO. 2025. The Status of Youth in Agrifood Systems. 24 FAO. 2025. Understanding opportunities, barriers and risks for private sector engagement in climate action for agrifood systems. SCALA private sector engagement guidance series. 25 FAO. 2023. Promoting gender-sensitive farm business schools. A companion guide. 26 FAO. 2025. Understanding opportunities, barriers and risks for private sector engagement in climate action for agrifood systems. SCALA private sector engagement guidance series. 27 FAO. 2025. Stocktaking and situation analysis of FAO's work with cooperatives and other forms of collective action in the Near East and North Africa region. 28 FAO. 2013. Linking Farmers To Moving Markets. Food and Agriculture Organization of the United Nations. 29 FAO. 2023. Promoting sustainable land management through evidence-based decision support. A guide with country insights. 30 FAO. 2025. The Status of Youth in Agrifood Systems. 31 FAO. 2023. Promoting sustainable land management through evidence-based decision support. A guide with country insights. 32 FAO (2020), The effects of global value chain (GVC) participation on the economic growth of the agricultural and food sectors – Background paper for The State of Agricultural Commodity Markets (SOCO) 2020.

12. UNIDROIT – Study LXXXC – Draft Introduction

exert disproportionate influence over pricing, contractual conditions, and standards compliance,

leaving upstream producers and smallholders with limited negotiating capacity. More recently, the

growing weight of input providers is redistributing power between the upstream and the downstream

segments of the chain. The middle segment − comprising intermediaries like cooperatives, producer

organisations, and local processors − plays a pivotal but precarious role. Without an enabling

environment, and infrastructural pillars such as institutional capacity of farmer organisations to be

able to provide services and act in the interests of smaller actors, the imbalance in bargaining power

has increased. Additionally, the increasing role of technology providers and the use of digital

platforms has also shifted power allocation. Strengthening horizontal and vertical collaboration

among midstream actors is crucial to counterbalance the market power concentrated at the chain’s

apex and to foster more equitable, inclusive, and sustainable agrifood systems. However,

collaborative forms are compatible with highly asymmetric power distribution. Hence the governance

of collaboration becomes a key variable of power distribution among the enterprises within the chain.

II. DRIVERS OF THE USE OF COLLABORATIVE LEGAL STRUCTURES

40. Global perspective demands local context. Collaborative legal structures can help address

some of the needs and overcome some of the challenges that smallholders and agri-MSMEs face in

order to participate more equitably and effectively in agrifood value chains. Even though these needs

are broadly shared, the local context shapes the needs of particular actors. Accordingly, the

objectives and needs described in paragraph 2 of the Preface of this Legal Guide should not be

considered exhaustive since this would overlook other important local context-specific realities that

also must be taken into consideration.

41. Internal and external drivers of collaboration. Drivers for the use of collaborative legal

structures may relate to the participants’ interests (internal) and factors related to other actors

and/or the legal system and the business culture (external). The most relevant drivers of

collaboration for smallholders and agri-MSMEs may not coincide with the interests of external actors

who influence the choice of legal structures (see Chapter V). Although many of these drivers can be

considered as cross-cutting and of importance to motivate collaboration, only some are further

explained below.

A. Internal drivers of collaboration

42. Formalising collaboration. Many smallholders and agri-MSMEs already engage in

collaboration, for example, by sharing knowledge of best practices and techniques and other

information, as well as sharing inputs such as seeds, livestock, or equipment. The Guide can be used

to formalise collaboration or to create more stable and sophisticated forms suitable for global chains.

43. Collaboration may be informal or it may be more structured and formalised. This Guide

provides guidance relating to whether and how to structure and formalise a collaboration depending

on the objectives of smallholders and agri-MSMEs. Formal collaboration is necessary to access

strategic resources that may be individually inaccessible. Formalising collaboration for micro and

small enterprises may be required to access larger and, a fortiori, international markets. Formal

collaboration is also very relevant for micro enterprises engaging in processes of upgrading their

skills and growth opportunities through collaboration; here, formalisation of even simple

organisational structures may ensure clarity of commitments and effective planning of common

activities.

44. Reluctance to collaborate. Some smallholders and agri-MSMEs may be reluctant about

collaboration and may prefer to work independently and not participate in domestic, regional or

global value chains or engage with large agrifood enterprises. Collaboration may be perceived as

risky because it deprives an operator of full control over the entrepreneurial decision-making process.

Small-scale farmers are characterised by great diversity in their production, often resulting in

UNIDROIT – Study LXXXC – Draft Introduction 13.

different and even conflicting interests and priorities,33 and building necessary trust is difficult. Some

resistance may be cultural; in some countries or regions, smallholder farmers may be more accepting

of collaborative initiatives in general or may be more willing to consider a wider range of prospective

collaborators from varied backgrounds, not to mention women.

45. This Guide illustrates that a well-designed legal structure can limit or eliminate common risks.

As noted in the Preface, the main drivers for the use of collaborative legal structures by

smallholders and agri-MSMEs include: (i) improved access to viable markets, market resources and

inclusive financial services; (ii) opportunities to access innovative technologies and techniques;

(iii) increased participation in decision-making within agrifood value chains; (iv) deterrence of unfair

commercial practices in agrifood value chains; and (v) sustainable growth of enterprises. Some of

these drivers of collaboration are further explained below.

1. Improving access to markets and finance

46. Improving access to viable markets, market resources and inclusive financial services. One

of the first challenges for smallholders is to reach a scale of production that allows their participation

in commercial agriculture, which could be achieved by pooling resources and products together with

others. As a smallholder starts to produce surplus for sale and begins to grow, gaining access to

viable markets may become the next challenge. Horizontal collaboration with other producers (e.g.,

through farmer organisations) can gain such access also in this second case, even in the simplest

manner of shared transport. Vertical collaboration with processors and/or distributors can also be a

key to access markets. Collaborative legal structures offer a mechanism to formalise and expand on

this concept in order to gain access to market resources and inclusive financial services.

47. Importance of aggregation and collaboration to financing. While it can be difficult and costly

for financial institutions to lend to individual farmers, it can be easier to lend to a group of individuals.

Collaboration increases accessibility to resources, in particular to capital. This can be achieved

through different types of collaboration: (i) aggregation of various agricultural products to improve

access to finance by having a larger pool of agricultural assets; (ii) aggregation of assets ; and (iii)

more intense organisational forms that aggregate enterprises for specific objectives, leaving them

independent for every other aspect. Thus, it is necessary not only to examine how to finance

collaboration, but also whether and how collaboration serves as a driver to enable financing.

48. Importance of access to credit. The terms “access to credit” and “financing” are used

interchangeably in the CLSAE Guide. Credit is key for all businesses, irrespective of type, size and

industry, but it can be particularly difficult for smallholders and agri-MSMEs to obtain. Because of

the nature of agricultural production, supply is variable and prices are volatile. At both national and

international levels, specialised credit institutions have been created to provide agricultural

enterprises with the necessary financial resources. Equity and debt represent complementary

instruments to finance enterprises and their growth. Without credit, smaller operators are often

forced to sell their crops immediately upon harvest in order to pay debts and/or buy inputs for the

next season. The abundance of product at harvest, however, typically forces prices to their lowest

levels. In order to obtain liquidity to continue business operations or cash to survive in times of crisis,

smallholders and agri-MSMEs who lack credit may have to resort to selling off their business assets,

such as equipment, inventory, seeds or livestock. Credit enables smallholders and agri-MSMEs to

weather price volatility, respond to emergencies, access viable markets, and seek opportunities to

expand in value chains.

49. Commercial credit and access challenges. In this Guide, “commercial credit” refers to secured

and unsecured credit provided by banks or other accredited financial institutions primarily based on

the overall creditworthiness of enterprises, with their expected future cash flow usually considered

as the main source of repayment. Most often, commercial credit is secured by assets of the borrower

that the financer can seize if the borrower defaults. Commercial lenders generally require collateral

33 FAO (2017), State of Food and Agriculture: Leveraging Food Systems for Inclusive Rural Transformation.

14. UNIDROIT – Study LXXXC – Draft Introduction

to secure a loan since they reduce the financer’s risk in lending and thereby usually allow for more

favourable loan conditions. In the case of agrifood operators, this requisite collateral is most often

land or large equipment. Producers without such assets or who are not allowed to use such assets

as collateral are either unable to access commercial credit at all, or only in an “unsecured form” at

very high rates of interest. Other challenges that limit smallholders’ and agri-MSMEs’ access to

commercial credit in many countries relate to the difficulties that financiers encounter in assessing

and monitoring the creditworthiness of such enterprises. In some countries, certain segments of the

population, such as women in rural areas, face special challenges in accessing commercial credit,

both on the demand side (women’s access to credit is often constrained by sociocultural, economic,

legal and educational barriers) and the supply side (financial institutions often lack understanding of

rural societies). Given their difficulty in accessing commercial credit, many resort to non-commercial

forms of credit to support their activities. Such informal sources of credit, however, are frequently

offered at much higher rates of interest and fall outside the protection of the law.

50. Differentiation by legal structure. Collaboration can improve the chances of a project to

access credit. Chapter V examines the ways the legal structure chosen may impact the collaboration’s

financing options. Specific features might make a difference, such as the existence of a common fund

and the type of resources conferred to it (whether pecuniary or intangible resources), limited liability,

or separate legal personality, among other things. The main focus of whether and how the

collaborative legal structure could influence access to credit is also considered within each Chapter.

51. Importance of formalisation to financing. The perspective shared by international financial

institutions is that institutional lenders are generally less concerned with the legal structure of an

enterprise and more focused on its formality, as informal businesses are less likely to provide financial

statements and a business plan, and less likely to have assets to pledge as collateral. Many small

farmers are unable to access credit as they often have no paper trail. While a lender can take a

security interest over a future crop, if that crop is sold for cash, then the cash cycle of the asset-

based lending methodology is broken and the fungibility of cash plays a role in making that security

interest ineffective over the proceeds of the sale. Moreover, lenders are more likely to provide short-

term loans (under a year) for working capital rather than long-term financing, as the maturity of

those loans carries greater risk. The possibility to use movable property (such as cash flows,

inventories, raw materials, crops, etc.) to collateralise loans has become increasingly important in

recent decades. The self-executory nature of some of these secured transactions facilitates collection

on the part of lending institutions, which in theory increases access to credit and reduces interest

rates.

52. Public and private sources of credit. Given ongoing challenges for credit in the agricultural

sector, it is common for the State to step in with public assistance. It should be noted, however, that

while State guarantees can act as a significant driver of financing for smallholder producers, this can

also create an over-dependence and exclusivity over the small producer markets that financial

institutions are trying to enter.

53. Financial support through family and friends. Financial support from family, friends, Rotating

savings and credit associations (ROSCAs) and crowdfunding is a key source of financial support for

small businesses. These sources often provide flexible, unsecured funding with fewer requirements

than commercial lenders. They can also guarantee loans and are particularly important for financially

vulnerable groups, including women, youth, and ethnic minorities.

54. Size and access to credit. Another consideration is the size of borrowers. For example, once

a smaller entity has grown to a certain size, it might fall outside the scope of microfinancing

institutions that lend not against collateral but rather on capacity of repayment. Thus, there is a

continuum in the type of available financing, and the CLSAE Guide considers how to differentiate

ways of accessing credit based on size within each of the three collaborative alternatives. It is also

valuable to bear in mind the differences along this continuum between access to banking finance,

alternative mechanisms of finance, commercial finance (suppliers, etc.) and possibly even corporate

finance.

UNIDROIT – Study LXXXC – Draft Introduction 15.

55. Legislative responses to credit needs. Recognising the importance of financing, international

and regional organisations have developed a variety of instruments to address the need for improved

access to credit for enterprises of all sizes.34 National governments have also responded, in turn, by

adhering to international guidance in the development of their own domestic legislation. While the

CLSAE Guide acknowledges the need to improve credit access, this is not its primary goal; instead,

it seeks to outline considerations for access to credit in the context of decisions made in the

agricultural sector when evaluating alternative forms of collaborative legal structures. Accordingly,

reference is made where appropriate to other instruments that do seek to improve credit access, but

without extensive discussion on their content.

2. Access to innovative technologies and techniques

56. Innovation opportunities. An important component of increased efficiency is innovation which

may include organisational, technological, social and financial innovation. Innovation can be accessed

in markets or public institutions or can be created by the enterprises. In both instances individual

enterprises may face unsurmountable barriers. For smallholders and agri-MSMEs, exposure to new

methods and innovative applications can be enhanced through the use of collaborative legal

structures. Innovation includes both product and process, and it is ever more connected with

sustainability. Collaboration enables achievement of the necessary scale for market participation,

which can then foster innovation, facilitating adoption of technology and knowledge.35 Specific

opportunities and risks offered by digitalisation, digitisation and digital platforms are discussed below

in Section […].

3. Participation in decision-making

57. Participation in decision-making and addressing power imbalances. Trading in global chains

defines not only prices of services and commodities but also regulatory features concerning products

and processes. Smallholders and agri-MSMEs are often powerless in negotiations with large buyers.

Intermediaries play a significant role in promoting fair and equitable negotiations. They differ

between domestic and global value chains. They can promote collaboration among the enterprises

within the chain. Certifiers of products and processes represent an important category of

intermediaries in promoting and designing collaborative forms. Use of collaborative legal structures

is one way to address power imbalances and increase participation in decision-making by enabling

smallholders and agri-MSMEs to pool their negotiating power. Collaboration may increase bargaining

power, decrease technological and financial dependence and increase access to strategic resources.

B. External drivers of collaboration

1. Sustainability

58. Sustainability as a driver of collaboration. The circumstances calling for the sustainable

operation of agrifood enterprises are ever-increasing and diverse. For example, as climate change

increasingly affects agricultural production across the world, farmers may be inclined to explore more

sustainable farming practices. Similarly, as retailers and consumers become increasingly discerning

with respect to environmental and social sustainability standards, additional demands may be placed

on smaller enterprises in the form of investments in better technology, fair working conditions, and

the training or recruitment of more highly-skilled employees. Sustainability concerns may also

present opportunities as new markets emerge in response to consumer and industry expectations,

environmental, social and governance (ESG) standards, sustainability legal requirements, and

34 Instruments include the UNIDROIT-UNCITRAL Model Law on Warehouse Receipts (2024), UNIDROIT Model Law on Factoring (2024), Convention on International Interests in Mobile Equipment (2001)(“Cape Town Convention”) and its protocols, specifically the Protocol on Matters specific to Mining, Agricultural and Construction Equipment (“MAC Protocol”), UNCITRAL Guide on Access to Credit for MSMEs (2023), UNCITRAL Model Law on Secured Transactions (2016) and accompanying legislative guides, among many others. 35 FAO (2017), State of Food and Agriculture: Leveraging Food Systems for Inclusive Rural Transformation.

16. UNIDROIT – Study LXXXC – Draft Introduction

increasing interdependence among value-chain actors. Irrespective of the circumstances, the desire,

need, or requirement to conduct agrifood activities in a manner that is socially, economically and

environmentally sustainable may be a significant driver for engaging in a collaborative endeavour.

59. Sustainable development goals (SDGs). Collaborative legal structures may contribute to the

achievement of certain SDGs, particularly SDGs 1 (No poverty); 2 (Zero hunger); 5 (Gender

equality); 8 (Decent work and economic growth); 12 (Responsible consumption and production); 15

(Life on land); and 17 (Partnership for the goals). Collaborative legal structures may contribute

indirectly towards the reduction of poverty through more direct effects on alleviating hunger by

improving agricultural productivity and livelihoods of smallholders through improved access to value

chains and access to credit. They may contribute towards gender equality since the legal and digital

structures can foster women’s full and effective participation in agrifood value chains. They may

contribute towards decent work by encouraging legal formalisation of agri-MSMEs and towards

economic growth by establishing the foundations for improved innovation. They may encourage more

responsible consumption and production through better management of resources as a result of

collaboration. The extent to which they may do so depends on a variety of factors, including the

choices regarding different legal features and internal organisation. Conversely, the SDGs can have

implications for the legal structure of an agricultural enterprise, for example, by encouraging

inclusiveness and diversity. Accordingly, social, economic, and environmental sustainability is taken

into account throughout the CLSAE Guide.

60. Sustainable outcomes and collaborative operations. The impact of collaboration on

sustainability can be viewed from different perspectives. Sustainability may be the very object of a

collaboration or may have an impact thereon. The CLSAE Guide demonstrates how multiparty

contracts, cooperatives, companies, and digital platforms may help pursue sustainable outcomes. In

certain cases, the Guide demonstrates how sustainability may entail changes in the features of the

collaborative legal structures considered. Collaboration can foster sustainability in terms of practices

and outcomes generated, for example, by rendering the adoption of better technology more feasible

through economies of scale, as in the case of collaboration among a group of producers with a digital

service provider for the adoption of precision agriculture technology that enables more efficient use

of water and agrochemicals. Collaboration can also encourage awareness of, and compliance with,

sustainability standards within the governance of the legal structure by embedding sustainability

provisions throughout the foundational documents and internal organisational rules. For example, a

company might require a gender-balanced board of directors or adopt an ESG policy, a cooperative

might adopt internal regulations on organic produce specifications, or a multiparty contact might

require that all those who perform services under the agreement must be party to the contract,

regardless of gender or social standing.

61. Bearing the costs of sustainability. An important question for consideration is who bears the

risk and cost of transitioning to sustainable practices within the agrifood value chain, with respect to

both negative and positive externalities. This entails not only higher costs of the transition itself,

such as the introduction of new technologies and training, but also the costs associated with

monitoring sustainability performance. Also to be considered when discussing the costs of

implementing sustainable practices are the incentives, profitability, and returns on investment for

smallholders and agri-MSMEs. The Guide has been designed to assist smallholders and agri-MSMEs

to address sustainability challenges from institutional, organisational and transactional perspectives

by considering the role of multiparty contracts, cooperatives, companies, and digital platforms to

support compliance with sustainability standards and fairly distribute allocation of the costs of

compliance.

62. Policy decisions for early adopters. Differentiating legally mandated and voluntary

sustainability goals is necessary. A collaborative legal structure would most likely be legally bound

to comply with mandated goals or face repercussions; in pursuing sustainability goals on a voluntary

basis, the enterprise might be considered an “early adopter”, with its attendant risks. For example,

in order to become environmentally sustainable, it might be necessary to incur costs that make the

enterprise economically non-viable, especially if its competitors do not introduce similar changes.

UNIDROIT – Study LXXXC – Draft Introduction 17.

Although this conflict between business viability and environmental sustainability may dissolve over

time if the competitive divergence eventually disappears through the introduction of mandatory

sustainability requirements, this dilemma raises an important policy decision.

63. Sustainability and access to credit. Financial institutions are increasingly developing

frameworks for so-called “green finance”, which entails investment in economic activities that meet

given environmental and social requirements. A comprehensive assessment of costs and benefits

can also help businesses mobilise financial resources for the transition to sustainability, opening up

opportunities for new investment and upscaling.36 Collaboration that enables sustainability will then,

in turn, also facilitate access to finance. Financial institutions may be more inclined to finance

collective rather than individual projects that generate higher impact for communities and on the

environment.

64. Sustainability and digitalisation. Digitalisation may facilitate efficiencies and at times

contribute to sustainability through the introduction of improved technologies, data collection, etc.

Sustainable process requirements may be facilitated by precision farming. While intangible digital

assets might seem of immaterial impact, it is becoming apparent that digital platforms and artificial

intelligence can be used to enhance oversight and compliance. They permit compliance control and

corrective actions at much lower costs than centralised control by chain leaders through

intermediaries.

65. Corporate sustainability due diligence. In recent years, efforts have been made at

international,37 regional38 and national levels39 to impose a general duty on businesses, specifically

incorporated companies and their directors, to identify actual or potential adverse impacts on human

rights and environmental adverse impacts arising from a company’s own operations, or those of their

subsidiaries, or established business relationships (direct and indirect suppliers). Most of these

initiatives − to impose standards beyond the legal minimum − are directed at large companies;

however, there can be a trickle-down effect on smallholders and agri-MSMEs operating in the value

chain of the companies concerned and a cascading effect of breaches of sustainability obligations

along the value chain. Although one of the objectives of the CLSAE Guide is to improve access to

value chains, the focus of sustainability should be understood in relation to the collaborative legal

structure itself, rather than the value chain.

66. Sustainability and self-regulation. In response to sustainability concerns, those interested in

structuring a collaboration may consider one of the certification schemes that already exist, such as

the certification provided by the International Organization for Standardization (ISO) or the B-Corp

Certification. Self-regulation may help ameliorate the adverse impacts on human rights and the

environment by providing stakeholders with an overview of an organisation’s operations and risks.

Third-party accountability is thus provided by creating standardised practices, enabling value chain

governance, facilitating internal culture change, and encouraging enterprises to set standards beyond

legal minimums.

36 FAO (2023), The State of Food and Agriculture: Revealing the true cost of food to transform agrifood systems. 37 OHCHR (2011), Guiding Principles on Business and Human Rights; OECD (2023), OECD Guidelines for Multinational Enterprises on Responsible Business Conduct; ILO (2022), Declaration on Fundamental Principles and Rights at Work and its Follow-up; ILO (2016), Resolution concerning decent work in global supply chains; ILO (2022), Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy. 38 European Parliament and Council. (2024). Directive (EU) 2024/1760 of 13 June 2024 on corporate sustainability due diligence and amending Directive (EU) 2019/1937 and Regulation (EU) 2023/2859. Official Journal of the European Union. 39 For example, the California Transparency in Supply Chain Act of 2010, the United Kingdom’s Modern Slavery Act of 2015 and Australia’s Modern Slavery Act of 2018. Although these initiatives require companies to disclose their efforts, usually through annual statements, they do not create any substantial obligation, and non- compliance results mainly in reputational risk. By contrast, the 2017 Duty of Vigilance Law adopted in France establishes an obligation for companies to implement a “vigilance plan” to identify risks and prevent serious violations to human rights and the environment.

18. UNIDROIT – Study LXXXC – Draft Introduction

2. Digitisation and digitalisation

67. Growing reliance. Collaboration is also driven by the technological transformation of

agriculture. Similarly to sustainability, digitisation and digitalisation have contributed towards the

reorganisation and centralisation of value chains. In addition, the possibility to market products

through digital platforms may exclude or reduce the role of some traditional intermediaries while

allowing new enterprises to emerge, such as digital service providers. The question of whether

disintermediation is modifying the legal structures for collaboration and if digitalisation is favouring

the creation of a specific legal structure and/or the emergence of new digital intermediaries that

directly connect input providers and farmers is a notable development explored in the CLSAE Guide.

Along with the inputs traditionally employed in the agrifood value chain (seeds, agrochemicals,

fertilisers, agricultural machinery, etc.), data is gaining importance as a new production factor

capable of changing the structure and operational routines of agricultural enterprises. This is due to

the fact that farming is becoming increasingly reliant on the digitisation of data and the digitalisation

of its processes and operations. In this context, the adoption of collaborative legal structures which

take these new trends into account is essential.

68. Impact of technology on collaborative legal structures. Information and communication

technologies (ICT), digitised data, and digital platforms represent an important motivator for

collaboration in agriculture. International organisations operating in the agricultural sector, such as

FAO and IFAD, are promoting ICT for Development (ICT4D) to foster rural development. Accordingly,

the CLSAE Guide includes the role and impact of digital technologies, data, and digital platforms in

its analysis of the collaborative legal structures. The Guide describes the risks, challenges, benefits,

and opportunities that can derive from taking part in collaboration with rights over or access to data.

69. Digitisation, digitalisation and digital platforms. While digitisation refers to the process of

converting analogue data into a digital format, digitalisation involves the integration of digital

technologies into business operations to optimise processes, enhance customer experiences, and

drive innovation. A digital platform is a two-sided or multi-sided online marketplace which facilitates

value-enhancing transactions between two or more groups. Analysis of the legal issues related to

these aspects will not be exhaustive in the Guide; rather, it will be limited to those issues and factors

that can affect the operation of the legal structures that are considered , while adopting a risk-

mapping approach.

70. Extent of digitisation and digitalisation and among smallholders. Although digitalisation of

agriculture has increased considerably over the past decade, adoption rates vary significantly by

region and demographic group.40 In sub-Saharan Africa (SSA), 84% of digital agriculture solutions

target smallholders, with mobile-based advisory platforms, mobile money, and e-commerce playing

a central role. This growth is driven by strong government support, partnerships with mobile network

providers, and targeted initiatives for youth, making SSA a leader in digital adoption rates among

rural farmers. Nonetheless, barriers persist, including high data costs and limited access to advanced

tools such as blockchain, which are more accessible to larger agribusinesses than smallholders. In

Southern Asia, digital agriculture solutions have expanded as well, but with lower engagement from

smallholders, who represent only 33% of users. The region’s digital growth has been concentrated

among larger, wealthier farmers, who benefit from emerging technologies like data analytics and AI

for farm management, while smallholders face greater access and affordability challenges. In Latin

America and the Caribbean (LAC), over half of digital agriculture users are smallholders, though the

adoption of advanced digital tools remains limited, and disparities persist. West and Central Asia,

Oceania, and Northern Africa show smaller digital footprints but use the few available tools

exclusively for smallholders. Across regions, female participation is highest in Southern Asia and

40 GSMA AgriTech and Digital Agri Hub (2022), Assessment of Smart Farming Solutions for Smallholders in Low and Middle-Income Countries

UNIDROIT – Study LXXXC – Draft Introduction 19.

Northern Africa, while SSA leads in youth involvement, attributed to government-backed youth

initiatives and a demographic push towards a younger workforce.41

71. Policy support for equitable access. Since the COVID-19 pandemic, digital solutions have

accelerated globally, especially as physical agricultural support services became restricted. This shift

saw increased use of SMS advisories, mobile money transactions, and remote e-commerce access,

especially for input supplies, highlighting the versatility of digital tools in bridging information and

service gaps. Although the rate of new digital solutions has slowed in recent years, digital adoption

continues to expand as farmers increasingly depend on these platforms for critical agricultural needs.

The varied rates of digital adoption underscore the importance of policy and infrastructure support

in promoting equitable access to digital tools for all smallholders.

72. Digital inclusion. To bridge the digital divide and promote digital inclusion, cooperatives and

companies involving smallholders have increasingly adapted traditional legal and organisational

structures.42 They focus on people-centred design, gender responsiveness, and accessible digital

solutions to ensure that marginalised groups also benefit from technological advances. For example,

some cooperatives have introduced internal regulations mandating gender mainstreaming in digital

initiatives, which includes integrating cultural and practical considerations into digital platforms to

support women’s roles in rural economies. Additionally, to protect data privacy, some regions have

enacted normative requirements for secure data handling, where cooperatives must implement

reporting protocols and business tools specifically designed to safeguard the data collected from

smallholders, ensuring compliance with international data protection standards.

73. Evolving normative requirements. Another significant development is the establishment of

offline service delivery options and support for digital intermediaries, such as telecentres, that offer

rural communities access to digital services and skills training. To address potential data misuse,

these frameworks increasingly include remedies and dispute resolution mechanisms that allow

smallholders to act in case of unauthorised data usage. These evolving normative requirements and

legal adaptations ensure that digital advancements reach marginalised groups, fostering greater

equity in the agricultural sector and supporting rural transformation through inclusive digitalisation.

74. Coordination of diverse users and large numbers. Digital platforms are also increasingly

effective in addressing the practical challenges of coordinating diverse and geographically dispersed

smallholders.43 These platforms improve communication, streamline logistics, and enhance access

to market information, crucial for smallholders who face challenges due to remote locations and

limited resources.44

III. THE COLLABORATIVE LEGAL STRUCTURES COVERED IN THE GUIDE

75. Legal structures and digital platforms. This Guide analyses three categories of collaborative

legal structures, namely multiparty contracts, cooperatives, and companies. Additionally, digital

platforms are also considered as a tool increasingly used for collaboration. These structures are not

exclusive options in competition with each other. Instead, they are a suite of solutions that

smallholders and agri-MSMEs may use both individually and in combination.

76. Multiparty contracts. In this Guide, a multiparty contract is defined as a contract concluded

by three or more parties (enterprises)45 for collaborating for the fulfilment of common objectives,

41 ILO (2023), Women and men in the informal economy: A Statistical Update. 42 FAO (2024), Towards digital inclusion in rural transformation. 43 FAO (2024), Towards digital inclusion in rural transformation. 44 An example of this is the “Smart Milk” platform launched in Kazakhstan by FAO and the European Bank for Reconstruction and Development (EBRD), a platform that allows dairy farmers, milk collectors, and processors to share essential information on production practices and food safety, thereby promoting higher standards across the value chain. It is discussed in the Chapter on Digital Platforms. 45 For the purpose of this Guide, a contract between two parties that provides rules for the entry of additional parties is also considered a multiparty contract.

20. UNIDROIT – Study LXXXC – Draft Introduction

the realisation of common project(s), and (or) for carrying on common activities. Participating

enterprises can be natural or legal persons. This contract should be distinguished from agreements

between enterprises and stakeholders (for example, NGOs). Two main features of multiparty

contracts derive from this definition: (i) it is a contract that has at least three parties,46 and (ii) it

serves the purposes of establishing, developing and facilitating collaboration among parties to pursue

common objectives. A multiparty contract can be concluded among only private entities or among

private and public entities.

77. Cooperatives. This Guide uses the term “cooperatives” as defined by the International

Cooperative Alliance (ICA) Statement on the co-operative identity and the 1995 International Labour

Organization (ILO) Recommendation N°193 on the Promotion of Cooperatives, as “[…] an

autonomous association of persons united voluntarily to meet their common economic, social and

cultural needs and aspirations through a jointly owned and democratically controlled enterprise”.

78. Companies. In this Guide, companies are those business organisations that operate under a

legally recognised form the foundational objective of which is to generate profit. This category also

includes public benefit companies and other hybrid forms where profit-making is associated with the

pursuit of social and environmental objectives. Although it is nearly impossible to define and

categorise the various legal forms available to profit-oriented business organisations in a clear and

universal manner that would satisfy all legal systems and national laws, most jurisdictions offer a

choice of legal structure that includes some variation of the following: (i) general and limited

partnerships, (ii) limited liability companies, and (iii) corporations.

79. Digital Platforms. The digital platform is a tool of collaboration which is functionally distinct

from multiparty contracts, cooperatives, and companies. While digital platforms can be developed

and used by these collaborative legal structures, they perform functions that merit separate,

additional analyses. In this Guide, digital platforms are defined as online infrastructures within which

individuals and organisations can interact, making possible the exchange of goods and services

(transaction platforms) or the development of new digital products and services (innovation

platforms).

80. Legal complexity, applicable law. Collaborative legal structures operate within complex sets

of laws and regulations. These legal frameworks are particular to each form. Legal complexity is

amplified for those collaborative entities that seek access to cross-border value chains due to the

different jurisdictions of the actors involved. One of the key issues to be addressed in such

circumstances will be the applicable law (i.e., participants will be required to determine which

jurisdiction’s laws will apply to various aspects of their collaborative endeavour, including succession

law, land law, etc.). A legal entity, such as a cooperative or a company, must usually be created

according to the law of the State where it seeks registration and will be domiciled. Depending on the

circumstances, it might be more appropriate for the applicable law governing certain activities of a

legal structure to be that of another jurisdiction (e.g., the State where the product is being

processed). As noted above, agricultural enterprises operate within the agrifood system with its legal

complexities that include laws governing food safety, phytosanitary measures, etc. Many of these

issues are covered under international legal regimes and trigger application of international law, such

as the laws of international trade. Another aspect of the application of international law is

extraterritoriality and the reach and effect of domestic law in relation to global value-chain

governance (e.g., human rights and environment).

81. Similarities and differences of legal structures. The fundamental similarities and differences

between the legal structures for collaboration covered in the Guide are explained by considering,

among other things, their objectives, formation and entry requirements, governance and

management, financing and distribution, decision-making procedures, scope of liability, remedies

and sanctions for non-performance, the requirements for exit and dissolution, termination and

46 Id.

UNIDROIT – Study LXXXC – Draft Introduction 21.

mechanisms for dispute prevention, and resolution.47 These topics are developed in the Chapters

that consider each legal structure and digital platform (see Chapters I-IV) and are also considered

in the comparative Chapter V.

82. Complementarity of legal structures for collaboration. The legal structures for collaboration

examined in the CLSAE Guide may operate individually or be combined. For example, a multiparty

contract can be combined with a company to manage common resources. A company can use

agreements and contracts among the members to govern specific collaborative projects, whilst the

main infrastructure remains regulated by company law. The combination of legal structures increases

complexity, but it can maximise the advantages associated with each legal structure.

47 These topics reflect the main sections developed in each Chapter devoted to the legal structures in the CLSAE Guide and the comparative variables considered in Chapter V on comparing and choosing the collaborative legal structure.

UNIDROIT 2026 – Study LXXXC – Draft Chapter I 22.

CHAPTER I

MULTIPARTY CONTRACTS

TABLE OF CONTENTS

I. INTRODUCTION 24

A. OVERVIEW 24

B. DIFFERENCES BETWEEN HORIZONTAL AND VERTICAL CONTRACTS 25

C. DIFFERENCES BETWEEN MULTIPARTY AND BILATERAL CONTRACTS 25

D. DIFFERENCES BETWEEN EXCHANGE AND ASSOCIATIVE MULTIPARTY CONTRACTS 26

E. USING MULTIPARTY CONTRACTS FOR COLLABORATION IN AGRICULTURE 27

F. REGULATION OF MULTIPARTY CONTRACTS IN AGRICULTURE 28

II. DESIGN AND CONTENT 29

A. FACTORS AFFECTING DESIGN AND CHOICE 29

B. TERMS AND CONTENT 30

C. OBLIGATIONS AND INTERACTIONS WITH THIRD PARTIES 31

D. MODIFICATIONS 32

III. ENTRY REQUIREMENTS AND FORMATION 32

IV. GOVERNANCE AND DECISION-MAKING 33

V. CONTRACTUAL EXECUTION 34

A. INDEPENDENT AND INTERDEPENDENT PERFORMANCE 35

B. THE ROLE OF GOOD FAITH AND FAIRNESS 36

C. DIGITISATION AND DIGITALISATION 36

D. RESOURCE MANAGEMENT AND ASSET PARTITIONING 39

E. INVOLVEMENT OF THIRD PARTIES 42

F. MONITORING CONTRACTUAL PERFORMANCE 42

G. CHANGE OF CIRCUMSTANCES AND SUPERVENING IMPOSSIBILITY 42

VI. NON-PERFORMANCE 43

A. OVERVIEW 43

B. FUNDAMENTAL NON-PERFORMANCE 43

VII. JOINT AND SEVERAL LIABILITY 44

A. LIABILITY OF CONTRACTING PARTIES TOWARDS EACH OTHER 44

B. LIABILITY TOWARDS THIRD PARTIES 45

VIII. REMEDIES FOR NON-PERFORMANCE 45

A. GENERAL PRINCIPLES 45

B. TYPE OF NON-PERFORMANCE AND AFFECTED INTERESTS 47

C. DECISION-MAKING ON CHOICE OF REMEDY 48

D. PARTIES SEEKING REMEDIES 48

UNIDROIT 2026 – Study LXXXC – Draft Chapter I 23.

E. CHOICE OF REMEDIES 49

F. CORRECTIVE REMEDIES 50

G. RESTITUTION 51

H. PARTIAL OR COMPLETE TERMINATION 51

I. COMPENSATION OR DAMAGES 52

J. HIERARCHY OF REMEDIES AND PRINCIPLES OF STABILITY AND

PROPORTIONALITY; DISPUTE RESOLUTION MECHANISMS 54

K. DUTY TO MITIGATE 55

IX. EXIT, DISSOLUTION AND POST-CONTRACTUAL OBLIGATIONS 55

A. EXIT 56

1. Voluntary exit 56 2. Forced exit (exclusion) 58

B. DISSOLUTION OF THE CONTRACT 59

C. POST-CONTRACTUAL OBLIGATIONS 60

24. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

I. INTRODUCTION

A. Overview

1. Scope. Agri-food value chains, both domestic and global, contain a variety of contracts.

Different types of contracts govern processes from input provision, production, processing, and

distribution. These contracts may include linked bilateral contracts or multiparty contracts (MPC).

However, analysis of collaborative forms rarely includes the entire chain. Accordingly, this Chapter

aims to identify the main issues concerning the use of multiparty contracts as a legal form for

collaboration across agri-food value chains.

2. Contents. The first section of this Chapter introduces the multiparty contract and explains its

unique characteristics as distinct from other contractual forms, the function of collaborative MPCs in

global value chains, and regulation. The second section outlines the design and content of MPCs,

with a focus on choice of terms and obligations. The third and fourth sections review entry

requirements and formation, governance, management and decision-making. The fifth section

explains contractual execution, with details on independent and interdependent performance,

resource-sharing, use of a common fund, and performance monitoring. The sixth section considers

non-performance, followed by the seventh section on joint and several liability. The eighth section

reviews remedies for non-performance, including a hierarchy of choices that include correction,

restitution and compensation (damages). The final section explores the options of voluntary and

forced exit, dissolution of the MPC and post-contractual obligations.

3. Definition and main features. In this Guide, an MPC is defined as a contract concluded by

three of more parties48 for collaborating for the fulfilment of common objectives, the realisation of

common project(s), and (or) for carrying on common activities. This type of contract should be

distinguished from partnerships49 and agreements between enterprises and stakeholders (for an

explanation of the differences between exchange contracts and MPCs, see Section D). Two main

features of the MPC derive from this definition: (i) it is a contract that has at least three parties,50

and (ii) it serves the purposes of establishing, developing and facilitating collaboration among parties

to pursue common objectives. An MPC can be concluded among only private entities or among private

and public entities.51

4. Long-term, oral or written. An MPC is usually long-term in order to allow the parties to pursue

their common objectives. This affects the governance and execution of the contract. An MPC, as any

other contract, may be concluded orally or in writing; however, written form is advisable.

5. Additional features. Beyond the long-term perspective, MPCs are suited to establishing and

governing collaboration, including strategic collaboration. MPCs have: (i) a collective structure,

usually with regulated entry and exit; (ii) a governance structure to enable participation in decision-

making, to allocate management power internally, and to monitor cooperation; (iii) mechanisms for

sharing physical and intangible assets; and (iv) mechanisms for sharing risks, profits and liabilities.

6. No separate legal entity. The MPC does not usually constitute a separate legal entity and

consequently it requires fewer formalities than cooperatives and companies. With the exception of

specific kinds of MPCs,52 or contractual joint ventures for which some jurisdictions have specific

48 For the purpose of this Guide, a contract between two parties that provides rules for the entry of additional parties is also considered an MPC. 49 For more information on the distinction between multiparty contracts and partnerships see the Chapter on Companies paragraph […]. 50 Id. 51 Although the focus of the Guide is on collaboration among private parties, involvement of public entities may be relevant in practice as regards their role as financiers or for capacity building services, training, etc. 52 An example is the network contract, which is legally defined in certain jurisdictions.

UNIDROIT 2026 – Study LXXXC – Draft Chapter I 25.

legislation, the MPC is governed largely by general contract law, which usually enables greater party

autonomy to determine the definition, scope and structure of the mechanism.

7. Agricultural or food contracting. This Chapter covers MPCs throughout the agri-food sector,

encompassing agricultural commodities, as well as food products and activities in the field of

production, processing, and distribution (see Introduction, para. […]). Nonetheless, it is important

to acknowledge that the environment of agricultural contracting usually differs from that of food

contracting. These differences may be reflected in the degree of formality and incompleteness of the

contract. Informal and incomplete contracts in agriculture call for different enforcement strategies.

Enforcement with reputational mechanisms, for example, may have greater influence in small

communities where micro and small agricultural enterprises operate. Hence, whether the content

concerns an agricultural or a food contract does matter in terms of defining the business and social

environment within which collaboration takes place.

B. Differences between horizontal and vertical contracts

8. Horizontal and vertical contracts distinguished.53 Multiparty contracts may be either

horizontal or vertical.54 Horizontal contracts coordinate parties operating at the same level of the

chain (for example, agricultural producers). They are often constructed as MPCs, such as, for

instance, strategic alliances, contractual joint ventures or consortia. Vertical contracts coordinate

parties operating at different levels of the chain (for example, a vertical MPC could be undertaken

between producers and one or more of the following: input providers (products or services),

certifiers, utility providers, processors, traders, distributors, retailers, financial institutions, insurance

companies, NGOs, municipalities or governments, digital service providers). Vertical contracts are

often bilateral contracts between any two parties along the chain. By coordinating parties from

different segments they may reduce the length of the chain. However, vertical contracts can be

structured as an MPC involving two or more parties within the same contract. A vertical MPC can

include several producers and a buyer or several producers and an input provider or an input

provider, a producer and a processor. Multiparty contracts may be linked to bilateral contracts.

C. Differences between multiparty and bilateral contracts

9. Multiparty or linked bilateral contracts as alternatives. A collaborative contractual relationship

can be constructed either as an MPC or as a set of bilateral contracts that are linked when the

performance by one party is conditional on that of a party privy to the contract. For example, the

growing of coffee beans could be organised around an MPC among several parties that include various

input providers (of seeds, fertilisers, robots), the producer, processor and trader. Alternatively, a set

of bilateral contracts could be concluded: one between each input provider and the producer, one

between the producer and processor, and one between the processor and trader. These bilateral

contracts could be linked using contractual terms, for example, terms that impose compliance with

a particular set of standards incorporated into each bilateral contract (known as contractual

“cascading”).55 The choice between these two alternatives may be influenced by the factors discussed

below.

53 The horizontal and vertical contracts under consideration are collaborative horizontal and vertical contracts. A standard sale between a farmer and an input provider with no long-term perspective and no collaborative content would be an example of a vertical contract outside the scope of analysis. 54 For example, a vertical MPC could be undertaken by four parties operating in the cotton production sector among a farmer committee interested in the production of high quality raw seed cotton, a bank willing to provide financial assistance, a National Cotton Development Authority willing to provide logistical and technical support, and the so-called “ginners” willing to provide a market for the seed cotton. An example of a horizontal MPC would be one undertaken among the farmers themselves. 55 On the role of bilateral contracts as means of cooperation in the agricultural chain, see UNIDROIT/FAO/IFAD Legal Guide on Contract Farming, presenting the characteristics of contract farming as a paradigm bilateral agreement between a producer and a buyer.

26. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

10. Coordination. The choice may depend on the need to coordinate based on interdependence

among various actors (input providers, technology providers, farmers, financial providers, local

indigenous communities, etc.). The requirement to comply with quality, safety and sustainability

standards along the entire chain intensifies interdependence and may serve as a driver for the MPC.

Increasingly, the need to coordinate multiple actors along the chain prompts the choice for

collaborators between several bilateral connected contracts, each dealing with a single aspect of

production (or processing and, to a large extent, distribution), or a multiparty contract. However,

governance of an MPC comes with a “cost”; the parties must agree on the standards to be used.

11. Coordination and governance costs. In general, MPCs are used when the costs associated

with coordinating several bilateral transactions are high and the costs associated with governing the

participation of multiple parties are low. Conversely, linked bilateral transactions are more often used

when coordination costs are low and governance costs are high.

12. Contractual power. MPCs tend to be used when power is allocated relatively evenly, whereas

linked bilateral contracts tend to be preferred when power is asymmetrical. An even distribution of

decision-making power may facilitate governance in a multiparty relationship, where consensus must

be reached among several parties based on the principle of “one party, one vote”, whereas in an

asymmetrical power relationship, the party with more power might be able to exercise it more easily

in a bilateral contract.

13. Comparative advantages. Contractual performance and implementation can be easier in

MPCs than with linked bilateral contracts because the former offer governance structures for

collective decision making and monitoring. Moreover, it may be easier to modify a single MPC should

unanticipated circumstances arise as opposed to amending several bilateral contracts, which may

require more time and higher coordination costs. MPCs may also provide better responses to

individual non-performance and identify remedies that ensure the continuity of production,

processing, and distribution (see Comparative Chapter […]).

D. Differences between exchange and associative multiparty contracts

14. Exchange and associative contracts distinguished. Many legal systems draw a distinction

between exchange contracts and associative contracts. Exchange MPCs focus on the organisation of

exchanges of goods and services among contractual parties. Associative MPCs imply a common

project usually supported by financial and non-financial resources. The distinction is made according

to the circumstances of the contract. Parties either only exchange goods and services, or they

collaborate in the execution of one or multiple projects. This distinction may be relevant but is not

decisive to regulate the contract and the performances.

15. Connection with horizontal and vertical collaboration. Exchange MPCs usually involve vertical

collaboration (i.e., between different actors along the value chain), while associative MPCs can

involve both vertical and horizontal collaboration.

16. Exchange contracts. Exchange MPCs are usually contracts employed by multiple parties for

complex exchanges of goods and/or services. A common example is in contract farming when

farmers exchange their produce for other physical or intangible assets, such as know-how or the

licence to patents. Another example might be a vertical MPC among four parties operating in the

cotton production sector –national regulators, farmers, ginners, and financial institutions.56 Yet

56 In this contract, the National Cotton Development Authority provides the planting seed to the farmers, whose duty is to grow the cotton and sell it to the ginner companies, who, in addition to buying the produce, are required to provide extension services. The bank is required to open individual accounts and loans to individual farmers who qualify. The National Irrigation Board maintains the irrigation infrastructure.

UNIDROIT 2026 – Study LXXXC – Draft Chapter I 27.

another example might be a tripartite loan agreement between farmers, a bank, and a processing

company.57

17. Associative and network contracts. Some legal systems recognise several forms of

associative MPCs. For example, the Italian network contract is an MPC where two or more

entrepreneurs try to individually and collectively increase their innovative capacity and

competitiveness. On the basis of a common network programme, the entrepreneurs cooperate in

predetermined forms and areas relating to the exercise of their respective businesses; and/or

exchange information or services of an industrial, commercial, technical or technological nature; or

jointly exercise one or more activities that fall within the scope of their business.

18. Overlap with other legal forms. In certain legal systems, associative MPCs are partnerships,

cooperatives or companies, instead of contracts. For example, farmers may jointly acquire a machine

for use on their own farms. Depending on the legal regime, such a “machinery pool” might be a

community of property, a civil law company similar to the general partnership under English law, a

cooperative, or any other kind of company. However, when such a machinery pool exists only among

the parties without the formation of a separate legal entity,58 it falls within the definition of the MPC

as adopted in this Guide.

E. Using multiparty contracts for collaboration in agriculture

19. Specific features of the MPC. As outlined in the Introduction to the Guide, collaboration may

be driven by various needs: to combine skills; to share resources; to implement common standards

along the value chain to achieve systemic goals – such as access to international markets; or to

coordinate the providing of technology (See Preface, para. 2). The MPC form has certain specific

features that can help achieve these collaborative goals, as explained below.

20. Aggregation of skills and inputs. A vertical MPC enables micro and small farmers to aggregate

their access to skills, know-how, technologies, or machinery and seeds. Access to these resources

can be encouraged by including the commodity or service provider in the MPC as a party, or by

arranging a procurement contract with multiple buyers and one seller. An arrangement with higher

levels of complexity may require that the buyers (farmers) be able to source multiple services using

the same contract, and be able to directly coordinate with the services’ suppliers.

21. Resource sharing. The MPC also facilitates resource sharing, either as the primary objective

of the contract or as the mechanism used to pursue another common objective. For instance, a

vertical MPC arises when several parties collaborate to purchase tractors using a contract that both

regulates the purchase of the tractor and the use of the tractor by the contracting parties. A horizontal

MPC concerning resource sharing arises when parties share a common technology that both ensures

proper water treatment and allocates the treated water fairly among different users.

22. Considerations in resource sharing. There is an important distinction between sharing

strategic resources, which are irreplaceable and indispensable to perform the collaborative endeavour

(as in the examples in above paragraph), and non-strategic resources. In principle, resource-sharing

may also be linked with better access to finance, given that common resources become security for

financing. However, the use of common resources as security may conflict with the need for the

resource to further the collaboration.59

57 Under this agreement, the bank and the company jointly select the farmers that would be beneficiaries of the loan. The bank lends the selected farmers the necessary funds to develop a plantation, while the company provides extension services and other technical advice and assistance to the farmers, who develop the plantation, sell the product to the company and repay the loan. 58 See also the considerations regarding “partnerships” in Chapter III on Companies. 59 For example, a creditor’s seizure of the technology would undermine rather than support the execution of the common project. Moreover, a financing party may prefer to obtain priority over general creditors by means of a lien against individually owned assets (as opposed to common property) or against assets that are segregated

28. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

23. Implementing common standards. Many agri-food products require coordination across the

value chain to ensure that the final product meets specified standards for food safety, quality control,

certification and, increasingly, sustainability. Accordingly, coordination of different stages in the value

chain has become extremely relevant since compliance with transnational standards is determined

by the interdependence of each party’s performance. As was noted above, the MPC form can be

selected to ensure such coordination and compliance with transnational standards by producers,

processors, and distributors. MPCs can be especially useful when the implementation of the standard

requires performance interdependence among the parties.

24. Achieving systemic goals. The use of an MPC may be appropriate when a concerted effort is

required by multiple parties to improve an overall systemic or structural change, as opposed to

achieving a specific, individual outcome. For example, where a plant disease is affecting a given area,

rather than using an agrochemical, farmers may decide to use an environmentally friendly alternative

that requires participation of all farmers; failure by one will lead to proliferation of the disease to the

detriment of all. In order to ensure compliance, an MPC could be used to create a consortium of

farmers and to enact an internal regulation that addresses both the need for technical support and

monitoring. This could be achieved by providing recourse to internal advisors, public bodies, or

external experts. Oversight could be undertaken by an internal supervisory committee, through

controls performed by a third party such as a certification body, or through platforms that collect

data in the field. The actors involved in providing both technical support and monitoring might also

become parties to the MPC.

25. Coordinating technology provision. An MPC can help with coordinating the provision of

technology to a large number of farmers that operate in the same area and are subject to similar

risks. Parties along a supply chain - for instance, input providers and farmers with complementary

knowledge and skills - may need to collaborate to improve production and reduce risks of natural

events that may negatively affect the final result (i.e., harvest). It is important to consider in this

context how digitisation is influencing both the scope and intensity of collaboration (discussed below

in section V.C).

F. Regulation of multiparty contracts in agriculture

26. Domestic or cross-border. An MPC can be concluded between parties that are located within

a single State or in multiple States. Contracting parties will need to consider the relevant domestic

legal framework as well as party autonomy when drafting an MPC. If the parties are located in more

than one jurisdiction, parties will also have to make decisions concerning applicable law and the lex

fori is generally allowed under relevant private international law.

27. Domestic legal framework. At the State level, regulation of the MPC form may fall under

general contract law, and/or agricultural or rural law. Whereas general contract law most often

devotes very little attention to MPC, their use is well known in business practice, e.g. in the form of

contractual joint ventures, strategic alliances, pooling agreements, economic interest groupings,

networks contracts. In some jurisdictions these forms have been regulated by specific statutory

norms, normally applicable across sectors. When an MPC is concluded outside a specific legal

framework that is provided by law for that particular multiparty collaboration, parties should verify

whether, under applicable law, a court could ex post qualify that collaboration as a partnership or a

de facto company for the purpose of applying partnership or company law as a consequence (see

Chapter III on Companies). As regards the distinction between general contract law and

agricultural/rural law, many legal systems differentiate between agricultural contracts (used by agri-

entrepreneurs) and general commercial contracts for the supply of goods and services (used by other

enterprises such as input producers or distributors that do not qualify as agri-entrepreneurs). For

the purpose of the CLSAE Guide, this distinction is not considered necessary and the broader scope

from the debtor’s personal assets, as occurs in limited liability companies (see chapter on Companies, section IV). These limitations may be partially overcome through the creation of (trust-like) segregated funds within the MPC.

UNIDROIT 2026 – Study LXXXC – Draft Chapter I 29.

is assumed to include all commercial contracts that can be used to engage in both horizontal and

vertical collaboration as applied to agri-food businesses.

28. Freedom of contract and its limitations. Freedom of contract characterises MPCs. Parties may

normally choose the contractual scheme to be used for collaboration (whether a joint venture, a

consortium, a network contract or any other available form under domestic contract law or

autonomously designed by the parties), the number and type of parties, the rules on entry and exit,

the rights and obligations for the parties, the risk and liability allocation, and the like. The principle

of freedom of contract can be limited by legislation, such as mandatory rules and general clauses. It

can also be limited through private rules, for example, a contractual obligation that all participants

in the value chain must use the same standard terms and conditions imposed by the lead firm through

a supplier code or the like.

29. Limitations in an agricultural context. The parties’ freedom of contract is often more limited

for agricultural contracts than under general contract law because domestic legislation tends to

protect farmers, especially MSMEs. Parties with weaker bargaining power can be protected either

through mandatory rules (e.g., requirements of written form, minimum content) or general clauses

(e.g., fairness and good faith). Consequently, contracts among producers may be different from

contracts between producers and other entrepreneurs along the value chain. Limitations of freedom

of contract usually occurs when contractual power is unevenly distributed.

30. Standard terms and conditions. The content of a contract within a GVC is often determined

by the chain leader in its Standard Terms and Conditions (STCs). The chain leader is usually the

buyer of the final product or service but it can also be an input provider, especially in the case of

precision farming. The content of the chain leader’s STCs may include performance and price

definition criteria. These STCs may also cover safety, social and environmental aspects of production,

which may be regulated by separate instruments. These aspects may be regulated by international

instruments on human rights and corporate sustainability, as well as private codes of practice, or

supplier codes. However, the question of who controls private regulatory power arises when the

content of a contract is not determined by agreement of the contracting parties, but rather by private

instruments such as these Standard Terms and Conditions.

II. DESIGN AND CONTENT

31. Analytical perspectives. MPCs can be analysed from either a structural perspective or a

functional perspective. The structural perspective concerns the number of parties, what constitutes

a “party”, whether bilateral contracts are open to the participation of more than two parties, and

whether the contract is open or closed. The functional perspective considers the MPC as the setting

for long-term collaboration rather than mere exchange of performances, project-based cooperation,

and long-term multi-project cooperation. This Chapter considers both perspectives since they can

complement one another.

A. Factors affecting design and choice

32. Factors affecting design. The following are factors to consider when designing an MPC: the

number of participants; the size of participating entities; the market power of each participant; the

contractual power of each participant; the nature and quantity of contributed resources (i.e., assets,

knowledge, services, etc.) and whether these resources are irreplaceable (i.e., land); the ownership

of contributed resources whether individually owned or shared; and, the control over innovation,

where applicable (i.e., intellectual property, technology, trade secrets, etc.)

33. Factors affecting choice of legal form. The following factors can influence the choice of an

MPC as the legal form for collaboration.

30. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

(a) Number of parties. MPCs work best with a limited number of parties. The form is not

as effective at coordinating a large number of parties. However, an MPC can in effect

coordinate a large number of participants when the parties to the MPC are themselves

entities (e.g. cooperatives or companies).

(b) Regulatory flexibility and contract completion. MPCs offer parties considerable freedom

to shape the content. Whereas cooperatives and companies often have structures that

are pre-determined by law, the content of an MPC is determined by agreement of the

parties. MPCs offer flexibility when the collaborative vehicle has to be incomplete, as

is often the case when the collaboration involves innovation.

(c) Nature of shared resource. The MPC should make a distinction between monetary and

non-monetary resources and another between strategic and non-strategic resources.

A strategic resource is not readily available in the market and/or has unique features

(e.g. know-how). Collaboration in strategic projects often requires sharing of

knowledge and/or access to critical resources (e.g., technology). The need to share

strategic resources among collaborators affects the decision to use an MPC to formalise

the collaboration. Within an MPC, the nature of the shared resource, whether it is

tangible or intangible, shapes the specific features of the contract. For example,

intangible resources (e.g., a patent, plant variety certification or trade secret) usually

require more sophisticated forms of coordination as well as governance of parties’

performances, particularly in circumstances where the interdependence of contractual

performance is more complex. For instance, when a contract seeks to regulate the use

of a shared resource like a patent-protected plant variety. The shared resource needs

to be controlled at various stages from cultivation through production and to sale.

Thus, the actors involved at each stage - the breeder, the nurseries, the farmers, and

the processors - need to coordinate their interdependent performances.

(d) Network externalities. In order to protect a name, regulate its use, or if a particular

product becomes more widely known incentives emerge to establish some form of

MPC, as opposed to several bilateral contracts. An example is the Geographical

Indication (GI), which has at the core a common resource (i.e., a geographic name

and associated reputation). Protection of the name and reputation is a common

objective of multiple actors in a GI territory. Participants in the value chain usually

protect the GI through compliance with common standards. Farmers/producers can

collaborate to avoid problems of moral hazard and opportunistic behaviour by using

MPCs, such as consortia, or by creating private associations, public/private bodies or

unions.

(e) Governing interdependence. Interdependencies result from the performance of one

party depending, either partially or entirely, on the performance of others.

Interdependence can happen in both horizontal and vertical MPCs. Interdependence is

strongest when resources are shared. But it can occur even in circumstances with no

sharing (e.g., where operators have no choice but to cooperate in order to limit the

spread of a certain disease). Interdependence of actors calls for coordination and

cooperation along the chain. The greater the interdependence, the more likely it is that

chain actors will benefit from MPCs aimed at governing interdependence.

B. Terms and content

34. Types of content. An MPC usually sets out objectives of the cooperation/project, defines the

activities of common interest to the parties and contains the financial commitments of the parties.

The terms of an MPC lay out the obligations between the parties; allocate tasks among the parties;

establish the governance rules for the collaboration, as well as the rules for entry and exit of the

collaborators; and divide liability among the parties. An MPC can contain further safeguards, such as

UNIDROIT 2026 – Study LXXXC – Draft Chapter I 31.

commitments on exclusivity, non-competition, confidentiality of information and business secrecy,

data protection, or compliance with safety/sustainability standards.

35. Incorporation by reference. As previously mentioned, in an international value chain,

contractual content is often determined by standard terms and conditions imposed by the chain

leader(s). Hence, these terms, such as those related to quality, food safety and sustainability are

often incorporated by reference into the contract.

36. Internal regulations. These standard terms and conditions are often employed to create

uniformity along the chain through interdependent obligations. One option to incorporate these

standards into the terms of an MPC is through the use of internal regulations. These internal

regulations, often adopted by a chain leader to be applied along the whole value chain, may limit

parties’ contractual freedom while concluding an MPC.

37. Framework and execution contracts. Incorporation of terms may also involve the use of

framework and execution contracts. A framework contract among two or more businesses or

organisations establishes the general terms that govern any contracts that may be awarded during

a given period, including an MPC. It might include more specific clauses for execution, or determine

the price or quantity of goods to be delivered. An execution contract is stipulated within the

framework agreement and governed by those general terms. Both the framework and the execution

contract may be an MPC for collaboration within agri-food chains.

38. Sustainability provisions. Sustainability provisions that require compliance with

environmental or social protection standards can be included in all types of MPCs, including those

involving production or distribution, whether horizontal or vertical. Sustainability obligations may

apply only to the contracting parties or, when the activity is within the scope of the chain, they may

reflect a broader commitment by parties not in privity, for example related to a greenhouse gas

emission target. Conventional instruments are often based on cascading techniques that mirror the

same commitments in each linked bilateral contract along the chain. By contrast, the MPC structure

may be more inclusive when it is open to the participation of an indefinite number of agents along

the chain. MPCs may also provide a more effective monitoring system to ensure that all parties are

in privity with each other. Although interested parties such as workers or local communities usually

stand outside the contract, an MPC may establish a coordination unit to which third parties may refer

in case of disputes.

C. Obligations and interactions with third parties

39. Obligations among the parties. Each party to an MPC has obligations to all other contracting

parties. These obligations include the duty of good faith and loyalty, the duty to promote

collaboration, and the duty to preserve the results of the collaboration (see discussion below on good

faith at V.B).

40. Obligations towards third-parties. The parties to an MPC can be jointly obligated towards

third parties when the execution of the contract depends upon the involvement of third parties, for

instance, in the case of input provision, when the input provider is not party to the contract. The

parties can also be obligated to third parties in cases where the collaboration is aimed at addressing

third parties’ interests in addition to the interests of the contracting parties (e.g., protecting the

environment, creating job opportunities for local workers, ensuring fair wages to employees, etc.).

Another form of obligation to third parties occurs when enterprises commit to environmental

standards for processes or products. The role of good faith and fairness in MPCs should also be taken

into account in respect of these obligations.

32. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

D. Modifications

41. Modification over time. As MPCs are usually long-term agreements that are frequently

incomplete, parties should be able to modify an MPC to complete it and to adapt to new circumstances

(rise or fall of prices, drought, trade tariffs, etc.). The default rule should be that the contractual

terms can be modified by majority vote, but specific strategic matters may require unanimity.

42. Minority protection. The minority should be protected from contractual modifications that

benefit only the majority, particularly in circumstances when participants hold unequal power. The

dissenting minority should at least be able to exit the MPC (see discussion below on exclusion at […]).

III. ENTRY REQUIREMENTS AND FORMATION

43. Identity of parties. Entry requirements for an MPC include the definition of who may be a

party to the agreement and whether there are any restrictions imposed by the original parties on

future entries. Contracting parties can be limited to a particular category and/or size of enterprise.

Perhaps parties may only include farmers, agricultural entrepreneurs in a particular sector,

entrepreneurs having a certain legal form, or entities with a certain qualification or certification (e.g.,

compliance with safety or environmental standards, etc.).

44. Entry regimes. Entry usually occurs at the initial stage or later, once an MPC has already

been concluded. An MPC can regulate entry through the following regimes: a) free entry; b) limited

entry (e.g., based on specific requirements); or c) no subsequent entry after the contract is

concluded to preserve the allocation of power and tasks designed by the initial contract.

45. Factors influencing choice of entry regime. When selecting the entry regime parties should

consider the homogeneity or heterogeneity of participants, their contractual power, and the existence

and nature of shared resources. Parties may also consider the uptake of certain technology to enable

control or monitoring of members’ activities. For example, if the collaboration intends to promote

collective action to achieve a systemic goal, entry could be conditional on the adoption of specific

technological solutions (limited entry). Similarly, entry could be conditional on the ability to comply

with certain standards. The MPC could require compliance with the sustainability standards

demanded by global value chains, in which cases entry into the MPC becomes an enabling factor to

gain better access.

46. Governance of entry. When forming an MPC, parties should consider how and by whom future

applications for entry will be reviewed. The decision to admit new contracting parties could be made

by: a) the participants, either unanimously or by majority; b) only one participant assigned to the

task; c) a board or committee of a few participants; d) a third party; or e) no one (in the case of

free entry regimes). In designing the regime, parties should consider whether these decisions can

be challenged and reviewed, either by the participants or the rejected party.

47. Oral or written form. An MPC may be in oral or written form (including the provisions on

consent and time of formation). Oral contracts are more informal than written contracts, usually

incomplete, and are more common in the agricultural sector. In the food segment of the agri-food

chain, contracts are usually written and more formalised. However, they are also often incomplete

and need mechanisms to adjust for contingencies that concern market and institutional factors.

Whether at the agricultural or food processing level, the use of the written form for MPCs may help

parties jointly design core aspects of their collaboration The written form can add transparency and

facilitate concrete planning. It can also provide explicit mechanisms to address supervening

unforeseen circumstances and, at a later stage, to fill in gaps left during the early stage of contract

formation. In addition, a written agreement can further facilitate relationships with third parties.

48. Stages of formation. Formation of an MPC usually includes a precontractual stage, which may

be followed either by a preliminary agreement and then a final agreement, or directly by a final

contract. The precontractual stage may entail precontractual liability, if before concluding the

UNIDROIT 2026 – Study LXXXC – Draft Chapter I 33.

contract one party fails to provide due information, unfairly withdraws from negotiation, or causes

another party to consent to an unfair contract or contractual term. Preparatory or preliminary

agreements, usually define the path toward collaboration and commit the parties to making

investments that are intended to verify the costs and benefits of the collaboration. When parties

have verified the advantages of collaboration they can move to the final stage and conclude the

contract. The extent to which preliminary or precontractual agreements are binding is a matter of

domestic law.

49. Role of digital tools in formation. Digital technologies can facilitate contract formation by

making the process more rapid and cost-effective. However, this ease might create issues concerning

transparency and may lead farmers with low levels of digital literacy to enter into an MPC without

fulsome appreciation of the contents and their implications.

50. Digital adoption as pre-requisite. Digitisation can meaningfully increase levels of monitoring,

both quantitatively (e.g., many different variables/functions can be monitored simultaneously) and

qualitatively (e.g., data can be measured in real time, data can be stored, for example, to elaborate

performance statistics). If monitoring is crucial for the collaborative project, then the adoption of

given technologies to enable such monitoring might represent a pre-requisite for becoming party to

the contract.

51. Digital platforms. Use of digital platforms may impact the contract formation process. In

particular, digital platforms provide the options of (i) sequential entry, (ii) entry at time of conclusion

and (iii) subsequent entry (see Chapter on Digital Platforms).

IV. GOVERNANCE AND DECISION-MAKING

52. Need for governance. As an MPC can be a complex arrangement, often involving multiple

projects realised over time, an extensive governance infrastructure may be required, one that is

usually absent in bilateral contracts. Governance of an MPC concerns completion, execution, and

dissolution of the contract, as well as dispute resolution arising from non-performance and

impossibility of performance, and the post-contractual obligations of the parties. Governance

provides mechanisms that allow the parties to modify the contract in response to both market

changes and external crises. As MPCs among individual entrepreneurs are significantly different from

those among legal entities (e.g., cooperatives), their governance structure will also differ.

53. Participatory or delegated governance. Allocation of decision-making power determines the

governance features of MPCs. Decision-making power can be distributed among the parties in relation

to various criteria such as the parties’ contribution in kind, financial contribution, involvement in the

implementation, or the size of participant. Decision-making can be participatory or concentrated.

Participatory governance is based on collective decision-making by all the parties to the contract.

Concentrated governance is the delegation of decision-making power to an individual, such as a

project manager, or to a small group, such as a board. The parties delegate decisions related to

governance to the individual or board and contract implementation to management. In this model,

there is a general meeting and managerial governance of the contract such as the type deployed in

cooperatives and in companies. Between the two extremes of participation, where all parties have

equal power and where only one party holds all the power, there are many intermediate solutions

where decision making power can be distributed or allocated to a board representing the various

enterprises. The higher the degree of power concentration, the more necessary it becomes to protect

the parties from power abuse. This protection can be achieved by using minority rights to oppose

decisions or to ensure exit in case of disagreement with the majority.

54. Board governance. When the complexity of governance of the MPC so requires, the parties

can create a board of directors responsible for contract execution. The members of the board have

the legal power to make decisions and to engage in relationships with third parties. They owe the

contracting parties a fiduciary duty, the breach of which can lead to liability (see discussion below,

para 105).

34. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

55. Project manager. Execution of the MPC may require the parties to appoint a project manager,

either for a single project or the entire MPC. The project manager can coordinate the parties and

ensure that potential failure/non-performance is promptly and effectively addressed and resolved.

The project manager can be an independent party or one of the contracting parties appointed by one

or more of the other parties. In the latter case, a conflict-of-interest policy is strongly recommended

to avoid situations where, in executing the MPC, the manager pursues its own interest rather than

that of the collective.

56. General or specific governance. Parties may decide to collaborate for one or several projects,

and for multiple objectives ranging from sharing resources to innovation. They may use an

overarching MPC that distinguishes between general governance of the MPC and specific governance

of individual projects, which may be governed through ad hoc committees and/or ad hoc managers.

When only a few parties to the MPC decide to participate in an individual project, a specific

governance mechanism may be designed for that project, even if the decision to engage in the

project was made by all parties to the MPC.

57. Voting. Voting power can be allocated in various ways and can affect the choice of projects,

resolution of conflicts among contracting parties, selection of remedies, and dissolution of the MPC.

Possible alternatives and their correlation with decision-making could be as follows:

(a) each party has one vote regardless of the resources each has provided;

(b) voting power is allocated in proportion to the resources provided by each party;

(c) voting power is allocated on the basis of criteria other than resource contribution

(e.g., contribution to the project, competence, market share, size, etc).

58. Minority protection. Voting and the distribution of decision-making power should take

minority protection into account, especially when decisions are made by majority rule rather than by

unanimity. Protections can include compensating dissenters, offering other types of benefits, or

preserving the right of withdrawal from the MPC should a majority decision generate negative

consequences for the minority.

V. CONTRACTUAL EXECUTION

59. Preconditions. Contractual execution entails performance by the parties of their contractual

obligations however, execution extends beyond individual or joint activities. It also requires strategic

planning, resource sharing, and collection of data, all of which are preconditions for contractual

performance. As MPCs are long-term, they are often incomplete (especially if made orally) and thus,

changes or additions to any preconditions to performance may be required over time, depending on

the objectives of the collaboration.

60. Impact of contingencies. As the execution of a long-term MPC takes place under changing

circumstances, it may necessitate new or redefined tasks that could not be anticipated at the time

of contract conclusion. Agricultural contracts, particularly those that involve production, can be

subject to multiple contingencies largely outside of the parties’ control, such as natural events and

market volatility. The parties can factor such contingencies into an MPC using pre-determined

indicators or an algorithm that regulates the parties’ performance.

61. Definition or delegation of completion. When the complexity of the collaborative project is

such that it requires gradual completion, or where the instruments of collaboration cannot be fully

elaborated at the outset, the parties can complete the MPC at a later stage. The parties can define a

mechanism that enables completion as soon as the necessary information is acquired. Completion

can either be implemented by the parties or delegated to an independent project manager that can

supervise the execution of the project.

UNIDROIT 2026 – Study LXXXC – Draft Chapter I 35.

A. Independent and interdependent performance

62. Core distinction. A core distinction is to be drawn between independent and interdependent

types of performance:

(a) Independent performance. Independent performance does not depend upon the

activity of any other contractual participants. For example, where several producers

have agreed to sell their produce collectively, delivery by one does not depend on

delivery by another.

(b) Interdependent performance. Interdependent performance occurs when the

performance by one party depends on performance by another. This is common in

vertical agreements, such as those between producers and processors. For example,

in the production of olive oil, if the producers do not harvest the olives in a manner

compliant with process and product standards, then the processors might not be able

to perform or they may have to correct the defects caused by the producers’ failure to

perform in order to perform themselves.Similarly, the relationship between input

providers (e.g., seeds) and producers implies interdependent performance;

performance of producers depends on performance of input providers (seeds or

fertilizers). Horizontal agreements may or may not feature interdependencies.

63. Implications of interdependent performance. The interdependencies of contractual

performance affect the following: (i) contract execution; (ii) definition and consequences of non-

performance; and (iii) dissolution of the MPC. Accordingly, execution of interdependent performance

requires much more coordination than independent performance.The degree of interdependence has

an impact on the modes of coordination and monitoring of the different actors involved in execution.

Greater interdependence is more likely to require a governance mechanism to coordinate and/or

monitor activities.

64. Degree of interdependence. There are two factors in the interdependence of performance for

a collaborative project first, is the number of parties involved - the higher the number, the greater

the interdependence; second, is the impact of failure to perform the interdependent obligation on

the final product or service to be delivered. By way of illustrative comparison, in one case failure to

comply with food safety standards leads to the result that the product cannot be sold at all, whereas

in another case, failure to comply with organic certification leads to the result that the product can

nevertheless be sold, albeit as non-organic. The second factor is key; the number of parties do not

have as much of an impact on the degree of interdependence but rather, on the consequences of

interdependence and the complexity of its control mechanism.

65. Services. A service provider's failure to perform an interdependent obligation usually affects

multiple actors. For instance, when technical assistance is not provided to a group of farmers engaged

in an MPC, the non-performance prevents the farmers from executing their own performance and

thereby undermines the collaboration. Many parties could be harmed by a single non-performance,

and the anticipated remedies must not only redress the harm caused by the non-performance but

must also ensure that the provision of the service is guaranteed.

66. Governing interdependent performance. Different contractual architecture may be required

to govern interdependent performance. It may be part of the general governance structure of the

MPC through which decisions are taken (e.g. the same person to whom decision-making power is

delegated is also in charge of governing and monitoring interdependent performance), or it may

operate next to it (e.g. through a contract manager). The following are some contractual mechanisms

that can be used to monitor interdependent obligations:

(a) set up a body, members of which are appointed by MPC parties, with responsibility for

coordinating interdependent performance;

36. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

(b) delegate to a third-party responsibility for assisting the MPC parties with performance

of their interdependent obligations (e.g., a consultant) and/or for monitoring the

different elements of interdependent performance (e.g., a certification body);

(c) set up a peer review evaluation among the MPC parties to mutually assess

performance; and/or

(d) set up a platform for sharing information and collecting data about individual

performance in the MPC.

B. The role of good faith and fairness

67. Basic concept. Parties have a duty to collaborate to execute an MPC and to ensure that its

objectives are achieved. The duty to collaborate must be carried out with good faith and fairness and

it persists even after an MPC is terminated, when post-contractual obligations can arise.60 The duties

of collaboration and good faith are particularly relevant in MPCs that require strategic collaboration.

Strategic collaboration often requires the parties to make specific investments and there are limited

opportunities to redeploy such investments easily. Interdependent performance makes the duty to

collaborate more relevant because the parties must ensure that common objectives are pursued

effectively. Accordingly, the MPC should include a specific term or requirement to execute the

contract in good faith, as well as a good faith renegotiation clause to address unanticipated

circumstances that may change the premise of the collaborative project. These contractual terms

would play an important role, particularly in those systems where good faith and related duties, such

as the one to renegotiate in good faith in case of unforeseen circumstances, are not recognised as

general duties within applicable contract law.

68. Duty of good faith. The duty to maintain the ongoing collaboration and the duty of good faith

should affect remedies for breach chosen by the parties. Furthermore, the duty of good faith also

affects the choice of exclusion and dissolution of the contract. For example, parties to an MPC should

share information related to the performance of individual obligations which are interdependent with

other obligations to be performed under the contract.

69. Fairness. Fairness is particularly important when the distribution of contractual power is

unequal. The contract should contain remedies against unfair behaviour. The remedies should lead

to correction or modification of performances that were not defined in the contract and were

unilaterally imposed on the parties by either the chain leader or by one of the parties.

70. Timeliness. In some jurisdictions, legislation related to long-term contracts provides that

time is of the essence to define collaboration duties. This ensures that, while the explicit contractual

terms may not regulate all possible future circumstances, the objective of the contract can be fulfilled

and the effects desired by the parties will be achieved.

C. Digitisation and digitalisation

71. Contract completion. Digitisation61 can assist with contract completion, publicity and record

keeping, as well as reduce some of the completion costs. For example, digitisation can facilitate price

discovery. Digital monitoring of contract performance generates a lot of data. The parties can then

process the data using algorithms that account for all variables that impact price, eventually allowing

automatic price determination. Digitalisation can also have an impact on contract completion. Parties

cannot fully anticipate contingencies, thus completion always requires some degree of renegotiation.

For example, the incompleteness of a contract might be related to the parties’ need to exchange

60 The nature of any such obligations may vary depending on the jurisdiction and whether one is dealing with a common law or civil law system. 61 Digitisation and digitalisation are two different concepts. While digitisation focuses on converting and recording data, digitalisation develops processes and changes workflows to improve manual systems.

UNIDROIT 2026 – Study LXXXC – Draft Chapter I 37.

information. The use of digital technology in agriculture may help farmers monitor the impact of their

activity on the environment (e.g. greenhouse gas emissions). This could trigger specific collaboration

duties, e.g. to comply with sustainability standards agreed upon in the MPC among farmers.

Digitalisation can facilitate such information exchange.

72. Contract design and execution. Digitalisation has significantly changed the way contracts are

executed. As a consequence, contract design has changed as well. Digitalisation changes the way

parties coordinate multiple performances, as well as the way they monitor and solve problems arising

from non-performance. Digitalisation, and in particular surveillance agriculture, is redistributing the

decision-making power between farmers and technology providers and data management

enterprises. Digitisation could facilitate automatic information transmission by specifying, for

example, the type of pesticide and quantity to be applied. Finally, it can circumvent product rejections

and/or notification of contractual non-performance, for example, by automatically flagging produce

that has pesticide content that usually should not be present in organic produce.

73. Precision farming. Precision farming uses digital technology to enable operational decisions.

It can bypass the farmer to some extent, by using of passive drones and sensors to collect field data,

or to a larger extent, by using artificial intelligence. For example, a tractor could be equipped with

sensors that collect data about soil characteristics; such data could be sent to a platform that might

elaborate statistics the farmer could use to identify the most optimal strategy to address soil deficits.

The platform might propose recommendations to the farmer, or it might order the tractor to

automatically make the recommended additions. The introduction of precision farming has

concentrated performance monitoring in the hands of the data-holder. Information about potential

defects is important when performance is interdependent and implemented at different stages of

production. Precision farming can be used as a tool to improve contractual execution.

74. Implications for farmer autonomy. The redistribution of power triggered by digitalisation can

have different effects which depend not only on technology, but also on how power is distributed

among the parties. For example, digitalisation can make it possible for chain leaders to impose their

requirements directly on farmers, even if these chain leaders are not party to the MPC, to monitor in

real time whether farmers are performing in accordance with agreed contractual terms, to require

farmers to justify decisions not to follow the recommendations generated by precision farming

applications or to completely substitute farmers by AI for some activities. As a consequence, farmers

risk losing their autonomy and becoming agents of the chain leader, thus exacerbating power

dynamics that may already exist. On the other hand, digitalisation might improve cooperation and

farmer autonomy; chain leaders might rely on real-time monitoring, leave farmers “more space”,

and focus instead on surveillance and the final output.

75. Reduced autonomy due to third-party control. Farmers’ autonomy may also be reduced

because of their reliance on the entities who own or control digital technology, which is outsourced

to third-parties. In the case of digital agriculture, the distribution of power is tripartite: some power

might be left with the farmer; some power remains with the chain leader or with third parties like

certifiers; while the initial source of power is in the hands of the owners or providers of the

technology, who thereby control access to data and technological functions and can therefore

influence the choices of both farmers and chain leader(s). Data, once collected, could be used for

multiple purposes. For example, data about the average yield of a given field could be used not only

to better program or control production, but also to determine the price of an agricultural plot (e.g.,

data on soil fertility), or the insurance premium (e.g., data on yields affected by adverse atmospheric

conditions). These various uses for data have implications from a legal point of view. Tools and

principles such as the portability of the data from one technology provider to another and/or the

openness of technical solutions/infrastructures are impacting the distribution of power.

76. Modification of structure and relationships. MPCs may feature different architecture

depending on the type of collaborative endeavour concerned. Digitisation can build an architecture

that allows coordination between parties and prompt reactions. These features depend upon the

degree and the level of interdependence of performance. Digitisation often results both in changes

38. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

in the relationships among contractual parties and reallocations in the power of decision-making.

Therefore, digitalisation can partly substitute for governance arrangements, or, at a minimum, it can

shape them. The changes to the governance arrangements caused by digitalisation become even

more important when the activity under an MPC is part of a process that takes place within a chain.

77. Facilitate exchange of information. Digitalisation can have an impact on the performance of

interdependent obligations in different ways. Digitalisation can facilitate feedback on the modalities

of performance by enabling technical devices to trace communications in real time. In turn, improved

communication might allow for more efficient management of production and supply, for example,

by allowing parties to share know-how on agronomic activities or advise of changes in agronomic

practices due to external events. Technical devices might also enable the chain leader to give real-

time instructions to farmers or other professionals, thus directing their activities through a top-down

approach.

78. Price setting. Digitalisation can define prices, especially when prices change over time on the

basis of factors exogenous to the relationship. Digitalisation can help to set prices and allocate costs

related to the performance of interdependent obligations by allowing the parties to monitor the input

and output of each participant. This might be valuable for incomplete contracts where it is often

impossible to determine ex ante how to calculate prices and costs.

79. Correct deficiencies or non-performance. Digitalisation might make it possible to correct

deficiencies in the performance of obligations that emerge during the monitoring phase. In

circumstances when the level of automation is high, direct intervention by a machine can fix a

problem before the product reaches market. For example, a drone or tractor could address a

deficiency automatically while the crop is still growing. Cure by spraying serves as a sort of

automated corrective remedy. In other cases, digitalisation might facilitate cooperative remedies,

where the non-breaching party gives instructions and/or shares know-how to cure a given non-

performance.

80. Monitor performance. Digitalisation can offer technical tools to monitor performance and

determine if activities within the execution of the contract are being carried out properly (See also

discussion on Performance below at Section VI). Digital monitoring might also enable other

participants to start operating or providing services. For example, where one of the parties to an

MPC is a financial institution who wishes to lend money to an operator, but only when such operator

has achieved given sustainability goals, digital monitoring might signal to the bank when the funds

can be transferred. In other words, digitalisation allows the traceability of performance, which is

important in the context of interdependent obligations.

81. Improved coordination. Digitisation allows for better coordination in cases of resource

sharing. Digital technology does so in different ways. For example, it may facilitate the apportionment

of benefits and costs deriving from the use of a given resource. The ability to monitor the use of the

resource in real time allows the parties to calculate benefits and costs for each of them in a more

precise way than by estimating forfeit as occurs in a non-digital context. In addition, if there are

limits to the use of a shared resource, digitalisation can help control violation of those limits. Another

example might be the direct control of a shared resource through a digital application. For instance,

an automated tractor might be equipped to spray pesticide only when given conditions are met or

only when the controller so decides.

82. Non-perfomance detection. Digitalisation can also facilitate non-performance detection by

monitoring the production process in real time (See discussion on Non-perfomance below at Section

VI). For example, there might be sensors that collect field data on the agronomic practices, which is

sent to a data-processing station that automatically compares this data with given standards. In the

event of a discrepancy, the data-processing station might automatically signal this to the farmer who

might need to provide additional data to better assess if there indeed has been a non-performance.

Moreover, digitalisation can also help provide solutions for the problems that have been detected. In

particular, it is possible that, as a sort of extension of the non-performance detection function, data-

processing stations could:

UNIDROIT 2026 – Study LXXXC – Draft Chapter I 39.

(a) recommend to the farmer implementation of corrective remedies to fix the non-

performance, with three further possibilities:

(i) the farmer is free to accept the recommendation or not;

(ii) the farmer is expected either to implement the recommendation or justify why

it was not followed;

(iii) the farmer is required to follow the recommendation, failing which will amount

to contractual non-performance; or

(b) ask farmers to provide data on which solutions they are going to adopt to fix the

problem and then assess if such solution is compatible with the standards; or

(c) automatically implement the corrective measures, for example by sending instructions

to a tractor to fix the problem (e.g., to spray crops with a chemical product).

D. Resource management and asset partitioning

83. Types of resources shared. As mentioned above (see para. 22), an MPC often requires

resource sharing. The resources can be material, such as real estate, inputs, and machinery, or

intangible, such as know-how and data. In order to fulfil an MPC, the parties may choose different

mechanisms to share common resources. Property regimes and contractual obligations govern

common critical resources. Parties should clearly establish whether these means are being used to

share existing resources; allocate rights, powers and costs of these resources; produce common

resources to be shared; or to purchase resources.

84. Ownership options for shared resources. Parties can own their shared resources collectively

(co-ownership), or they can create a company to own the resource. When parties share ownership,

each party holds a share of the same right to ownership (e.g., shared piece of agricultural

equipment). Such shares may be divided equally among the parties or unequally, usually based on

a party’s contribution in the creation or purchase of the resource. Depending on applicable law and

the type of co-ownership, the share may be disposed of in favour of third parties. The rules of the

contract or certain co-ownership regimes may, however, limit the right to freely dispose of one’s

share and restrict the common use and enjoyment of the shared asset to the co-owners only. When

a company is created to have ownership of the resource, two parallel governance structures exist:

that of the MPC, and that of the company. A company that is created to manage a common resource

is an instrument used to pursue the collaborative project and must be governed accordingly. The life

of the company and that of the MPC should be strongly coordinated. Moreover, different liability

regimes may apply depending on whether shared resources are commonly owned within the MPC or

by a company in which the same parties are members. Indeed, depending on the applicable law, a

corporate structure may shield the shared assets against seizure by creditors differently from a

liability regime whose rights are linked to the management of the shared assets. The end of the

contract is usually associated with the end of the company.

85. Data as shared resource. Special attention should be devoted to data as a shared resource,

including its creation and management. Complex contracts likely require a large quantity of data to

execute performance. Parties should consider the data ownership and data management during the

lifetime of an MPC and after its dissolution. Some of the legal issues for MPCs that involve data

creation and management might arise in the following areas: a) personal data protection laws; b)

use of intellectual property; c) data cooperatives; and d) use of the MPC to control data collection

and access to data by individual parties.

86. Land as shared resource. Parties may or may not pool land as a common asset. If pooled,

land may become object of common and undivided ownership, as owned by shares by all participants.

This choice will limit individual freedom not only in managing the land well beyond the purpose of

the collaboration but also in disposing of it through sale or transfer upon death. Moreover, being part

40. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

of common assets, land could be easily seized by creditors, whose rights have arisen from the

collaboration, and, if these assets are not ‘legally separated’ by parties’ personal assets (see next

par.), they may also be seized by personal creditors of individual parties. Alternatively, land may

remain object of individual ownership without being conferred into the common pool. In this case,

still parties may contractually commit to use individually owned land in certain ways (e.g. avoiding

over-exploitation of natural resources or abstaining from the use of additives that may be harmful

for the environment, etc.) but these obligations will not change the land’s ownership status, neither

expose the land to additional risk of creditors’ seizure.

87. Options for separation of assets. An MPC usually requires financial resources to carry out the

activities. The creation of a “common fund” under an MPC requires consideration of the allocation or

separation of assets between the individuals contracting and the community of parties. The applicable

law and the specific legal regime for MPCs determine the way these funding mechanisms are

structured. In some jurisdictions, such law provides that resources contributed by the parties become

joint assets of all parties and that the parties shall keep resources constituting the common fund as

undivided for the duration of the MPC to preserve its dedication to achieving the common objectives.

As to the effects of the creation of a common fund on creditors, several models can be identified, as

follows:

(a) Full separation. When there is full legal separation between the resources necessary

to perform an MPC and the parties' individual assets, individual creditors of the parties

may not seize the common fund and the MPC creditors may not seize the individual

assets of the participants.

(b) Partial separation. When there is partial legal separation of an MPCs’ resources and the

parties’ assets with some residual liability for the parties, the individual creditors of the

parties may not seize the common fund, but the MPC creditors may seize the personal

assets of the participants if the common fund is insufficient.

(c) No legal separation. When there is no legal separation of the common fund apart from

separate accounting, the individual creditors of participants may seize that portion of

the common fund allocated to the relevant participant and the MPC creditors may seize

personal assets of participants in accordance with the share of the debt for which each

participant may be responsible. Depending on applicable law and the nature of debts,

each participant may be liable only for a specified share of the debt or, jointly with

other participants, for the whole of the debt attributable to the MPC activity.

88. Jurisdiction-dependent. This area of the law is heavily influenced by domestic legislation;

party autonomy is often limited within pre-defined schemes that provide for different degrees of

separation and liability shields. In most cases, party autonomy may best be exercised through the

choice of a specific scheme within the menu provided by applicable law, rather than through

adaptation or modification of existing legislative schemes.62 The use of companies and cooperatives

to separate assets and liability is rather common throughout the world. However, legal systems

greatly differ in the use of asset partitioning within MPCs.

89. Insolvency. Some jurisdictions distinguish between voluntary and involuntary creditors in

terms of who may seize the parties’ individual assets. If one of the parties is a company limited by

shares that may create trust-like funds. If the segregated fund’s original destination has the same

scope as the MPC’s programme, then the MPC creditors may enjoy exclusive rights as to the whole

fund, including the segregated fund. However, if the segregated fund’s destination is more specific

than the contractual programme, then creditors’ rights for obligations contracted in relation to this

segregated fund (a sub-fund within the common fund) will be the only ones able to seize the

62 Selection of the preferred scheme may be by means of the choice of law applicable to the MPC. Moreover, the choice may be between different types of MPCs or between a MPC and another form, such as a cooperative, where these options have different degrees of asset segregation and because the chosen scheme offers a certain type of liability shield.

UNIDROIT 2026 – Study LXXXC – Draft Chapter I 41.

segregated fund, while other network creditors may only seize other assets within the common fund.

For example, a network contract is established among five farmers and a wine producer, having

exclusive intellectual property rights over grape varieties forming a “segregated fund” destined for

research and development (“R&D”) programmes in the field of organic wine production. The

segregated fund is conferred into the common network fund, which is destined for the execution of

the network programme including but not limited to R&D in the field of organic wine production. A

bank, financing R&D activity in this field, will be able to seize the segregated fund unlike other

creditors, e.g., those financing the network’s activity in conventional wine production. In several

jurisdictions, the creation of a fund within an MPC does not limit liability to the fund’s boundaries;

creditors may also seize parties’ personal assets or at least the assets of those parties who acted as

managers, while “mere participants” could be shielded. Conversely, the law more often shields the

common fund from parties’ personal creditors.

90. Impacts of segregated common fund. Shielding personal assets from claims related to the

MPC encourages participation in the MPC collaboration and facilitates financial risk management for

each party. The same is true from the point of view of creditors whose claims relate to the MPC’s

execution, when the common fund is shielded from the parties’ personal creditors. When the common

fund established under the MPC is sufficiently solid and not subject to substantive risks of loss or

deterioration, it may also improve the project’s access to finance, at least in principle. Nonetheless,

by contrast with an incorporated company, the common fund established within an MPC that is not

qualified as a separate legal entity is subject to seizure against all participants as co-owners.

Moreover, in practice the common fund could be composed of limited monetary conferment rather

than conspicuous endowments of money or instrumental goods. If instrumental goods are ever

conferred, the risk of seizure by financing parties runs against the fulfilment of the common

objectives. For example, should a high-tech machine be conferred to the common fund, the seizure

of the fund would run against the common objective of the fund, which is having the machine in full

operation. All the above could make access to finance rather challenging, especially when, as seen

above, by law the fund is not coupled with a limited liability regime for participants. In this case,

access to finance may be easily subject to the assignment of distinct security on participants’ or third

parties’ assets, including those of public entities or development banks.

91. Creation of company. The parties can create a company to manage the fund and/or the

shared resources, thereby shielding the financial and intangible assets with limited liability. This

combination may allow governance of the collaboration through the MPC and, at the same time,

would limit the liability to ensure financial accountability.

92. Distribution of risks and costs. The contract can be performed in various ways. Each party

can be responsible for part of the implementation or parties can collectively perform the contract.

The independent or interdependent nature of performance may influence the parties’ choices about

the distribution of risks and costs. The burden of individual performances may vary and consequently

the costs and benefits may be allocated differently. However, performance is not the only factor that

defines risk and cost allocation among contracting parties.

93. Equality or proportionality in the allocation of costs and revenues. Execution of an MPC

requires the parties to allocate costs and revenues among the participants. The same principles of

distribution do not necessarily have to apply to both. Unless prohibited by the applicable law, parties

may, for example, freely agree to distribute costs according to financial availability and benefits

according to each party’s contribution to the project’s execution. There are several ways to allocate

profits among the participants. First, the costs and benefits may be distributed equally among the

parties. Second, the costs and benefits may be born in proportion to the amount of resources

provided by the parties (both financial and non-financial resources, e.g. workforce, know-how, etc.)

and/or the efforts in contributing to the achievement of the objectives. Third, the distribution of costs

and benefits may follow some other criteria such as a goal to promote economic growth of micro and

small enterprises, in which case, the micro and small enterprises might gain more than they confer.

42. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

E. Involvement of third parties

94. Execution of the contract through third parties. Parties to an MPC may be required to engage

with third parties to perform the contract. Three main factors may need to be considered: i) the

degree of dependence on third parties to carrying out the underlying obligation of an MPC; ii) how

MPCs behave when contracting bilaterally with a third party; and iii) ways that the MPC can protect

the underlying collaboration when they have to rely on a third party to perform part of the MPC.

95. Partial or total execution. There is a difference between partial execution of the contract by

third parties or total execution by third parties. Since an MPC is made up of several enterprises

grouped to act as one party in a bilateral contract with a third party, the parties to that MPC may

need to organise their collective interest. The parties, or their agent, represent the collective in

negotiations with that third party. For example, the parties to an MPC might set up mechanisms to

validate third parties before they become involved in contractual performance. The parties to an MPC

may also use confidentiality clauses, especially in MPCs involving intangible resources (e.g., trade

secrets, sharing of know-how, etc.).

F. Monitoring contractual performance

96. Impacts of complexity. MPCs may require more complex monitoring systems than those used

in bilateral contracts. Prompt information sharing about failure or defective performance is important,

especially for the party(ies) whose performance depends on the actions of another. For example, if

a raw agricultural product is defective, this information is relevant to enable the processor to decide

whether the goods can be processed or if alternative delivery of produce should be pursued.

Monitoring can lead to detection of failures that the parties can correct before they amount to a non-

performance or even after the non-performance. Monitoring interdependent obligations allows the

parties to understand the situation in real time and to suspend activities that can negatively affect

other, subsequent activities, thereby saving resources, improving their efficient use, and enabling

better planning.

97. Options. In an MPC, parties monitor each other’s performance and the governing body

oversees overall contractual execution. Complex projects might necessitate a committee whose

responsibility is to ensure compliance and solve problems concerning failure to perform or

misfeasance. As was noted above (para. [80]), digitalisation offers technical tools that can greatly

assist in monitoring performance and interdependent obligations. The technological advances that

now enable remote monitoring, have made collaboration among parties located in different

jurisdictions much more feasible due to the deployment of platforms and blockchain.

98. Lock-in effects and hold-up risks. The possibilities of delays and opportunistic behaviour at

the expense of other parties increases when performances are interdependent. Indeed, both strategic

investments and interdependence among performances may generate “lock-in effects” (e.g. when a

farmer becomes dependent on a technology developed within an MPC and finds it difficult or costly

to switch to an alternative outside the collaboration with the other farmer parties) and “hold-up risks”

(e.g. when the technology provider takes advantage of the farmers, raising its fees, once they have

all made irreversible investments in the developed technology). The design of an MPC, the sequence

of performance, the duty to correct and mitigate failures to perform, and the systems of

compensation associated with mitigation ensure fair allocation of risks, costs and responsibilities

among the participants in the MPC. Hold-up problems can be addressed by appropriate terms that

detect opportunism and mitigate its consequences.

G. Change of circumstances and supervening impossibility

99. Distinctions. Because MPCs are generally long-term, the circumstances that exist at the

beginning may change over the course of the contract’s execution. Such changes may affect either

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individual performance or the entire project. It is important to distinguish between the impossibility

of individual performances and the impossibility of the MPC. The distinction between independent

and interdependent performance is also relevant for deciding appropriate remedies in a change of

circumstances.

100. Individual impossibility. Impossibility of individual performance, such as delivery of inputs or

agricultural products, should only lead to the dissolution of an MPC when it makes achievement of

the contractual objectives impossible. Impossibility of individual performance should lead to

renegotiation when alternative performances are available and the party whose performance has

become impossible can engage in different conduct that can ensure ongoing collaboration. If

performance of an individual can be excused, or if the performance can be replaced or substituted,

the MPC should not be terminated and the obligations of the other parties should remain in force. In

such cases, the party excused from performance should not receive remuneration. Furthermore, the

other parties might ask the party whose performance has been excused to return resources to the

common fund (see discussion below on exit and dissolution). Alternative performance may be sought

first among the parties and if not available, then in the marketplace.

101. Independent and interdependent performance. When performance is independent,

impossibility does not influence the other parties’ ability to perform. When performance is

interdependent, the impossibility may have consequences for the ability of other parties to perform

their obligations. When impossibility of performance/s leads to the impossibility of achieving the

objectives of the contract, then dissolution should take place.

VI. NON-PERFORMANCE

A. Overview

102. Basic concepts. Non-performance of an MPC occurs when one party, or more fails to fulfil

their obligations, such as performance or payment. For example, a party might deliver inaccurate

quantity or poor quality of product. The non-performance might cause harm to only one party,

several parties, or the entire group. The harm might even extend to third parties. Non-performance

leads to liability and responsibility for the harm caused. If the non-performance is individual

(committed by one party), the breaching party is liable towards the other contracting parties. If the

non-performance is collective (committed by several), the breaching parties are jointly and severally

liable towards the other parties.

B. Fundamental non-performance

103. Basic concept. Non-performance of an MPC is fundamental if it harms the collective interest

and impairs the collaborative project to such an extent that it becomes significantly more difficult,

or impossible, to achieve the objectives envisaged. Unlike in a bilateral contract, a fundamental (or

material) non-performance of an MPC includes harm to both collective and individual interests. For

example, this might involve critical resources for the group being endangered, confidential

information being shared with third-party competitors, or an innovative instrument, purposely

designed for the project being irreversibly damaged by the negligent use of one party. Fundamental

non-performance concerns the party who committed the non-performance, those harmed, and

whether the non-performance has disruptive effects on collaboration. Non-Performance by one party

that harms only one other party is not usually considered fundamental.

104. Defined by the parties. To signal the relevance of certain elements of performance, parties

may define “fundamental non-performance” in their contractual terms. For example, parties may

agree that violating workers’ rights in the context of project execution is a fundamental non-

performance.

44. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

105. Non-performance of sustainability provisions. Non-performance can be considered

fundamental not only for the non-performance of obligations concerning quantity or quality, but also

when process obligations are breached, such as in the case of sustainability violations. Hence, when

parties consider the materiality of non-performance, they should consider not only the interests of

the parties to the contract but also the interests of third parties. For example, the use of child labour

or violation of environmental standards leading to substantial harm may constitute fundamental non-

performance. Sustainability violations frequently harm the collective interest.

106. Consequences. Qualification of a non-performance as fundamental affects the decision to

continue the collaborative relationship. It affects the choice and content of remedies. For example,

the determination of a fundamental non-performance enables the non-breaching parties to terminate

the MPC and seek remedies for contractual termination. The determination affects the nature of

correction in case of continuation by re-establishing the conditions for effective collaboration.

VII. JOINT AND SEVERAL LIABILITY

A. Liability of contracting parties towards each other

107. Basic concept. When there has been a non-performance of an MPC by one or more parties,

liability can be joint, several, or joint and several. When liability is several, each party is liable for its

share. When liability is joint, each party is fully liable and can then seek indemnification.

108. Different contexts. Joint and several liability for non-performance of an MPC may occur in

different contexts:

(a) several parties fail to execute the same obligation (e.g., defective products are

delivered by several farmers);

(b) several parties fail to execute different but interconnected obligations that produce an

individual collective harm (e.g., input provider fails to deliver safe inputs to farmer and

farmer fails to deliver safe produce to the processor);

(c) one party fails to monitor another party’s conduct that results in a non-performance-

unlike (a) and (b) with different obligations within a single contract, in this case there

are different obligations in different contracts;

(d) if the MPC is governed by a board or a committee, the members of the board owe a

fiduciary duty to the contracting parties. If this fiduciary duty is breached, each board

member is jointly and severally liable towards the contracting parties.

109. Vertical MPCs. In vertical MPCs, joint and several liability might occur if the same obligation

is breached sequentially by several parties. For example, if a sustainability standard (e.g., prohibition

to use a certain chemical) is violated by more than one party, all breaching parties could be liable

towards those that did comply and/or to those that were unable to comply because of the failure to

perform by other parties. By comparison, if the non-performance is committed only by one party and

the other parties fail to mitigate the negative consequences, joint and several liability does not arise

because the failure to mitigate precludes the non-breaching parties from full recovery for the harms

suffered but it does not make them liable towards the other non-breaching parties.

110. Complexity in horizontal MPCs. In horizontal MPCs there are situations where several parties

(i) make a joint promise to perform a joint activity together; (ii) make the same promise to the other

parties to individually and distinctively perform the same activity in accordance with the same

standards; or (iii) make different yet interdependent promises within the same contract. In the first

case, in the event of non-performance, joint and several liability arises. In the second case, joint and

several liability arises if there is a single harm caused by multiple non-performance. In the third case,

it depends. Each party has connected obligations to achieve a common result. Whether joint and

several liability arises in the case of multiple non-performance within the same contract for different

UNIDROIT 2026 – Study LXXXC – Draft Chapter I 45.

obligations depends on the degree of the obligations’ interdependence and on the nature of the harm

that stems from the multiple non-performance. Hence, there might be joint and several liability for

breach of different but interdependent obligations. If the obligations are independent, individual

liability arises for each breaching party.

B. Liability towards third parties

111. Alternative sources of liability toward third parties. Liability towards third parties may arise

in one of two ways. One is where non-performance of one or more of the obligations under the MPC

that contracting parties owe to each other also results in harm to a third party. This usually arises

as a claim in tort (negligence). For example, a contracting party (producer) delivers contaminated

produce to another contracting party (processor) who then processes and sells a contaminated

product to a third party, who sues. Secondly, the parties to an MPC may also conclude contracts with

third parties and those subsequent contracts, which are also subject to non-performance, should also

be considered with a view towards evaluating potential liability, which may arise out of a contractual

and/or tort claim.

112. Liability to third party for non-performance of MPC. The law may apportion the “liability” (i.e.,

the legal responsibility for the harm) among parties to an MPC in a particular way. For example, if

two parties are each responsible for 50% of harm, the law might require each party to pay 50% of

damages. However, under the MPC, depending on the rules of party autonomy under the applicable

law, the contracting parties might be able to apportion the “liability” (i.e., the payment or

indemnification) differently. For example, liability could be apportioned in proportion to the share of

risk of harm borne by each party. The criterion for sharing liability may also vary, depending on

whether strict liability or negligence applies to the particular type of breach.

113. Liability for non-performance of contract between MPC and third party. When there is a non-

performance of the contract between an MPC and a third party, e.g., a supplier who is not party to

the MPC, the parties to the MPC can be individually liable; and jointly and severally liable. Under the

legislation in several jurisdictions, the latter most often occurs when parties act on behalf or in the

interest of the common project.

VIII. REMEDIES FOR NON-PERFORMANCE

A. General principles

114. Basic concept. In broad terms, remedies are any type of measure that may be sought, under

the applicable law, by the aggrieved party(ies) against the party(ies) for redress of non-performance

of an MPC. This may include monetary and non-monetary measures and may or may not interfere

with the continuation of the MPC.

115. Judicial and extra-judicial remedies. This section focuses both on remedies that are both

imposed by a court (judicial) and self-enforcing remedies or remedies designed by the parties in

amicable settlements arranged outside of court (extra-judicial). Depending on the applicable law,

most remedies are sought within the framework of judicial enforcement. This section provides

guidelines on the choice of remedies and who can seek them. It does not cover administrative or

criminal enforcement in relation to agricultural MPCs. The analysis assumes that legal systems define

remedies through default rules that can freely be changed by the parties.

116. Preserve the MPC. The choice of remedies should reflect the objective of keeping the long-

term contract operational despite a single non-performance because MPCs are long-term agreements

that pursue common needs and objectives through collaboration. Remedies should aim to preserve

the stability of relationships, promote the collaboration among parties even after non-performance,

and avoid disruptive termination. Should termination be necessary for one of the parties, cooperation

46. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

should be preserved to the extent possible for the remaining parties in order to enable execution of

the common project and achievement of the contractual objectives.

117. Cause of non-performance. Remedies should focus not only on the consequences for the

party that caused the injury, but also on the causes of non-performance. Hence, remedies should

aim to correct or eliminate the causes of the non-performance and focus not only on redressing the

losses. This approach is necessary when contracts are among parties operating in global value chains.

In ordinary contract law, when bilateral contracts are considered as distinct from a chain approach,

the cause of the non-performance is not usually relevant in determining the remedy. Only by

addressing both the cause and the consequences can long-term collaboration be maintained.

118. Direct and indirect effects. As MPCs often operate in global value chains, which are complex

trading infrastructures it is necessary to account for both direct and indirect effects of non-

performance. Such chains require stability and often cannot tolerate disruptive events. Hence, the

remedies should be seen in light of the overarching governance architecture of the entire chain.

119. Contractual remedies. To the extent possible, parties should try to find an amicable solution

using remedies defined in the contract. An MPC can provide for an internal committee, one that might

include independent third parties, that can assess whether non-performance has occurred, whether

and how it can be remedied or, if corrective measures are not possible, whether to proceed with

contract termination and assessment of damages. Indeed, the internal governance mechanism

should be the first option with judicial intervention considered as a last resort.

120. Dispute prevention and resolution. Although remedies are in response to contractual non-

performance, they should also be viewed in combination with contractual governance as instruments

to prevent and resolve problems that may arise during contractual execution. Thus, collaborative

governance not only fosters cooperation in the execution of the contract, but also mitigates the

negative consequences of a non-performance, especially when the collective interests of contracting

and third parties are harmed. For these reasons, an MPC should always include a duty to collaborate

between breaching and non-breaching parties, and governance mechanisms that require the parties

to do so.

121. Collective and individual harm. The distinction between individual and collective interests

affects the selection of remedies in the contract. The parties should determine whether the remedy

can only be sought by the group of non-breaching parties or whether individual parties that suffered

harm can also seek redress. If the non-performance has an impact on the collective interest,

decisions concerning remedies belong to the group of non-breaching parties.If the collaboration falls

apart, all parties suffer harm, but the measure of harm may vary for each party. Hence, when both

collective harm and multiple individual harm occur, parties may seek redress for both. There may

also be claims for the gains that were expected by each party and by the entire group (expectation

damages).

122. Collective interest and sustainability non-performance. A non-performance of sustainability

obligations often harms the collective interest. On the other hand, a non-performance that concerns

quality and quantity of goods may only affect the collective interest if the obligations are

interdependent. For example, it may undermine the certification of the entire project if there is an

obligation to deploy an environmentally friendly technology in the production process and only some

parties deploy that technology, if the contract presupposes that every party uses the technology.

Similarly, in respect of social standards, if some parties violate an obligation to refrain from using

child labour, the harm that stems from employing children is collective.

123. Nature and extent of non-performance. A significant factor in determining available remedies

is the nature of the non-performance. Some remedies are only available when the non-performacne

is fundamental (discussed above at section VI.B); this usually applies to disruptive remedies, such

as termination, and sometimes to remedies that generate high costs for the obligee, such as product

or service replacement.

UNIDROIT 2026 – Study LXXXC – Draft Chapter I 47.

124. Independent or interdependent performance. non-performance of independent performance

does not impact the ability of other parties to perform under the contract. Interdependent

performance requires much more collaboration; failure to collaborate may aggravate the

consequences of non-performance in such a way that mitigation becomes difficult or impossible.

Performance is almost always interdependent in vertical MPCs. For example, when producers fail to

deliver, processors are unable to process the goods. An appropriate remedy would aim to ensure

delivery of the final product (or service) despite non-performance by intermediate parties. Such

corrective remedies could include the identification of alternative sourcing.

125. Remedies, contractual environment, and enforcement regimes. Remedies should not be

defined with primarily judicial enforcement in mind. Access to judicial enforcement may be limited

and usually ends the long-term relationships that are characteristic of MPCs. Hence, remedies

considered should be those that are self-enforcing and subject to a duty to collaborate with fair

distribution of the costs associated with the non-performance. More generally, especially for MPCs in

agriculture, the degree of informality is high, and the role of local communities and networks within

which farmers operate is relevant for the resolution of disputes. The environment of agricultural

contracting differs from that of food contracting, and enforcement may reflect these differences.

Mechanisms based on reputation might have a higher level of influence in small communities where

micro and small agricultural enterprises operate. Hence, whether an MPC involves an agricultural or

food product might matter in defining the business and social environment within which collaboration

takes place.

B. Type of non-performance and affected interests

126. Affected interests. As the remedies required are dependent on the interests affected by the

type of non-performance, these should be distinguished, as follows.

127. Non-performance affects the interests of a single party. Some instances of non-performance

affect the interest of a single party, without having any significant consequence for other parties. For

example, in an MPC to develop digital infrastructure among several farmers, a supplier of digital

devices, a digital service provider and a bank, one of the farmers may default on payment to the

bank without impacting the performance of the contract for the other farmers. Alternatively, if one

device provided to a single farmer is defective, the defect does not interfere with other devices or

the digital infrastructure.

128. Non-performance affects the interests of more than one or all parties. A non-performance

may affect the interest of more than one party, or even all of the parties. In some cases, the collective

interest may be directly impaired. For example, a digital service provider may fail to develop the

digital infrastructure and as a result, the collective will not be able to collect accurate data. In other

cases, the non-performance may impact an interdependent obligation in the MPC and generate a

“cascade” down the chain making it difficult for parties with subsequent roles to comply with the

terms of the contract. For example, a supplier of digital services may have an impact on the

performance of the digital service provider and therefore impact the project as a whole.

129. Non-performance involving standard, strategic or specialised resources. Non-performance

may involve standard, strategic or specialised resources in any type of MPC. Non-performance that

only affects the interest of a single party usually happen in MPCs where the shared resources are

standard, for example, inputs that are easily accessible through market transactions. Non-

performance that affects the interests of multiple parties tend to arise in MPCs that involve the

sharing of strategic and non-standard (specialized) resources requiring strategic investments. A

single breach in horizontal MPCs tends to impair the interests of all parties while in vertical MPCs a

single non-performance tends to cascade through the performance of subsequent parties.

130. Non-performance affecting third party interests. When the MPC concerns a segment of a

production process, the question arises as to whether a third party along the chain may make claims

for non-performance of contract against the MPC. Usually, the requirement of privity of contract

48. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

prevents such third parties from seeking compensation. However, contractual terms may be inserted

into an MPC to ensure that, should the negative consequences of the non-performance extend beyond

the parties, remedies will be granted accordingly. While some legal systems provide the possibility

to seek contractual remedies from the breaching party even if the complainant was not party to the

contract, most legal systems offer protection to third parties via extracontractual liability

C. Decision-making on choice of remedy

131. Non-Performance affects single party. When a non-performance affects the interests of only

one party, the function of contractual remedies remains, as in bilateral contracts, to redress the

harmed party. The injured party can usually choose the appropriate remedy without consulting the

other parties. The non-injured parties can not ordinarily oppose the choice without demonstrating

that the remedy might undermine execution of the MPC or violate the principle of proportionality.

Nonetheless, the injured party should consider the impact of their chosen remedy on the collective

interest (e.g., contract termination) and on other participants.

132. Non-performance affects multiple parties. By contrast, when a non-performance affects

multiple parties, either because it directly impairs the collective interest or because it relates to

interdependent performances, then the function of contractual remedies should instead provide

redress against the violation of the collective interest. All affected parties should be involved in the

choice of remedies related to the collective interest, particularly when there is a risk that the chosen

remedy might, itself, disrupt the collective project, such as termination of the MPC. For example,

should the delivery of a defective device to a farmer disrupt the entire digital infrastructure of a

project, not only should the farmer who received the defective device be able to seek redress for the

individual harm, but all contracting parties should also be able to seek remedies. This default rule

can be modified: depending on the governance model, the power to choose a remedy can be

delegated to an appropriate entity.

133. Non-performance that affects both individual and collective interests. Non-performance

might cause both collective and individual harm. In such instances, the non-breaching parties

collectively choose the remedy for the collective injury and each injured party chooses the remedy

for their individual injury. Where there is a conflict between parties as to the chosen remedy, a

difficult issue can arise if, for example, some parties wish to terminate the collaboration while others

wish to continue. Choice by majority vote can be an undesirable method in such circumstances,

especially because the majority may not duly take into account the interests of the minority. On the

other hand, a requirement of unanimity creates the risk of abuse on the part of the minority.

134. Right to choose remedy. Decisions on the choice of remedies depend on the interests violated

by the non-performance. In practice, however, the applicable contract law may be unsuitable to deal

with this case since “standing” for contractual remedies in MPCs is rarely regulated by national

contract laws. When this is the case, parties may refer to rules of collective organisations, such as

companies, but they may also create remedial rules themselves by adopting a special procedure for

internal dispute resolution. In these circumstances, whether decisions about remedy are made by

majority rule or by unanimous decision of the aggrieved parties depends on the applicable law and

on the choice made by the parties in the contract.

D. Parties seeking remedies

135. Single aggrieved party seeks remedy. Where the non-performance only affects the interest

of a single party, only the affected party has the interest and power to seek remedy from the

breaching party. The situation is relatively similar to that of a bilateral contract. Depending on the

type of collaboration envisaged by the MPC, the aggrieved party could seek remedy not only from

the party in non-performance but also from the other parties. There are various circumstances under

which a single injured party can seek remedy from multiple parties to an MPC, for instance, whenever

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the MPC requires all parties to monitor one another’s performance or when some parties are

guarantors for the payments of others. It is also necessary to consider the ways responsibility will

be apportioned, both as may be outlined in the contractual provisions and in any legislation

applicable, for example, to consortia or network contracts.

136. Several aggrieved parties seek remedies. Where non-performance affects several or all

parties, the collective interest underlying the collaboration is harmed either by a direct non-

performance or indirectly through breach of an interdependent obligation. Since multiple parties are

affected by the same non-performance, they are all entitled to seek remedy from the party in non-

performance. Aggrieved parties in an MPC may be in a stronger position than they would be had they

chosen to use separate or linked bilateral contracts to organize the collaboration. Moreover, an MPC

facilitates access to contractual remedies for those parties that operate at levels distant from the

chain leader and who, in the absence of an MPC, would have no contractual right to bring a

contractual claim against the party in breach. For example, a digital service provider may have an

interest in seeking remedies from a digital device supplier who delivered a defective device to a

farmer. The provider is only considered a contractual party vis à vis the party in breach within an

MPC but not along the lines of bilateral contracts, even if the bilateral contracts have been linked.

137. Parties seeking remedies for non-performance of sustainability standards. Non-performance

of sustainability standards usually affects the collective interest of parties to an MPC. Non-breaching

parties may seek corrective remedies against those who committed the violation and force them to

submit remediation plans. In these cases, multiple aggrieved parties can seek recovery to repair

both the collective and individual harms. Nonetheless, the principle of proportionality (discussed

below in para. xxx) also applies to the remediation of violations of sustainability obligations.

138. Advantage of MPCs for third parties seeking remedies. When the performance of a third-

party is affected by the execution of an MPC, the third-party beneficiary doctrine can apply, i.e.,

when third parties (e.g. workers and workers’ families, local communities, etc.) may show that the

MPC was meant to generate benefits directed to them (e.g. preservation of water safety for household

consumption). Hence, by taking into account the collective interest, all parties affected by the same

non-performance, including the third-party external to the MPC, would be able to seek redress within

the same dispute; this would be impossible, or extremely difficult, in an arrangement of separate

bilateral contracts.

139. Disadvantages of MPCs for parties seeking remedies. Conversely, there might be situations

in which the collective dimension of a claim under an MPC creates additional burdens. As discussed

below, the affected interests may not necessarily be homogenous, the collective interest may conflict

with individual interests, different individual interests may collide, or majority and minority interests

within the MPC might be opposed.

E. Choice of remedies

140. Categories. Non-perfomance of an MPC usually triggers an extensive menu of remedies that

can be distinguished on the basis of the type of non-performance and its consequences, as follows:

(a) remedies that require the contractual relationship to remain in place (specific

performance, corrective remedies);

(b) remedies that bring the contractual relationship to an end (contract termination); and

(c) remedies that can operate in both cases of persisting or terminated relationships

(damages and other remedies, such as restitution).

141. Menu of options. Depending on the applicable law, non-breaching parties usually have several

options to remedy their injury. These include injunctions, corrective remedies, restitution,

compensation, or contract termination – either termination of the relationship with the party in non-

performance, or termination of the whole MPC.

50. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

142. Remedies prescribed by contract. Limitations on both party autonomy and the range of

available remedial options that might be imposed by the applicable law must be considered by the

contracting parties. However, contracting parties are generally free to include provisions to regulate

their choice of remedies. Specific clauses, such as those that establish a hierarchy of remedies

(discussed below in section VII.J), can add certainty, prevent litigation, and foster cooperation

whenever incidents occur or mistakes are made. Such clauses could include terms to ensure the

hierarchy is consistent with the principles of contractual stability and proportionality.

F. Corrective remedies

143. Corrective remedies preserve collaboration. Given the long-term nature of MPCs and a desire

to continue the collaboration, parties to an MPC generally prefer remedies that ensure performance.

Corrective remedies focus not only on consequences but also on the causes of non-performance. An

MPC could establish this priority and identify preferred remedies, which might include injunctions for

specific performance, adoption of corrective plans, replacement of defective inputs, products or

services, suspension of pending activities, etc.

144. Injunctions and corrective plans. The non-breaching parties can seek an injunction to secure

payment, certification, data transfer, repair or replacement of defects. The non-breaching parties

might also require a corrective plan where the party in breach addresses the causes of non-

performance and defines mitigation strategies should the harm occur again.

145. Corrective plans for sustainability. When non-performance of sustainability provisions occurs,

the breaching party must submit a remediation plan to redress social and environmental harms. Such

a plan must be approved by the other parties. If the collaboration operates within a chain, the

approval of the chain leader is frequently also required. The corrective action will have to be

monitored according to objective indicators, and, in the event of continued non-compliance,

additional measures will be required.

146. Particular importance for MPCs. MPCs enable contracting parties to establish and exploit a

form of strategic collaboration that cannot be easily replaced by standard market transactions.

Parties to an MPC make specific investments and co-design and perform strategic activities to pursue

common goals. The common goals set out in an MPC depend on the performance of each party and

on the combined efforts of the parties, even if efforts are not evenly distributed among the parties.

For example, investments made by a specialised digital device supplier can hardly be replaced by

equivalent goods and services accessible on the market. In an MPC, relationships among the parties

are very important. It is very costly for all parties to seek remedies that would terminate the

relationship. For these reasons, specific performance and corrective remedies are more important in

collaborative MPCs than in bilateral contracts. This is even more relevant when smallholders are

involved, whose ability to invest in alternative ventures may be very limited.

147. Support from non-performing parties. Corrective remedies are usually sought from the single

party in breach. However, one or more parties may have to support the implementation of corrective

remedies. For example, adoption of a corrective plan to ensure compliance with environmental

standards could call for the sharing of information or best practices among parties. Whereas costs

for corrective remedies are normally borne by the party who is responsible for the non-performance,

some sharing of costs may be agreed among the parties in the interest of collaboration. This sharing

could be highly relevant when smallholders are involved and they may not afford unanticipated costs.

148. Replacement performance. In some cases, non-performance by one party that jeopardises

the common objective can be corrected through a replacement performance by a non-breaching

party. For example, if one farmer is no longer be able to supply produce compliant with contractual

standards, other parties may increase their deliveries. Cooperation like this could be factored against

the party in breach when liquidating damages. As explained below, this approach can help the parties

prevent the use of a more disruptive remedy, such as the exclusion of a breaching party, especially

when individual exclusion may lead to total contract dissolution.

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149. Duties of cooperation. Duties of cooperation are in effect during contract execution and after

the non-performance in the administration of remedies. Correction of the harmful consequences may

require the parties to cooperate to replace defective performance or to repair harm to the

environment and the community. Parties may be required to cooperate in order to address the causes

of non-performance and modify the execution of performances accordingly. Collaboration is crucial

when there are multiple non-performance of the same obligation or a non-performance of a joint

obligation that two or more parties must perform.

G. Restitution

150. Basic concept. Restitution is a remedy that is intended to prevent unjust enrichment. Parties

can seek restitution where non-performance involves misappropriation of common resources or

misuse of shared resources that lead to harm of the collective interest. For example, in a research

and development strategic alliance or joint venture, where one party has either misused the product

of the research or transferred the resource to third parties, restitution would require that any gains

resulting from the misuse be turned over to the non-breaching parties.

151. Stand-alone remedy or combined. Restitution can be a stand-alone remedy, or it can be used

in combination with other remedies. For example, restitution might be sought to restore the balance

in the parties’ interests, possibly in combination with compensation or even punitive damages. Parties

may be asked to return material or financial resources provided to perform contractual performances.

H. Partial or complete termination

152. Alternatives for termination. There are two different sets of relations that contract

termination might dissolve; the individual relationships that link each party to the group, and the

collective relationship among members of the entire group. Termination of an individual relationship,

the exit of the party in non-performance or the exit of the aggrieved party, may occur without

necessarily interfering with the collective relationship. The MPC can remain in force without the

excluded party or the aggrieved party. There are three different scenarios for termination of an MPC.

(a) An MPC should be terminated when the non-performance is so fundamental that it

prevents the continuity of the project’s execution and long-term collaboration. For

example, the common digital infrastructure is irreversibly damaged, or the violation of

sustainability standards is such that the project has irreversibly failed.

(b) The contractual relationship between the breaching party and all other parties should

be terminated when the non-performance is fundamental but does not prevent

collaboration to continue among the non-breaching parties. For example, the digital

infrastructure may be restored, or the project may continue through the enactment of

a corrective sustainability plan involving the remaining parties and possibly new

parties. This type of termination may be called “exclusion” or partial termination from

a subjective point of view (or “pro quota termination”). It plays an important role in

MPCs since it enables the continuity of the whole contract while addressing the non-

performance of a single party.

(c) The contractual relationship between the aggrieved party and all other parties should

be terminated when the non-performance primarily affects one party to the MPC who

then exits the contract due to the non-performance. For example, the financier who

exits an MPC due to severe delays in payment, or the farmer who exits an MPC after

receiving a defective instrument. This type of termination may be called “voluntary

exit” or “withdrawal from the MPC”; unlike other forms of withdrawal, it serves as a

remedy for the non-performance.

52. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

153. Complete termination. Complete termination as a remedy should be carefully considered

when choosing contractual remedies. Not only should termination be a remedy of last resort, but its

effects should also be limited, to the extent possible, to the single relationship between the group

and the party in non-performance, while preserving the MPC. Moreover, especially when exit or

exclusion may lead to contract dissolution for all parties, the party in non-performance should always

be given a chance to cure the non-performance and, if this is not possible, all parties should adopt

any measure aimed at preserving cooperation.

154. Exclusion or exit leading to MPC termination. Exclusion of the party in non-performance or

voluntary exit of the aggrieved party may also lead to the termination of the entire contract. Such is

the case, for example, if a digital service provider who is in non-performance is not replaceable, or

if a farmer who fails to transfer data is also the party who conceived the whole project. Similarly, a

financier exiting a contract as a result of a farmer’s default with no existing, or potentially new, party

capable of providing new financing could endanger the project’s continuity

155. Considerations. Parties interests may diverge around the question of contractual termination.

Some might prefer to continue the collaborative project, while others might prefer it terminated. The

decision to terminate has economic consequences that may not be identical for each party, which

give rise to distributional issues. Even if the MPC is terminated, in part or entirely, both breaching

and non-breaching parties may face different consequences that should be addressed by individual

remedies.

156. Issues to address. MPCs should address several issues in advance of non-performance that

include the following: (i) when can a breaching party be excluded (forced exit); (ii) when can an

aggrieved party exercise the right to exit (voluntary exit); and (iii) can the right to exit be limited to

preserve the collaboration. In principle, the right to exclude and the right to exit should be granted.

However, when the exit, whether voluntary of forced, has disproportionate consequences and

undermines the collaboration among the remaining parties, exit should be limited to the occurrence

of serious or material non-performance. An MPC can regulate the use of termination (in particular,

exit and exclusion) to ensure that collaboration is preserved to the extent possible. In particular, the

contract can specify which type(s) of non-performance justify the aggrieved party’s exit or the

exclusion of the party in breach. The agreement could determine whether the exit should be subject

to the completion of certain degrees of performance. For example, exit might be conditioned on

contribution to the common project activities. It could also determine whether exclusion should be

approved by the majority of non-breaching parties, or all of them. Due process safeguards might

apply to the exclusion mechanism, including information and motivation duties, right to be heard,

review by independent bodies or courts. Damages or restitution might be used as a complement to

termination in the agreement.

157. Strategic party. Contracting parties should be aware that, when exclusion applies to a party

that is not easily replaceable (also known as a strategic party), or when the aggrieved party who

wishes to exit is a strategic party, termination of the entire contract is hardly avoidable. Depending

on the applicable law and different legal traditions, the proportionality principle could be invoked to

support an approach whereby exclusion of a strategic party, which entails a substantive risk of total

termination of the whole MPC, should be sought only if the non-performance is of such severity that

the multi-party collaboration is due to fail and cannot be preserved. Similarly, the withdrawal of a

strategic party, aggrieved by a fundamental non-performance, should be limited, for example by

postponing the effects of withdrawal so as to enable the remaining parties to identify substitute

parties or similar adjustments.

I. Compensation or damages

158. Basic concept. Damages are monetary payments awarded to a party who has suffered a loss

due to another party's non-performance. The objective is to compensate the non-breaching party

and put them in the position they would have been in had the MPC been fulfilled as agreed. Damages

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may play either an alternative or a complementary role to other remedies, such as correction or

termination, but are the only available remedy when correction and or restitution is not possible and

no termination is sought.

159. Compensatory role. Damages can be requested to compensate for the following:

(a) violation of the collective and the individual expectation interest(s) harmed by the non-

performance, or both. For example, common equipment, such as digital infrastructure,

might malfunction and require costly maintenance for the group as a whole and as a

result of the malfunction, the individual parties may also suffer additional losses that

vary with each farmer. If the non-performance has caused damage to physical or

intangible assets (e.g., tractors or data, respectively), the economic value of such

losses should be considered as the basis for the calculation of damages.

(b) reliance interest (e.g., the expenses and losses incurred in the expectation that the

MPC will be performed) and expectation interest (the anticipated benefits from an

MPC). When there is uncertainty over the results of collaboration, reliance damages

may be easier to ascertain than expectation damages.

160. Complementary role. Damages may also complement other remedies. When combined with

corrective remedies, such as specific performance or the like, damages can compensate the

aggrieved party for the remaining losses and additional costs that remain, as well as any costs

generated by correction – e.g. the expenses generated to secure performance from third parties. For

instance, damages can be combined with specific performance to compensate for the losses caused

by delayed performance. Precisely because correction facilitates continuity of the cooperation, the

costs of correction should be calculated and included as damages for breach of MPCs.

161. Combined with partial termination. In cases of forced or voluntary exit, damages should

compensate the non-breaching parties for the costs borne to replace the excluded parties/their

performances and other consequences of their exit. Again, any additional costs incurred to facilitate

the continuity of collaboration among remaining parties should be factored into the calculation of

damages.

162. Combined with complete termination. If the entire MPC must be terminated, damages could

include compensation to cover reliance interest – lost investments that cannot be used in alternative

projects – or expectation interest – loss of profits reasonably expected from the project’s execution.

In the majority of legal systems, it would only be possible to recover both in exceptional

circumstances. In the event of complete termination, the contractual rules on damages should

coordinate with the contractual rules on restitution, in order to avoid duplication (see discussion

above on restitution).

163. Calculation of damages. As noted above, damages can be designed to redress both the

parties’ reliance interest and their expectation interest. Reliance interest includes the expenses the

parties incurred while relying on the agreement. It should include the economic value of any damage

the non-performance has caused to physical or intangible assets. Expectation interest, on the other

hand, includes any future benefits the parties intended to gain from the collaboration. Expectation

interest include lost profits and missed performance. Lost profits should be calculated both for the

group and for the individual parties, should they differ. Missed performance includes the value of

workers' training services that have not been provided. This forces the parties to secure replacement

services from other sources and continue the collaboration

164. Digital tools to calculate damages. The use of digital devices in contract execution could ease

the task of assessing parties’ contributions and determining damages in the event of non-

performance (see above Section V.C).

165. Special loss on non-performance of sustainability standards. Lost profits may be particularly

relevant when a party to an MPC violates sustainability standards. In the event of a non-performance

of sustainability standards, third parties may discontinue their contractual relationship with parties

54. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

to the MPC, including the parties who did not, themselves, violate the standards. In these

circumstances, that party’s expected income decreases and these lost profits are included in the

calculation of damages. To prevent this scenario from ruining the breaching party, the parties might

anticipate such losses and mitigate by adopting a corrective plan, the costs of which may also be

factored into the calculation of damages (although some MPCs exclude specific types of loss from the

duty to mitigate).

166. Liquidated damages and penalty clauses. Parties to an MPC can use a liquidated damages

clause to predetermine the value of contractual interests. Liquidated damages clauses are particularly

useful when the interest is critical, intangible, and difficult to put a value on, e.g. data. Depending

on the applicable law and parties’ choice, such clauses define the value of damages due in the event

of non-performance without any requirement for proof of loss. A liquidated damages clause avoids

litigation costs and signals the importance of the performance of certain obligations in the MPC to

discourage their non-performance. Penalty clauses can also prescribe the actions that are to be taken

by all parties should non-perfromance occur, thereby avoiding transaction costs over the definition

of desired behaviour by non-breaching parties. They are particularly useful when the interests of

non-breaching parties differ or conflict.

J. Hierarchy of remedies and principles of stability and proportionality, and

dispute resolution mechanism

167. Rationale. As parties may have different interests and conflicting views upon non-

performance, remedies can be used to protect these different interests and objectives. The parties

can preserve the collaborative endeavour by defining a hierarchy of remedies in accordance with the

principles of stability and proportionality.

168. Principle of contractual stability. Parties should insert a term concerning the hierarchy

consistent with the principle of contractual stability. Namely, the hierarchy should preserve the life

of the MPC and the possibility for some parties to continue execution of the contract despite the non-

performance while leaving individual participants the freedom to exit.

169. Principle of proportionality. The availability and hierarchy of remedies should take into

account the nature of the non-performance and whether the non-performance is considered

fundamental (as explained above in Subsection VI.B.) The principle of proportionality should be

applied when designing the contractual terms for remedies. Even beyond proportionality, other

considerations require distinguishing between a fundamental non-performance and others.

Proportionality may also require that correction precedes compensation.

170. Hierarchy of remedies. The hierarchy should be structured to prioritise those remedies that

redress without terminating the contract and, among these, those that correct the effects rather than

simply compensate for the losses. Hence, priority should be given to corrective remedies aimed at

removing the causes of non-performance, to re-establish the conditions for collaboration and to

reduce or eliminate the negative consequences of non-performance. Corrective remedies could be

combined with specific performance, especially in the case of interdependent performances where

the search for alternatives may prove ineffective.

171. Sequence of conflict resolution. A system to resolve conflicts should be in place before non-

performance occurs. A committee with representatives of the parties in the contract can be an

effective way to solve problems in contractual execution. Next, there can be dispute resolution

mechanisms internal to the contract with specific terms regulating their functioning. Mediation and

arbitration can be useful tools to solve disputes among the parties; the identification of mediators

and arbiters, their role, the rights of the parties during the procedures, the type of decisions that

may be reached and the possibility to challenge them should be defined in the contract within the

limitations provided by applicable law. Finally, judicial intervention should only be used as a last

resort.

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172. Impacts on third parties along the chain. Remedies should not only account for the interests

of the parties to the MPC but also for the consequences of non-performance along the chain.

Termination of the contract creates a hole in the chain that can hardly be filled in a short time

interval, thereby exacerbating and increasing the overall negative consequences of non-

performance. Hence, a hierarchy of remedies related to the non-performance of the MPC where

parties operate in a more complex chain should also consider the systemic consequences of the non-

performance and the choice of remedies.

K. Duty to mitigate

173. Basic concept. An MPC includes a duty to mitigate the consequences of non-performance, as

with a bilateral contract. However, given that MPCs are based on the duty of cooperation, the duty

to mitigate may play an even greater role in MPCs than in bilateral contracts. The duty to mitigate is

required and regulated by international commercial contract law63 and also many national laws. The

terms of an MPC should specify how parties should mitigate the consequences of non-performance.

174. Who has duty. All non-breaching parties have a duty to mitigate the losses stemming from

non-performance and should take action to reduce negative consequences. Non-breaching parties

are required to continue to cooperate and resolve problems created by the non-performance. The

duty to mitigate has specific features in MPCs. The parties must consider whether the non-breaching

parties should mitigate jointly or individually and also consider how the mitigation obligations should

be allocated. The collaborative framework implies that parties should collaborate in mitigation and

agree on actions to reduce the consequences of non-performance.

175. Scope of duty. Mitigation in MPCs is focused primarily on protecting the collective interest

underlying the collaboration. This is distinct from mitigation in a bilateral contract, where mitigation

is aimed at reducing the harm of the aggrieved party as an individual interest. Accordingly, not only

should non-breaching parties take action to reduce negative impacts of non-performance on the MPC

but also take steps to reduce any potential systemic consequences of non-performance on third

parties along the chain. Thus, the scope and extent of the duty to mitigate can extend beyond the

immediate parties to the MPC.

176. Type of non-performance and duty. Mitigation is closely correlated with the type of remedy

associated with non-performance. Although particularly relevant when the MPC continues to operate

after non-performance, mitigation is also relevant when damages complement termination; parties

are required to take action and limit any losses stemming from termination.

177. Failure to mitigate. When mitigation is collective, contractual parties may play different roles

in mitigation depending on both the party’s position within the MPC and the chain, and available

resources. Consequently, the costs of mitigation may be distributed unevenly. Failure to mitigate

may constitute non-performance of the MPC and may not only preclude the non-mitigating party

from recovering damages but may also require indemnification of the additional expenses of those

who did mitigate. The failure to mitigate by an individual contracting party bears effect only on that

party and does not preclude expense reimbursement for those who mitigated.

IX. EXIT, DISSOLUTION AND POST-CONTRACTUAL OBLIGATIONS

178. Overview. Whereas entry into an MPC signals the beginning of a long-term relationship, exit

is the moment the relationship may come to an end. Governance of exit and the dissolution of an

MPC have implications for the incentives of the parties to engage in common-interest activities and

collaboration. At the same time, options for exit and dissolution provide parties with flexibility,

particularly where there has been a change in either a party’s interest in collaboration or ability to

contribute. Only in exceptional circumstances should exit (in the form of exclusion) be viewed as a

63 See UNIDROIT Principles and CISG.

56. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

penalty for severe non-performance of the MPC. In these circumstances, due safeguards should apply

to the exclusion, as described below.

A. Exit

179. Basic concept. Exit is the termination of the single relationship between one of the parties

and all other parties to the MPC. Exit usually entails exit from the entire MPC, but when the MPC is

internally structured as multi-project, the exiting party may choose to exit from a single project while

remaining party to the MPC. Unless otherwise specified, this section considers exit as termination of

the whole relationship between the outgoing party and those remaining.

180. Importance of clear terms. While preserving the collaboration should be encouraged, it is

essential to outline in the MPC the options for exit, whether voluntary or forced, and their

restitutionary effects. In both forced or voluntary exit, termination of the single relationship with the

group may or may not lead to complete termination of the MPC (dissolution); this depends on the

role played by the outgoing party.

1. Voluntary exit

181. Basic concept. Exit from an MPC is voluntary when initiated by an outgoing participant

However, provisions of the MPC might impose certain limitations on exit and might in exceptional

circumstances assign veto power to the remaining parties in order to avoid disruptive consequences.

Voluntary exit from MPCs in agriculture can have different consequences depending on the content

and objectives of the collaborative contract, the degree of uncertainty of the outcome, and level of

interdependence.

182. Possibility of exit. A general principle in most legal systems is that a contract for an indefinite

period may be terminated by any party by giving the other parties notice a reasonable period of time

in advance. Pursuant to this principle, a complete ban against voluntary exit would not be possible.

Although voluntary exit may be discouraged by the MPC, whether it may be completely precluded

will depend on the applicable law.

183. Reasons for liberal exit regime. When the outcome of collaboration is uncertain, a free exit

regime may encourage parties to enter the MPC without fear of lock-in. For example, parties know

they will not be stuck in an MPC even though they cannot foresee whether co-investing in research

will increase productivity, or reduce carbon emissions. If the objective is to encourage entry through

a “liberal” exit regime, the parties should consider providing some remuneration to the outgoing

party for investments they made, the benefits of which will be directed to the remaining parties only.

This remuneration is particularly important for exiting smallholders, that may wish to reinvest such

resources in alternative ventures. This approach may be beneficial when collaboration from several

participants could maximise the collective interest, but participants are easily replaceable and no one

is essential while interdependence is low.

184. Reasons to restrict exit. Exit plays a different role when performance is interdependent. When

the outcome strongly depends on the collaboration of the parties, the exit regime does not encourage

entry. Rather, exit is designed to induce all participants to collaborate and preserve contract

continuity in order to prevent each other’s exit. For example, within an MPC aimed at the production

of organic products compliant with strict standards along the entire chain, limitations on voluntary

exit provide all parties with incentive to cooperate in order to achieve the common objectives. The

limitation discourages participants from voluntarily exit. Exit remains possible but with negative

economic consequences for the exiting party. Of course, exit should be designed to prevent abuse,

as described below.

185. Uncertainty and interdependence. When there is both uncertainty as to the outcome, and

interdependence among parties is high, the exit regime should seek to harmonize ease of entry and

protection of the collaboration. In such circumstances, voluntary exit should be allowed, but specific

UNIDROIT 2026 – Study LXXXC – Draft Chapter I 57.

investments should be protected, not only for the exiting party but also in favour of those remaining.

A balance should be struck, e.g. combining limited restitution rights for the exiting party and some

post-contractual duties, as described below.This balance is particularly important when specific

investments have been made by smallholders as parties to the contract. Their ability to reinvest

these resources out of the collaboration may be even more limited, which may suggest to favour

continuity over freedom to exit and anyway to limit restitutionary rights and insist on post-contractual

duties even further.

186. Regulating voluntary exit regimes. Regimes for voluntary exit may differ significantly.

Depending on the applicable contract law, parties are usually able to regulate such regimes by

including the following provisions:

(a) defining the instances in which exit is possible;

(b) setting a period during which exit is not allowed (usually at the beginning of the MPC

when specific investments are made);

(c) defining whether economic contributions may be returned to the outgoing party

(d) defining whether the outgoing party may be entitled to the collaboration’s proceeds or

intellectual property rights arising from cooperation;

(e) determining when the exit becomes effective after the outgoing party makes its

request;

(f) establishing whether the outgoing party will remain subject to certain obligations after

the individual relationship is terminated and/or the entire MPC is dissolved (post-

contractual obligations, see below); and

(g) setting penalties for early exit (in money or in kind).

187. Liberal or limited exit. A “liberal exit regime” is one in which there are few restrictions on the

circumstances of exit; the outgoing party preserves the economic rights over contributions, rights

and proceeds raised during the time of participation; the exit is immediately effective; there are no

substantive obligations imposed on the outgoing party. A “limited exit regime” is one in which one

or more of the above restrictions are foreseen in the MPC. Based on the considerations above, a

“liberal exit regime” may be preferable when entry needs to be encouraged, interdependence among

participants is low and parties are easily replaceable; a “limited exit regime” may be more appropriate

when interdependence is higher, specific investments are more relevant and parties are less easily

replaceable.

188. Restricted exit to prevent opportunism. Restrictions may be placed to regulate exit, or to

prevent or limit opportunistic behaviour. Limitations on the outgoing party’s access to intellectual

property rights, post-contractual obligations, and penalties for early exit may prevent or at least

discourage opportunistic behaviour from the outgoing party.These protections are particularly

important when contract parties have different economic power and different capacity to reinvest

resources conferred in the collaboration in alternative ventures, which may be the case when

smallholders collaborate with larger enterprises.

189. Veto or compensation to prevent voluntary exit. An MPC may validly assign the remaining

parties the power to veto voluntary exit if such exit would prejudice the pursuit of common objectives.

The most common technique to vest the parties with such power is to pre-determine the instances

in which voluntary exit would be permissible, taking the collective interest into account. For example,

an MPC among farmers engaging in a common project for the development of an irrigation system

could establish that voluntary exit is not allowed until the system is established, unless such early

exit does not cause substantive harm to the other parties. In such a case, the remaining parties may

be granted veto power if they can demonstrate such harm. Alternatively, a different technique to

discourage voluntary exit would be to vest the remaining parties with the right to compensation

rather than veto power.

58. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

190. Transfer of participation on voluntary exit. A party to an MPC may “transfer” its participation

in the MPC, thereby enabling continuity through replacement. For example, in an MPC for the

development of new irrigation technology, a farmer intending to leave the collaboration due to

financial difficulty might wish to transfer participation to another farmer. Such transfer without any

assessment from the remaining parties might be prohibited either by law or by the MPC due to the

trust that is necessary to collaborate. A party to an MPC might also seek to transfer that party’s

business or land to a third party. Under national legislation in some jurisdictions, in such a case the

third party would be permitted to enter the MPC unless the remaining parties oppose.

191. Consequences of voluntary exit on collaboration. In most cases, if a party exits the MPC in

accordance with the contractual rules, the other parties may not oppose. The detrimental effects of

voluntary exit, however, are often such that the collaboration might not be able to continue as it was

originally designed. In such circumstances, the remaining parties will need to consider whether to

modify the terms and re-allocate tasks and responsibilities among themselves, to find a replacement

for the outgoing party, or to accept that the MPC is dissolved. The parties decide how to respond to

the exit based on internal rules set out in the MPC.

192. Consequences for exiting party. Depending on the contractual rules, the exiting party may

(or may not) be entitled to restitution of its own contributions intended for future use in the

collaboration, the proceeds and revenue from projects and activities to which this party contributed,

and/or the resources conferred to a common fund or to the group. If any of the exiting party’s

contributions are considered critical resources upon which the success of collaboration is dependent,

the parties could agree ex ante to limit the exiting party’s restitution rights in order to preserve the

continuity of the common interest project. Thus, limitation of restitution rights could act as another

deterrent to voluntary exit. A more nuanced approach would for the MPC to deny restitution in kind

and substitute monetary restitution. This would allow the MPC to still access the exiting party’s

intellectual property or physical equipment for example. The parties may also impose post-

contractual duties on the exiting party. (see discussion below on post-contractual obligations).

2. Forced exit (exclusion)

193. Basic concept. Forced exit is a mechanism through which a party to an MPC is required to

leave the collaboration based on the decision of the remaining parties, either as a result of a (severe)

non-performance or objective impediments that prevent the party from continuing (e.g., bankruptcy,

death or the like). In the latter case, exit may occur with or without a decision from the remaining

parties. Some MPCs provide for immediate termination upon bankruptcy or death. Forced exit should

be considered with caution as it occurs under exceptional circumstances, usually with disruptive

consequences.

194. Remedy and penalty. When forced exit occurs due to supervening events (such as bankruptcy

or irreversible land loss), its governance is intended to address the consequences of such exit possibly

by releasing the outgoing party from certain obligations or reallocating tasks among the remaining

parties. When forced exit occurs due to (severe) non-performance, it acts both as a remedy and as

a penalty: Forced exit is a remedyfor the remaining parties because the latter are released from

obligations towards the excluded party. The remaining parties become free to continue collaborating

among themselves without the excluded party, who may be additionally obliged to pay damages

and/or provide restitution. Forced exit is a penalty for the excluded party because the latter is no

longer entitled to participate in the common project and could lose all specific investments with no

return. The excluded party could also be subject to additional penalties.

195. Principle of proportionality limits use of forced exit as a penalty. MPCs should carefully define

when forced exit may be used. The agreement should consider whether the party being forced to

exit plays an essential role in the collaboration. When deciding on a party’s exclusion in the case of

non-performance, the non-performance must be fundamental, final, and not curable. The principle

of proportionality dictates that forced exit should only be used when strictly necessary. In the case

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of multi-project collaboration, exclusion could be limited to a single project, while the party remains

involved in all other activities.

196. Principle of due process limits use of forced exit as a penalty. Decision-making about forced

exit is of particular importance. The MPC should include provisions to ensure that due process is

respected, that the party to be excluded has the right to be heard and the right to cure non-

performance. Opportunistic decision-making over forced exit may also be addressed through the

selection of the voting mechanism used when deciding to exclude a party, by either unanimity rules

or super-majority voting.

197. Harms and remedies of excluded party. Forced exit from an MPC may harm the excluded

party. For example, the party may suffer due to i) being unjustly barred from access to strategic

resources (e.g., data, knowledge about innovative agricultural practices, new technologies, etc.); ii)

unsold produce grown or processed in accordance with commonly-agreed standards; or iii) restrained

access to finance or to global value chains. The excluded party should be able to challenge the

decision on the basis of breach of good faith and collaboration duties within the MPC to address these

consequences.64 Whether the excluded party may seek annulment of the decision or only damages,

depends on applicable law in the given system.65

198. Penalties and damages paid by excluded party. Forced exit may also necessitate contractual

adjustments, such as replacement of the outgoing party or reallocation of tasks among the remaining

parties. In addition, the MPC should answer the question of whether the outgoing party is entitled to

any restitution or subject to any post-contractual obligations. As discussed above, restitution may

be limited by MPC rules to facilitate the continuity of the common project despite an individual exit.

When forced exit is based on fundamental non-performance by the excluded party, a partial or total

denial of restitution rights may be justified by the penalty function of exclusion and the need to

mitigate the damages caused by non-performance. Moreover, in case of exclusion based on

fundamental non-performance, payment of damages may complement the protection of the

remaining parties. Penalties (in kind or in money) could also be added to reinforce deterrence. For

example, five farmers use an MPC to set up a sustainable development project aimed at certification

for compliance with social and environmental standards. A party is excluded for severe non-

performance of human rights in the production process. Upon exclusion, the financial contribution

paid by the excluded party towards the project is retained by the other parties. In such case, not

only is the excluded party not entitled to restitution of such contribution, but it must also pay

damages to compensate for losses stemming from non-compliance with the certification, or pay

additional penalties.

B. Dissolution of the contract

199. Reasons. Complete termination (or dissolution) of an MPC occurs if the contract comes to an

end. In most cases the end of an MPC also implies the end of collaboration. This may happen if the

parties have agreed to collaborate for a definite period and such time has elapsed. Dissolution may

also occur if the parties decide to end the collaboration because the objectives have been achieved,

if the collaboration is no longer beneficial (e.g., demand for a product has drastically decreased), or

if there are new circumstances that make the collaboration impossible or too burdensome for most

participants. Lack of trust among the parties may also be a cause for dissolution or, among other

instances, if through voluntary exit participation in the MPC has been reduced to one party. As

discussed above, both voluntary and forced individual exit can prompt dissolution of the MPC, if the

outgoing party is essential.

64 Whereas this matter is addressed in ‘organisational law’ (e.g., law of associations, corporations and the like), it is not usually considered in contract law, other than through the lens of general principles, such as good faith. 65 The invalidity of decisions is usually acknowledged in company and association law.

60. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

200. Incentives to prevent dissolution. Except where collaboration comes to an end because the

objectives have been achieved, dissolution of an MPC remains a serious event with severe

consequences. Specific investments may be lost when investments used to develop resources cannot

easily be redeployed into alternative projects (e.g., investments into research for the development

of a new crop variety). The higher the specificity of the investments, and the more interdependent

the roles of contracting parties, the stronger are the incentives for preventing dissolution and

ensuring continuity of the MPC. Agreeing ex ante on a limited list of events that may cause contract

dissolution can help provide the correct incentives for specific investments during the collaboration.

201. Decision-making process. The parties may adopt an ad hoc decision-making process to verify

that the conditions that trigger dissolution are met, and that dissolution is not being opportunistically

used by contracting parties. Establishing that the decision to dissolve an MPC should be approved by

a majority or by all parties may further help contrasting the risk of abuse.

202. Impacts of dissolution on third parties. These decision-making processes could, in principle,

include consultation with third parties (e.g., employees, financing parties) who may suffer important

consequences from the dissolution. Including third parties in the process of dissolving an MPC could

serve as a relevant mechanism for those projects that contain social and environmental commitments

with strong implications for third parties. An MPC might also be liable towards third parties due to

the dissolution and the failure of the underlying project. For example, if producers use an MPC to

collectively commit to complying with social and environmental sustainability standards in order to

move towards certification, a question may arise as to whether NGOs may seek damages for the

environmental drawbacks coming from the parties’ decision to discontinue the project.

203. Payment of liabilities. Once the MPC has been dissolved, liabilities and any remaining

resources should be allocated using a liquidation procedure. Common resources should be used first

to pay any debts owed to third parties like financiers, licensors, suppliers, and anyone entitled to

damages. If common resources are insufficient, parties could be called upon for any shortfall and

their personal funds could be seized to cover the remainder. This (unlimited) liability of contracting

parties could be excluded, however, should applicable law allow the parties to create a trust-like and

separate fund to pursue the common objectives underlying the MPC or a sub-project within the MPC.

In such cases, only the fund (or trust) resources may be seized by creditors and not the personal

assets of each MPC party.

204. Liabilities of contracting parties towards each other. Contracting parties may be liable

towards other MPC parties at the time of contract dissolution. For example, a participating farmer

could owe pending fees for services or goods, or a party could owe damages for non-performance.

All such liabilities should be discharged before any remaining assets are distributed.

205. Distribution of assets. The remaining resources should be divided equally among the parties,

unless different shares have already been agreed. For instance, shares may be based on different

contributions to a common fund, or to common expenses. In the case of indivisible resources, (such

as new equipment or new technology), the parties could agree to assign the asset to one party with

compensation paid to the others.

C. Post-contractual obligations

206. Basic concept. Post-contractual obligations may arise for all parties when the MPC is

completely terminated (dissolution). On partial termination (voluntary exit or exclusion), post-

contractual obligations may arise for the outgoing party. These obligations, intended to preserve the

results of collaboration, are binding and enforceable despite contract termination. Non-performance

of post-contractual obligations is subject to remedies, such as corrective measures, compensation or

restitution. The duration of post-contractual obligations is usually limited and commensurate with

the reasonable reliance of the other parties.

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207. Types of obligations. Although termination brings the contractual obligations to an end,

certain obligations may persist and new ones may arise to prevent the collective interest from being

jeopardised by post-contractual action (or inaction) by the (outgoing) party(ies). Typical examples

are: (i) confidentiality obligations, (ii) non-competition duties, (iii) sustainability commitments, and

(iv) duties aimed at the completion of activities that cannot be postponed or omitted (see example,

below). These obligations may require restraint (refraining from certain activities) or positive action.

Exiting or excluded parties could be required not to carry on any activity in competition with the MPC

project, not to exploit relevant know-how that was developed during their participation in the MPC,

and not to oppose the use of intellectual property rights by the remaining parties when these rights

have been developed with the contribution of the exiting or excluded party. The exiting or excluded

party may also be required to continue to engage in pending activities for the completion of the

project that could not be discontinued or replaced without harm to the collective interest.

208. Changing nature of obligations. While these same obligations might have been imposed on

parties during the contractual relationship, their function changes in the post-contractual phase. The

objective is no longer implementation. Rather, the objective is to preserve the results that have been

achieved and to prevent their depletion. For example, an MPC could establish that farmers who exit

the contract but continue to grow their produce in the same area occupied by the remaining parties

should inform the remaining parties about the type, quantity and timing of pesticide administration

to enable the latter to protect their produce against the indirect effects of pesticides. As another

example, within an MPC regulating the functioning of a digital platform for the exchange of data on

agricultural practices, exiting parties should be obliged to update existing data for a certain period

after contract termination to enable the correct supply of services based on those data. As a final

example, within an MPC for the implementation of an experimental farming technique, the exiting

parties could be obliged to inform the remaining parties and their suppliers about any incident or

relevant supervening effects caused by experimental techniques that could be relevant for the further

development of the project. As the above examples illustrate, post-contractual obligations may be

directed towards parties to the MPC, or to third parties along or outside the chain.

209. Confidentiality and non-competition. Post-contractual obligations commonly concern

confidentiality and non-competition, particularly in research and development projects. Parties may

not engage in similar collaborative projects if this would entail the use of knowledge and resources

developed with contractual parties, even after parties have exited the MPC.

210. Distinctions between complete and partial termination. In the case of complete termination

of an MPC, performances might be owed by some parties to other contracting parties or third parties,

such as positive obligations to ensure collaboration or negative obligations to refrain from

appropriation or misuse of shared resources. External creditors may have an interest in ensuring that

post-contractual obligations are performed and that the creditor’s interests are fully protected, for

example, local communities that may be affected by project discontinuity. In the case of partial

termination, the excluded party may not only be required to compensate the other MPC parties, but

also to contribute towards longer-term solutions, especially when environmental or social standards

were violated and harm was caused to contractual and/or third parties. For example, where producers

had committed to refraining from the use of pesticides and the violation of this obligation caused

water and soil pollution, apart from damages and penalties imposed on the excluded party for direct

effects of non-performance, this party might also be required to execute post-contractual obligations,

such as preventing the expansion of water and soil pollution into the fields of remaining parties, or

of third parties.

211. Requirements of remaining parties on partial termination. When the MPC continues to exist

after exit or exclusion, the determination of duties may be complemented by other post-contractual

obligations based on the need to continue the collaboration and to complete the project’s execution.

Contractual modifications may be necessary to redefine the structure of collaboration and replace

the activity of the parties that have exited. The remaining parties have an interest in ensuring the

excluded parties comply with their post-contractual obligations. As a result, they might have to make

collective decisions about which course of action to take.

62. UNIDROIT 2026 – Study LXXXC – Draft Chapter I

212. Implications for third parties. Post-contractual obligations may also concern third parties

outside the chain. The contract should prevent parties from externalising costs by terminating

contracts the non-performance of which have caused or can cause harm to third parties. If, for

example, there have been sustainability violations of contractual clauses, infringers may have to

perform remediation activities to address environmental or social harms even when the MPC is no

longer in force. These activities should be performed even if the MPC was terminated because the

conditions for collaboration had ceased to exist.

213. Distinction from contractual rules for distribution. Post-contractual obligations differ from

those directly associated with contractual dissolution and the rules on asset allocation and distribution

of debts and credits among the parties. The rules for distributing debt and credit are usually qualified

as liquidation. Although liquidation follows termination of the MPC, their function relates strictly to

contractual execution and its characteristic performances. The same applies to restitution or

compensation due to or by the outgoing party in case of exit or exclusion. Where appropriate, the

MPC should also include terms regulating performance of post-contractual obligations after the MPC

has been terminated.

214. Enforcement. In the case of exit or exclusion, the remaining parties will be responsible for

the governance and enforcement of post-contractual obligations. By contrast, in the event of

complete termination of the MPC, no party remains and an enforcement gap can emerge. If the

complexity of the performances following contractual termination requires coordination and

monitoring, some governance mechanism may be devised to ensure completion of post-contractual

obligations. The MPC may provide some coordination mechanisms that ensure that contractual and

third-party creditors are fully satisfied by appointing a committee with delegated power to act on

behalf of the creditors and monitor the activities that debtors have to perform after contractual

dissolution.

63. UNIDROIT 2026 – Study LXXXC – Draft Chapter II

CHAPTER II

COOPERATIVES

TABLE OF CONTENTS

I. INTRODUCTION 65

II. OBJECTIVES OF COOPERATIVES 68

III. FORMATION 69

A. CONSIDERATIONS WHEN FORMING AN AGRICULTURAL COOPERATIVE 69

B. FORMATION PROCESS 73

C. PROCESS AND CONSEQUENCES OF REGISTRATION 74

IV. MEMBERSHIP 75

A. CENTRALITY OF MEMBERSHIP 75

B. ADMISSION TO AND TERMINATION OF MEMBERSHIP 75

C. OBLIGATIONS AND RIGHTS OF MEMBERS 77

1. Members’ obligations 77

(a) Personal obligations 77

(b) Financial obligations 78

2. Members’ Rights 78

(a) Personal rights 78

(b) Financial rights 79

V. GOVERNANCE 79

A. PRINCIPLES 79

B. BODIES OF THE COOPERATIVE 81

1. General assembly 81

(a) Composition 81

(b) Powers of the general assembly 82

(c) Decision-making 84

2. Supervisory council 84

3. Board of directors 85

VI. FINANCIAL RESOURCES AND INCOME DISTRIBUTION 85

A. PRINCIPLES 85

B. FINANCIAL RESOURCES 86

1. Internal financing sources 86

2. External financing sources 88 C. INCOME DISTRIBUTION 89

VII. COLLABORATION AMONG COOPERATIVES AND WITH OTHER

ENTITIES 89

A. COOPERATION AMONG COOPERATIVES 90

B. COOPERATIVE ECO-SYSTEMS 91

C. INTEGRATION INTO AGRIFOOD VALUE CHAINS 91

64. UNIDROIT 2026 – Study LXXXC – Draft Chapter II

VIII. REMEDIES, DISPUTE PREVENTION AND RESOLUTION 93

A. TYPES OF BREACHES AND DISPUTES 93

B. PRINCIPLES OF DISPUTE SETTLEMENT 93

C. REMEDIES AND SANCTIONS 94

IX. MERGERS, DEMERGERS AND TRANSFORMATION 94

X. DISSOLUTION AND LIQUIDATION 95

A. INSTANCES OF DISSOLUTION 95

B. LIQUIDATION 95

XI. DIGITALISATION 96

UNIDROIT 2026 – Study LXXXC – Draft Chapter II 65.

I. INTRODUCTION

1. Cooperatives. This Chapter uses the term “cooperatives” as defined by the International

Cooperative Alliance (ICA) Statement and the International Labour Organization (ILO)

Recommendation N°193, as “[…] an autonomous association of persons united voluntarily to meet

their common economic, social and cultural needs and aspirations through a jointly owned and

democratically controlled enterprise”.66

2. Taxonomy of cooperatives. Various criteria may be used to establish a taxonomy of

cooperatives. There is no single approach to describe the scope and typologies of cooperatives.

Generally, cooperatives may be classified by: (i) economic activity and/or (ii) cooperative

characteristics. Cooperatives may further be categorised according to the following:67

(a) member relationship with the cooperative, for example, consumer, user, worker;

(b) nature of member activity as producer (and thus, supplier), for example, crafter,

farmer, fisherperson;

(c) membership types, for example, homogeneous member cooperatives (e.g., farmers)

or multi-stakeholder cooperatives; and

(d) nature of the cooperative’s function in relation to the members’ production, for

example, purchasing or marketing.

3. Specifying agricultural nature of cooperatives. While the above-cited general definition of

cooperatives states the three-fold objective of cooperatives (meeting the economic, social and

cultural needs and aspirations of the members) and lays the cornerstones of the cooperative form (a

jointly owned and democratically controlled enterprise), the definition of agricultural cooperatives

requires further specifications to determine the agricultural nature of a cooperative.

4. Agricultural cooperatives. Agricultural cooperatives are a type of cooperative essentially

involved in carrying out an agricultural activity, especially by providing services to farmers that allow

them to be competitive, for example through inputs supply, marketing channels, advisory services,

subsidy services, insurance, supplies, training, education, etc. In practice, the cooperative may also

be involved in non-agricultural activities (e.g., data collection or marketing related to the agricultural

activity) and/or other activities for the well-being of its members, such as in areas of health or

finance. This is often secondary production or a related activity that is organised in some other way.

It is essential that secondary production or related activities promote the success of primary

production and thus enable farmers to be competitive.

5. Typologies of agricultural cooperatives. It follows that different types of cooperatives exist

within the agricultural sector, and may include supply cooperatives, marketing cooperatives and

agricultural producer cooperatives. Agricultural cooperatives could also be described by the relative

weight they put on the various aspects of their objectives which is economic, social and cultural, the

types of transactions (sellers of product, buyers of inputs and services), scope of activities of

66 See the 1995 International Cooperative Alliance Statement on the co-operative identity and the International Co-operative Review, Vol. 88, no. 4/1995, 85 f.; as well as the 2002 International Labor Organization Promotion of Cooperatives Recommendation No. 193. The “persons” referred to in the ICA definition are generally called “members” once the cooperative is formed. This definition of cooperatives has also been used in the Model Laws developed by the ICA with FAO’s support. For example, paragraphs 6 and 7 of the African Model Law on Cooperatives (2024) explicitly restates the ICA definition and principles and locates them within the ILO framework. The ICA/ILO-based identity elements are codified in Parlatino’s 2012 Framework Law for Cooperatives of Latin America, which mirrors the ICA Statement on the Cooperative Identity, lists the same seven principles and was developed on the basis of UN cooperative guidelines and ILO Recommendation 193. For more information see: https://ica.coop/en. 67 Ibid., ILO, 2017a.

66. UNIDROIT 2026 – Study LXXXC – Draft Chapter II

members (single stakeholder to multi-stakeholder), and types of members (individual farmers or

another legal person qualifying as member).

6. Different definitions. These given differences raise the question of how an agricultural

cooperative can be defined consistently from a legal perspective.68 The main reason for a definition

is to provide the basis for promotional policies and/or adequate regulations, for example taxation.

Different areas of law might have different definitions of cooperatives. Although it is possible that

similar approaches are chosen, it can generally be said that tax law offers a more precise and perhaps

narrower definition.

7. Legislators’ definitions. Legislators may define an “agricultural cooperative”, but this does

not seem to be a common approach.69 More common is a reference to an “agricultural activity”.70

Accordingly, agricultural cooperatives can be defined as those that either (i) carry out agricultural

activities themselves (as an enterprise, for example, with the members working as agricultural

workers) − this case may be of less practical importance − or (ii) exclusively or largely provide input

or market agricultural products that are produced or supplied by their members or by non-members

where those of the members do not suffice to honour an obligation of the cooperative with a third

party, for example a retailer. Furthermore, certain practices such as leaving fields fallow are

increasingly being defined as an agricultural activity, with the aim of reducing agricultural production

for environmental reasons.

8. Agricultural activities legally defined. It is therefore necessary to explain how an agricultural

activity can be defined from a legal perspective in order to understand what is meant by primary

production and secondary or related activities. Legislators and policymakers often define agricultural

activities through an enumerated list. In addition to such an approach, primary production can be

defined in general terms by referring to the maintenance and development of a biological cycle,

wholly or in part, of a plant or an animal on which the agricultural activity is based.71

9. Relationship between primary and secondary production. In both cases, the question arises

as to how a link can be established with the secondary activities mentioned. In list-based definitions

of agricultural activities, a distinction is commonly drawn between primary production (e.g., rice,

coffee, or livestock farming) and secondary or ancillary activities (e.g., butter or wine production).

While the latter are linked to agriculture, they are not strictly agricultural in the narrow legal sense.

Similar considerations apply to non-agricultural services that use farm infrastructure − such as

agritourism, including farm stays or on-site restaurants. To preserve the agricultural character of the

enterprise and avoid its transformation into a primarily commercial or hospitality business, such

ancillary activities are typically restricted. This can be done by limiting them to the processing of

products from the farm’s own primary production (e.g., using only on-site grapes for winemaking),

or by capping the scale of tourism services (e.g., limiting the number of guest rooms). These

measures ensure that secondary activities remain supportive of − and not a substitute for − the farm’s

primary agricultural purpose. With regard to the second approach (definition of primary production

68 The meaning of “agricultural activity” is discussed in the Introduction [add cross-reference]. 69 Parlatino's Model Law on Agri-Food Cooperatives (2024) does not repeat the generic ICA definition in Article 5. Instead, it offers a sector-specific definition of cooperativas agroalimentarias as a subtype of cooperative enterprise focused on agri-food production, processing, distribution and related activities. This text is drafted as special legislation that presupposes a general cooperative law with the seven ICA principles. 70 For example, a cooperatives act may state as follows: "Agricultural co-operative" means a co-operative that produces, processes or markets agricultural products and supplies agricultural inputs and services to its members. The reference to an “agricultural cooperative” may also appear elsewhere within the act. For example, the act may refer to “A society which has as one of its objects the disposal of any article or produce of agriculture, animal husbandry, fisheries, forestry, handcraft, or other manufactured goods, produced by it or its members.” Additionally, a cooperatives act may define an "agricultural product" as “any product of agriculture, including grain and seed, maize, groundnuts, cotton, tobacco and other field crops, livestock and livestock products, fruit and fruit products, vegetables and vegetable products, honey and any article wholly or partially processed or otherwise derived therefrom”.

UNIDROIT 2026 – Study LXXXC – Draft Chapter II 67.

with reference to a biological cycle), it should be noted that in this case too the general definition is

not sufficient to classify other quasi-typical agricultural products, such as the production of butter or

wine, as secondary products. In these cases too a link must be established by law between primary

and secondary production, e.g., by allowing the farmer to process only his own grapes from primary

production into wine: secondary production must take on a serving role in relation to primary

production.

10. Historical context. Many smallholders and agri-MSMEs have formed or joined agricultural

cooperatives72 since the mid-nineteenth century and continue to do so in order to mitigate the

prejudicial effects of their own structure in increasingly industrialising and now globalising economies.

Cooperatives make an important contribution to agriculture. The majority of cooperatives categorised

in the “Top 300” are cooperatives involved in agriculture (35%).73 This contribution by or through

cooperatives must not be confused with the number of members or the overall number of agricultural

cooperatives.74 For a variety of reasons, due to legal, institutional and economical barriers, which

this Chapter will briefly explore later, that number is rather low in many countries.75

11. Role and benefits. Agricultural cooperatives have played a decisive role in the development

of agriculture. They play an important role in the production, processing, and commercialisation of

food, as well as the organisation of the retail sector. Forming cooperatives can be an adequate way

for smallholders and agri-MSMEs to create economies of scale and to increase their

market/negotiating power by pooling without losing their autonomy. This is reinforced by the

members of cooperatives having an equal say, independently of their financial contribution, when

they agree to outsource some of their activities to an enterprise (cooperative) of which they retain

full control.

12. Variations in normative frameworks. This Chapter offers a generalised perspective on

agricultural cooperatives across diverse global contexts. This must not be construed as disregarding

the importance of variations in the normative frameworks at the domestic level that govern

cooperatives, especially the cooperative laws and internal cooperative rules and which must be taken

into consideration when dealing with concrete cases.

13. Chapter contents. This Chapter considers the following features of the cooperative form:

(i) objectives; (ii) formation; (iii) membership; (iv) governance; (v) financial resources and income

distribution; (vi) collaboration among cooperatives and with other entities; (vii) dispute prevention

and resolution; (viii) mergers, demergers and transformation; (ix) dissolution and liquidation; and

(x) the impact of digitalisation.

72 While cooperatives are a way to cooperate, not all cooperation takes place in the form of a cooperative. 73 Top 300 is a list of the largest cooperatives compiled by ICA/EURICSE for the World Cooperative Monito. See the 2023 World Cooperative Monitor: Exploring the cooperative economy report. 74 The International Cooperative Alliance (ICA) provides data on membership and the number of cooperatives worldwide. For more information, see: coops4dev.coop. 75 Based on the member directory of the International Cooperative Agricultural Organisation (ICAO), a sector of the ICA, the estimated number of farmers organised in cooperatives is 121 million individuals. However, it is important to consider that ICAO’s data covers: (i) only part of worldwide agricultural cooperatives, (ii) some ICAO members are not agricultural producers’ cooperatives (e.g. ACC(Türkiye), IFFCO(India), NAFSCOB (India)), (iii) some of ICAO’s members are not farmers, and (iv) some of ICAO members’ data has not yet been collected. Based on the internal data collected by the ICA, between the years 2015 and 2018, for 160 countries, it is estimated that 112.6 million members are organised in agricultural cooperatives. Additional information is available from the ICA facts and figures coupled with the World Cooperative Monitor developed by ICA and the European Research Institute on Cooperative and Social Enterprises (EURICSE). In addition, publications prepared by FAO Regional Offices may provide useful data on cooperatives (for example, see Agricultural Cooperatives in Eurasia). Although limited to a number of countries (Costa Rica, Italy, Republic of Korea, Türkiye, and the United Republic of Tanzania), useful information is provided in ILO Room document N°14 “Measuring cooperatives: a progress update on the ILO Pilot study on the applicability and implementation of the Guidelines concerning statistics of cooperatives in five countries.” The ILO is in the process of establishing an international data collection mechanism that considers smaller cooperatives.

68. UNIDROIT 2026 – Study LXXXC – Draft Chapter II

II. OBJECTIVES OF THE COOPERATIVES

14. Legal relevance of the cooperative identity. Cooperative enterprises may be distinguished

from other types of enterprises by the specific objective of meeting the “common economic, social

and cultural needs and aspirations [of the members]”, and by being “[…] a jointly owned and

democratically controlled enterprise”. This Chapter takes into account the definition, principles, and

values − the “Cooperative Identity” − as enshrined in the 1995 Statement on the Cooperative

Identity of the International Cooperative Alliance (ICA), as set out below.

15. Elements of the Cooperative Identity.The development of agricultural cooperatives has been

part of this unique evolution of “the cooperative identity” since the mid-nineteenth century. The

elements of this identity are: (i) a definition of cooperatives, (ii) a set of values on which cooperatives

are based, (iii) a set of ethical values of the members, and (iv) a set of principles. In the words of

the ICA Statement, these elements are linked as follows: “The [seven] cooperative principles [as

listed and explained in the Statement] are guidelines by which cooperatives [as defined in the

Statement] put their [six] values [as separated in the Statement from the four ethical values of the

members] into practice”. Thus, the often-used term “Cooperative Principles” means the cooperative

principles in their interconnection with the various other elements of “the Cooperative Identity”.

16. Significance of the ICA Statement. The world cooperative movement, organised in the ICA,

has a particular history of ongoing reciprocal processes of practicing cooperative theory and

theorising cooperative practice. This has led to the international recognition of the “Cooperative

Identity”.76 The text of the ICA Statement is unique in a number of ways. Firstly, the members of

more than three million cooperatives worldwide identify with it; secondly, through their membership

in the ICA, these cooperatives oblige themselves to respect it;77 and thirdly, this identity is being

recognised heteronomously by more and more national and regional cooperative laws and by public

international law, especially through the 2002 Promotion of Cooperatives Recommendation [No. 193]

of the International Labor Organization. This provides the legal relevance of the Cooperative Identity

that law-makers are required to justify in cases of non-compliance.78

17. Nature of a cooperative. Cooperatives are created on a voluntary basis, with freedom of

membership by following democratic governance principles. The distribution of surplus is made

according to members’ transactions or usage (see Section VI.C, Income distribution). Therefore,

76 The following international texts of varying legal nature are relevant for the discussion of the “Cooperative Identity.” These texts are: (i) the 1995 International Cooperative Alliance Statement on the Cooperative Identity; (ii) the 2001 UN Draft guidelines aimed at creating a supportive environment for the development of cooperatives, Annexe to the 2001 Report of the Secretary-General of the United Nations on “Cooperatives in social development” (A/56/73-E/2001/68); (iii) the 2002 International Labor Organization Promotion of Cooperatives Recommendation [No. 193]; (iv) the 2021 Report of the Secretary-General of the United Nations on “Cooperatives in social development” (A/76/209); and (v) the 2023 and 2025 Reports of the Secretary-General of the United Nations on “Cooperatives in social development”, which recommend to the United Nations General Assembly to have national governments align their legislative and regulatory frameworks with the 2001 UN Draft guidelines (see, respectively, UN Doc. A/76/209 (Chapter III), endorsed by A/RES/76/135; UN Doc. A/78/187 (Chapter III, A.), endorsed by UN Doc. A/RES/78/175; and UN Doc. A/80/168 (Paragraph 71.(a)). 77 According to Article 12.2 of the Articles of Association of the ICA (adopted on 28 June 2023), “All Members [of the ICA] shall expressly adhere to the Statement on the Cooperative Identity as set forth in Appendix ‘A’ to these Articles of Association.” The official text of the Articles of Association of the ICA is in French. The ICA provides the English translation for information purposes only. 78 This legal relevance, if not legal bindingness, can be derived in two ways: firstly, from a systematic reading of Article 12.2 of the Articles of Association of the ICA and Article 22 (Freedom of association) of the 1966 Covenant on Civil and Political Rights and, secondly, from arguments which show that ILO R. 193 is legally binding as far as cooperative law is concerned. The content of the cooperative law is predetermined (albeit not in detail) by public international law, especially the ILO R. 193. Its Paragraph 10 (1) states that “Member States should adopt specific legislation and regulations on cooperatives, which are guided by the cooperative values and principles set out in Paragraph 3 […]”. These “values and principles” are similar to those enshrined in the ICA Statement.

UNIDROIT 2026 – Study LXXXC – Draft Chapter II 69.

three general premises that capture the nature of a cooperative, coherent with the previously

identified criteria, are:

(a) an organisation with legal personality that functions according to specific principles;

(b) a member-based organisation; and

(c) specific objectives and functions related to its member-users’ needs.

18. Member-centred type of enterprise. Membership is the most distinctive structural

characteristic of the cooperative enterprise. By its objective, a cooperative is member needs-oriented

and, by its form, it is member-centred; capital plays a purely auxiliary role. More precisely and

according to the above-cited definition of cooperatives, the members of cooperatives are co-

entrepreneurs, as they themselves and not the cooperative “… meet their common economic, social

and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.”

19. Hybrid nature of cooperatives. This unique structure places cooperatives in a hybrid category

between associations of persons and associations of capital (companies). This hybrid nature is often

not addressed by legislators. As a consequence, this may lead to a conflict between cooperative law,

on the one hand, and labour law, taxation (income tax and VAT, especially), competition law, etc.,

on the other hand, because these laws are modelled on the company-type of enterprise.79

20. Democratic participation. The member needs-oriented and member-centred nature of

cooperatives is expressed through democratic (in the sense of per capita) member participation,

independent of members’ financial contribution. Member participation runs as a golden thread − a

meta-principle − through all elements of the cooperative identity, permeating all organisational

(governance, nature and structure of capital, etc.) and operational aspects of cooperatives. It is to

be understood in the widest sense possible, including control and the conditions that enable the

members to exercise their related rights and obligations, such as adequate information by the

board/management, adequate education, and their being informed through independent audit

reports. Members’ democratic participation is the core mechanism through which the objective,

namely “[meeting] the economic, social and cultural needs and aspirations [of the members]”, is

pursued.

III. FORMATION

A. Considerations when forming an agricultural cooperative

21. Benefits. The challenges which may occur when setting up a cooperative, mentioned below

in paragraph [32], are outweighed by the economic, social and cultural advantages that smallholders

and agri-MSMEs can achieve in forming an agricultural cooperative. The choice of cooperatives may

also include historical aspects. Some of them are direct, impacting net margins or savings, and some

of them are indirect, affecting market price formation and improving the quality of goods and

services. The advantages of collaboration may be obvious immediately after the agricultural

cooperative’s establishment; however, in general, the benefits will materialise only in the longer run

and in a sustained manner.

22. Overview of benefits. Agricultural cooperatives offer a wide range of benefits to smallholders

and agri-MSMEs. These include stronger bargaining power, enhanced transparency and democratic

governance, reduced input costs, increased returns, improved product and service quality, and

access to larger markets through economies of scale. Cooperatives also help secure essential

resources, such as infrastructure, training, technical support, and legal services. Furthermore, they

79 Most countries in Central and South America have introduced the figure of “acto cooperativo” to qualify the relationships inside the cooperative between the various groups as a relationship sui generis.

70. UNIDROIT 2026 – Study LXXXC – Draft Chapter II

play a key role in rural development, risk reduction, and the strengthening of social capital. Among

these, access to credit and agricultural inputs remains a central reason for cooperative formation.

While credit − where available (see Section VII.B) − can facilitate input purchases, in many countries

the inputs themselves are not readily accessible. This challenge is particularly acute for smallholders

and agri-MSMEs in remote areas or with limited market power.

23. Justifications. Where related factors are present (e.g., unequal bargaining power, difficulty

in accessing markets, high upfront or technical costs, etc.) the formation of an agricultural

cooperative may be simpler to justify. For example, often cooperatives operate in areas where other

enterprises are unable to reach, and they function to aid rural development and create social capital.

Cooperatives may be chosen as a response to inflated prices of essential commodities. If cooperatives

are able to implement incentive schemes to induce individual growers to improve quality, they may

also gain premium reputation in the market. In general, cooperatives are also chosen for the

empowering role they play through the integration of education, training, information-sharing

policies, providing support for women farmers, and, in general, promoting values of self-

responsibility.

24. Nature of products. The nature of the product (e.g., perishable fruit and vegetables, dairy),

may also influence the choice of forming an agricultural cooperative, given the infrastructure that is

necessary. While there have been some assumptions that cooperatives cannot deliver quality

products, this has not been supported by the literature as a general observation, particularly recently.

Research results indicate regional differences in terms of how cooperatives compete with private

companies with respect to quality and reputation.

25. Access to credit. An important consideration for establishing and joining agricultural

cooperatives is the use of cooperatives by farmers as leverage to access credit and distinct forms of

capital (see Section VI, Financial Resources). Beyond traditional loans, cooperatives may, where not

prohibited and if their autonomy and independence (fourth ICA Principle) can be maintained, utilise

specific financing features such as issuing shares to non-member investors with limited rights (e.g.,

non-voting shares, debentures, or investment certificates). This allows the cooperative to raise

necessary funds while maintaining the principle of democratic member control and autonomy.

Cooperative initiatives on innovative financing can combine loan guarantees with capacity-building

initiatives. In addition, some cooperatives also have savings and credit sections or only credit

sections, where farmers may access credit needed for purchase of inputs.

26. Cooperative services. In a study carried out in one African country, it was found that farmers

who have simultaneous access to credit and cooperative services achieve significantly higher

productivity than farmers who have access to either one or the other (or neither). The study

recommended that agricultural productivity-targeted programmes consider farmers’ simultaneous

access to credit and cooperative services. In other instances, cooperative banks and savings and

credit unions should be conceived as forming part of a cooperative ecosystem (see Section VII.B).

27. Sustainability. Smallholders and agri-MSMEs may be drawn to the cooperative model not

only for its practical benefits in pooling resources and accessing markets but also for its intrinsic

alignment with the objectives of sustainable development. The cooperative legal form, with its

inherent obligation to serve the economic, social, and cultural needs of its members (see Section I)

and its non-extractive distribution of surplus (that is, no third parties extracting profits), is

structurally designed to contribute to a more inclusive and resilient development pathway. When

combined with the cooperative movement’s seventh principle (Concern for Community), this model

directly supports three foundational dimensions of the legal principle of sustainable development:

economic security, social justice, and environmental protection. The interdependence of these

dimensions is crucial.

UNIDROIT 2026 – Study LXXXC – Draft Chapter II 71.

28. Social Justice. Cooperatives, by mandating attention to members' social needs, inherently

promote social justice. In turn, social justice is widely acknowledged as a prerequisite for political

stability, which itself is necessary for sustained economic security. Only in conditions of economic

security are individuals and communities more likely to engage meaningfully with environmental

challenges. Thus, the cooperative’s legally embedded mechanisms – particularly, democratic member

participation − play a pivotal role in regenerating social justice. It is important to clarify that this

perspective does not propose cooperatives as the sole or universally superior vehicle for achieving

sustainability goals. Rather, they represent one of several complementary legal structures available.

The strength of cooperatives lies in their participatory structure, which enables the operationalisation

of sustainability principles in a participatory and legally accountable manner − making them

particularly well-suited to the contexts in which smallholders and agri-MSMEs operate.

29. Pooling capacities. Finally, another reason to form a cooperative (of possibly increasing

importance) is the pooling capacities to (re)gain control over and benefit from members’ own data

(see also Section XI on Digitalisation). Agricultural data is a valuable asset in and of itself, whether

for market reasons or decision-making potential. Increasingly, it is consolidated in the hands of

powerful value chain actors, further exacerbating power imbalances.

30. Agricultural-related data. This Chapter considers the role agricultural cooperatives may play

in enabling farmers to benefit from, use, and control agricultural data. Cooperatives can provide

digital services directly to their members, assist farmers in monetising or leveraging their own data

or aggregated cooperative data, and facilitate partnerships with third parties offering specialised

services. Individual units of agricultural data alone have limited value. Their worth increases

significantly when combined with data from diverse sources and standardised across datasets. The

organisational structure of agricultural cooperatives naturally supports the aggregation of member

data. The challenge and the task of cooperatives should be to protect the autonomy of members in

relation to their data. Some cooperatives have launched data analytics initiatives aimed primarily at

member benefits − providing competitive advantages and promoting knowledge exchange.

Cooperative platforms may enable farmers to maintain control over and derive benefits from their

data. Recently, there has been growing interest in platform cooperatives and collaboration between

agricultural and IT cooperatives. These efforts focus on open-source solutions and interoperable

standards, promoting cooperative-driven innovation and data sovereignty.

31. Integration into value chains.Besides cooperating amongst themselves (see Section VII.A),

cooperatives, like all types of enterprises, integrate ever more often into (global) value chains (see

Section VII.C). The factors of globalisation (e.g., digitisation, digitalisation and tele-transferability of

data, see para. [142] allow and/or require them to do so, not only operationally and through

contracts, but also organisationally, often having to adjust their organisational structures to the

demands of value chain leaders. Traditionally, power imbalances in value chains related to capital

and labour issues; more recently, and increasingly, data have become the dominant factor. This is

an additional reason for smallholders and agri-MSMEs to form cooperatives, as on their own they

might not have the capacity to (re)gain their data autonomy and benefit from it.

32. Challenges. The setting-up of a cooperative with legal personality faces six main, interrelated

challenges, which are not all exclusive to this form of enterprise but need to be considered.

(a) Firstly, the widespread assumption is that a cooperative is a simple type of enterprise,

easy to set up and run. Although the material requirements to set up a cooperative

are minimal, the governance structure (see Section V) is not as straightforward as that

of most other enterprise types. To reduce governance complexity, a number of

jurisdictions have introduced simplified cooperative structures.

(b) Secondly, whereas trust is inherent in primary or close groups (for example, family

farms), in secondary or more distant groups, such as cooperatives, trust must be

72. UNIDROIT 2026 – Study LXXXC – Draft Chapter II

generated and constantly maintained.80 In some cases, however, the introduction of

cooperative initiatives has served to build social capital and trust. Internal governance

factors include decision-making processes, the role of the different governing bodies,

the allocation of control rights to members and professional management, and the

organisational structure of the cooperative enterprises, such as first-, second- or third-

tier cooperatives, holding companies or subsidiaries.

(c) Thirdly, the formation of agricultural cooperatives according to national law may clash

with customary law and/or social norms, especially within close-knit groups such as

extended family groups or ethnic groups to which potential members belong. While

natural persons belong to primary or close groups, governed largely by the laws that

regulate the status of the members, cooperatives are legal entities (secondary groups)

that require formal membership and adherence to the relevant laws.81 If this

difference is not taken into account, it may lead to a conflict of norms to the detriment

of both types of groups.82 This may contribute to why smallholders and agri-MSMEs

often remain in what is called the informal sector.83 The institutional environment

(social, cultural, political and legal context) in which smallholders and agri-MSMEs and

their potential cooperatives operate, may have a supporting or constraining effect on

their abilities to join cooperatives or on the cooperatives’ potential performance.

(d) Fourthly, there is the possible undue involvement of external actors. According to the

above-cited definition of cooperatives (see Section I), the members “[…] meet their

common economic, social and cultural needs and aspirations […]” through an

enterprise. The determination of these needs and aspirations and the agreement to

meet them through a cooperative enterprise must be left to the potential members.

This does not preclude involvement of outside experts who may provide advice on

various aspects, such as formation, legal requirements, taxation and accounting,

education and training, etc., as long as the delineation is clear between what is for the

potential members to decide autonomously and what outside promoters should be

allowed to do.84

(e) Fifthly, there are the legal and bureaucratic hurdles related to the cooperative’s

registration and thus recognition as a legal person. Notwithstanding their necessity,

these requirements are often cumbersome and not in line with the principle of equal

treatment of all enterprise types, as enshrined, for example, in Paragraph 7 of the ILO

R. 193 and in the 2001 United Nations Draft guidelines aimed at creating a supportive

environment for the development of cooperatives.

80 In addition, where history of the cooperative model might include incidents of misuse by cooperative organisations, donors, governments, etc., this hampers the building of trust. Both phenomena explain to some extent the aforementioned low number of farmers having formed or joined cooperatives. 81 Although there are exceptions − some jurisdictions recognise families as legal persons. 82 Two examples are illustrative. First, as legal person status can only be granted under State law, which will determine membership qualification. The question of whether a married woman may join an agricultural cooperative may, however, also be regulated by customary law where it pertains - as it often does - to the status of persons and where it pertains to access to land. Second, an adequate cooperative law will regulate the qualification criteria for persons holding office. These rules are often superseded by customary law relating to equivalent positions in primary groups. 83 Other potential reasons are, foremost, the fact that State law often “does not speak” to informal sector actors, does not reach them and/or that its administration is ineffective. “Informal” is not to be confused with “illegal”, nor must one assume that no law applies in the sector. Paragraph 9 of ILO R. 193 suggests that “Governments should promote the important role of cooperatives in transforming what are often marginal survival activities (sometimes referred to as the "informal economy") into legally protected work, fully integrated into mainstream economic life.” Bringing the sector and/or its actors into the formal realm has its advantages and disadvantages. The ILO has worked on this topic since 1972. 84 The involvement of governments in the development of cooperatives spans from setting the necessary framework, as suggested here, to being involved in the running of the cooperative enterprise and anything in between.

UNIDROIT 2026 – Study LXXXC – Draft Chapter II 73.

(f) Sixthly, other restrictions might make the cooperative enterprise form less attractive,

such as, for example, that in some countries cooperatives do not have the right to

export or exports are only possible with approval from the competent authorities.85

33. While some of these challenges may be unique to the cooperative form, others may be

common to more than one of the collaborative legal structures considered in this Guide, such as the

following: (i) inclusivity (membership usually has a cost: both in terms of price or because of a

requirement that members/farmers need to own the land); (ii) the difficulty in meeting market

requirements and performing well; (iii) the limited resources to access credit and inputs; and (iv)

the limited adaptability to face climate change and to promote new sustainable practices in

agriculture (see also Chapter V, Comparing and Combining Legal Structures).

B. Formation process

34. Legal requirements. If the potential or existing members might want or need to seek

recognition as a legal entity, they must get acquainted with the requirements they have to meet

according to the law on cooperatives and possibly other laws (together: “cooperative law”). The

applicable legal framework will usually stipulate the documentation required for registration and will

also specify the matters to be regulated in the internal bylaws or statutes86 of the cooperative and

which will have to be submitted to the registration authority. In general, these bylaws or statutes

will be registered in a public register.

35. Formation and registration. It is essential to distinguish between the formation of the

cooperative and its registration. Formation is the internal preparatory phase where potential

members define their common needs and agree on the structure of their collaboration. Registration

is the subsequent administrative step where the entity acquires legal personality under State

authority if needed and wanted by the members.

36. Defining common needs. The formation process begins with the identification of the "common

economic, social and cultural needs and aspirations" of the potential members. Generally, two issues

need to be kept distinct: (i) the contract to establish a cooperative; and (ii) the constitution of the

cooperative. Hence, the cooperative is established on the basis of a contract, but it is not a contract;

it is the result of the fulfilment of the agreed obligation to constitute a cooperative.

37. Constitution of a cooperative. In most jurisdictions, members are generally free to determine

the structure and internal rules of a cooperative. However, this freedom is subject to limitations

imposed by cooperative law − whether found in general legislation on cooperatives, sector-specific

laws, or other applicable statutes. These legal frameworks typically establish the fundamental

organisational elements of cooperatives, while allowing specific operational details to be set out in

the cooperative’s bylaws or statutes. This legal structure seeks to balance flexibility with the need to

protect the interests of third parties (e.g., business partners), the public, and the cooperative's own

members. Accordingly, freedom to stipulate internal rules is only permitted to the extent that

cooperative law allows such provisions to be defined in the bylaws or statutes.

38. Authorisations. Only in rare cases does the decision of the registration authorities include a

decision on whether the to-be-registered cooperative may exercise the envisaged activity. The

potential members must therefore generally seek additional authorisation from the respective

authority and understand that abiding by the cooperative law does not relieve them from abiding by

the laws governing the activity they exercise.

85 For example, in the Central African Republic, mining cooperatives cannot export but this does not appear to apply to agricultural cooperatives. In general, across Africa it seems that agricultural cooperatives may export upon receiving approval. 86 The terms vary. These are the two most commonly used and they are used here interchangeably.

74. UNIDROIT 2026 – Study LXXXC – Draft Chapter II

39. Membership agreements. In addition to the applicable legal framework, the articles of

association − where required − and the bylaws or statutes, may all regulate the formation and

organisational aspects of cooperatives.87 Such other legal instruments may include “membership

agreements” that outline the specific duties and standards required of each member. Detailed

production specifications and obligations might also be set out in these membership agreements or

in other contracts between the cooperative and its members.

40. Support mechanisms. The ILO has developed and tested a detailed guide for the agreement

to establish a cooperative and for its constitution. In some circumstances cooperative unions and/or

federations and semi-public entities provide support for the setting-up of cooperatives.

C. Process and consequences of registration

41. Separate legal personality. Upon registration, and in general upon subsequent publication of

the registration, the cooperative exists as a legal person with its own rights and obligations, separate

from those of the members. Without publication, third parties are left with uncertainty about the

legal status of the cooperative. Moreover, the published bylaws or statutes represent the document

from which third parties will seek information on important matters, such as who is empowered to

represent the cooperative, the liability of the members, and so forth.

42. Registration process. Once the members have agreed to establish a cooperative and drafted

their bylaws or statutes, they may seek recognition as a legal entity. The application typically requires

a minimum number of members, copies of the bylaws or statutes, and often a statement regarding

the capital or viability of the proposed entity. The role of the public authority is to verify that the

documents submitted comply with the objective legal requirements set out in the applicable

cooperative law. The authority checks, for instance, whether the mandatory content of the bylaws or

statutes is present, whether the proposed activities are lawful, and if the bylaws or statutes include

adequate provisions for audits and member education.

43. Liability during formation. Care must be taken by those acting on behalf of the cooperative

during the formation process, for example, in concluding contracts and performing other acts,

because they possibly remain liable for these acts as long as these have not been endorsed by the

cooperative as a legal person. Cooperative law does not always clearly regulate this.

44. Member liability. Members are not personally responsible for their cooperative’s obligations

but are liable up to their membership shares for debts incurred during their membership and often

for a limited time after leaving. Bylaws or statutes can extend this liability further. The scope of any

additional liability depends on members’ willingness and capacity, but it may encourage greater

member oversight and enhance the cooperative’s creditworthiness − especially when membership

shares are small and reserve funds are limited (see Section VI).

87 Some jurisdictions require a whole series of documents for registration, such as organisation/pre- membership agreements that establish the members’ commitment during the formation process and can include the objective, patronage and financial commitments, and calling of meetings; articles of incorporation (or equivalent), legal document for the formal registration of the cooperative that sets out the purpose and structure, name, place of business, duration (usually perpetual) names of incorporators and description of capital. In the case of such articles of association the bylaws or statutes will elaborate in more detail the internal operations, the governance structure and role of members, directors, and staff and serve as a guide on how the cooperative should function. See FAO. 2024. A Guideline on Effective Process of Writing and Reviewing Legal Documents for Agricultural Cooperatives.

UNIDROIT 2026 – Study LXXXC – Draft Chapter II 75.

IV. MEMBERSHIP

A. Centrality of membership

45. Member needs-oriented. Membership is the most distinctive structural characteristic of the

cooperative enterprise. As can be read from their definition (see Section I), cooperatives are member

needs-oriented by their objective, and they are member-centred by their form. The law-maker

assumes that the members obtain the best service if they themselves determine their needs and the

way to address them. To ensure this, members must have a central role in all organisational aspects,

including control, and in all operational matters.

46. Democratic member participation. Putting democratic member participation into practice

requires both clarity and capacity. While cooperatives are designed for members to serve themselves

through collective enterprise, many members misunderstand this role, expecting passively the

cooperative to serve them. A lack of time, interest, or understanding often limits participation, and

cooperative managers may lack the skills or motivation to support democratic processes. Moreover,

cooperatives may face certain risks caused by information and knowledge gaps among stakeholders.

Participation may become difficult in large, multi-stakeholder cooperatives, where coordination is

complex. Integration into value chains may add further complications. These chains often include

non-cooperative actors governed by different legal systems and business norms, potentially clashing

with cooperative principles like the principle of democratic member participation and inter-

cooperative collaboration (sixth ICA Principle). Ultimately, cooperatives must balance democratic

governance with the practical demands of operating in competitive markets − a central tension that

influences both internal management and external collaboration.

B. Admission to and termination of membership

47. Admission to membership. To become a cooperative member, an individual must satisfy

specific eligibility conditions. Unlike in a company, where a potential shareholder can typically buy

his or her way in, cooperative membership is not primarily defined by financial contribution. The

symbolic nature of the membership share is underscored by the fact that most cooperative laws do

not prescribe a fixed value for it. The key membership criterion stems from the first ICA Principle −

the so-called "open door" principle − which limits eligibility to those who can use the cooperative’s

services and are willing to accept the responsibilities of membership. However, meeting these

conditions does not automatically entitle a person to join. Admission remains subject to approval,

reflecting the right of current members to choose their collaborators. This ensures that membership

supports a functioning cooperative dynamic, where trust and mutual engagement are essential to

success.

48. Eligibility criteria. The conditions of agricultural cooperative membership can vary depending

on the laws where it is registered. However, general conditions commonly required include (i) legal

capacity, (ii) shared interest, and (iii) geographic location. The open-door principle is the starting

point for admission to membership. It aims to offer a democratic approach to entrepreneurship for

all those who are able and willing to adhere to the membership criteria of the particular agricultural

cooperative. For example, it may make sense for a smallholder or agri-MSME to have grapes

processed by the same cooperative as the neighbouring farmer. Reasons for this may be territorial

proximity to the farmer and the cooperative, similar production methods, or merely to support each

other. Legal entities may also be or become members.

49. Open door principle. Applicants for membership do not have a right to admission but are

entitled to a fair assessment based on objectively comprehensible criteria. In terms of its legal

feasibility, the open-door principle is thus positioned between economic expediency and the

expectation of correct treatment. In order to ensure the latter, the bylaws or statutes of an

76. UNIDROIT 2026 – Study LXXXC – Draft Chapter II

agricultural cooperative must specify exactly which requirements and criteria members must fulfil

(e.g., production of certain agricultural products, residence in a certain territory, etc.). When applying

for membership, it must be checked whether or not these criteria are met. This should also ensure

that the group of members remains homogeneous in terms of the interests to be jointly promoted −

which can reduce the risks involved in the heterogeneity of member interests. On the other hand,

the circle of members may have to be opened up for economic reasons, in order to be able to produce

more efficiently and ensure the competitiveness of the cooperative − and thus of its members.

50. Obstacles to entry. However, if a smallholder or an MSME farmer had a right to become a

member of a cooperative, this could, for example, mean that a cooperative that is already working

at full capacity would have to process additional agricultural products − without the corresponding

production or storage capacities. Accordingly, an obstacle to entry is the economic viability for the

agricultural cooperative or its members.

51. Homogeneous membership. A homogeneous membership base facilitates decision-making,

which, in turn, should have a positive impact on the economic success of an agricultural cooperative

and strengthen the bond of trust between the members and their cooperative. This applies to the

general assembly as a formalised decision-making body, but there are also other, less formalised

ways of strengthening trust between the cooperative and its members: for example, an ongoing

exchange between members and the members of the board of directors and the managers, such as

through joint field inspections to carry out harvest forecasts.

52. Decision-making power. Members should have the ultimate right to decide on membership

questions, notwithstanding the right of the board of directors to act provisionally, if necessary, and

pending a final decision of the members in the general assembly.

53. Membership size. Taking into account what the applicable cooperative law might prescribe

and considering the viability of the enterprise, the potential members might have to decide on a

minimum and/or maximum number of members of a cooperative. This should be specified in the

bylaws or statutes.

54. Termination of membership. Membership may terminate for several reasons; usually these

reasons are outlined in the cooperative’s bylaws or statutes. Voluntary and involuntary reasons may

justify termination. For example, four typical reasons include: (i) voluntary withdrawal, (ii) death of

a member, (iii) dissolution in the case of legal person members, and (iv) expulsion. The criteria for

the process and implications of the termination of membership vary depending on the applicable

cooperative law and the cooperative’s bylaws or statutes.

55. Voluntary withdrawal. The right to withdrawcorresponds to the right to freedom of

association. Specific rules may provide for notice requirements (oral or written notice) and time

limitations, e.g., length of time before members can leave, which might also be a consequence of

the member agreements (see above).

56. Expulsion. Expulsion is a rare case for termination of membership. It is rare for the reason

that the specific governance structure allows for preventive corrective measures (see Section VIII),

the most important of which being temporary suspension of membership. The reasons for expulsion

or temporary suspension may include a repeated failure to attend meetings or participate in

governance or other active membership requirements (e.g., non-payment of capital contributions).

The violation of bylaws or statutes as well as of codes of conduct (e.g., breach of rules or policies,

misconduct or fraud, conflicts of interest) may also lead to expulsion. The main reason may be the

failure to use the cooperative’s services over a defined period of time.

57. Capital refund. Upon termination of membership, members are entitled to a refund of their

capital contributions: in principle, the amount of the nominal value of their membership shares. This

UNIDROIT 2026 – Study LXXXC – Draft Chapter II 77.

is to avoid membership motivated by speculation. The cooperative’s bylaws or statutes describe how

to calculate the refund. Where the economic interests of the cooperative are seriously threatened by

an immediate reimbursement or where it would lead to violating a minimum capital requirement (if

any), the reimbursement may be withheld, but for a reasonable period of time only.

58. Membership shares. In some instances, a withdrawing member may decide to transfer his or

her membership shares to another natural or legal person under the condition that the candidate

fulfils the membership requirements and is admitted as a member by the cooperative. The same rule

applies, mutatis mutandis, to the heirs of a deceased member.

59. Financial obligations and inherited membership. A member whose membership has

terminated may remain liable for any debts incurred by the cooperative during his or her membership

for a specified period of time. In addition, he or she may have a legal obligation for a specified limited

period of time to make further financial contributions in the event of insolvency. The same rules

apply to the heirs of a deceased member.

60. Post-membership obligations. Moreover, a membership agreement may create additional

post-membership obligations for a certain period of time. Typical examples are delivery obligations

that go beyond membership so that the cooperative can fulfil promised services to third parties.

61. Transitions. A well-defined process for the termination of membership should be set out in

the bylaws or statutes to facilitate necessary transitions while safeguarding the interests of the

remaining members (and possibly of third parties).

C. Obligations and rights of members

1. Members’ obligations

62. Equality principle. Emphasis is put on the members’ obligations, as the members’ rights are

conditioned by the members discharging their obligations. According to the first ICA Principle, family

ties, age, religion or any other affiliation to a group must in no case affect the equality of the members

in terms of obligations and rights.

63. Sources. The obligations and rights of the members are usually regulated by the relevant

cooperative laws and are specified in the bylaws or statutes. Contrary to some types of companies,

financial contributions, membership shares, or the like88 have nearly no89 influence on the obligations

and rights of the members.

(a) Personal obligations

64. Use of cooperative’s services.Members have a duty to use the services of their cooperative.

This includes actively using its services (e.g., sharing equipment and training) and participating in

its transactions (e.g., supplying agricultural produce). Without sufficient member engagement and

demand, the cooperative cannot operate effectively or fulfil its objectives. This obligation is

fundamental − it is rooted in the definition and in the first ICA Principle − and forms a core part of

the cooperative’s structure. While it is possible to require members to use the cooperative’s services

to some extent, such a rule might harm the cooperative’s competitiveness over time and potentially

conflict with competition law if members run their own enterprises. Therefore, instead of a strict legal

obligation, it may be better to view this as a moral duty for members to support their cooperative.

It is also the cooperative’s responsibility to offer attractive services to encourage member

88 For cooperative principles respecting financing instruments, see: International Cooperative Alliance, The Guidance Notes to the Cooperative Principles. 89 The third ICA Principle allows for limited returns on capital contributions; upon termination of membership members have a right to receive the nominal value of their share(s) if the cooperative is solvent.

78. UNIDROIT 2026 – Study LXXXC – Draft Chapter II

participation. Exceptions can be made, especially if members agree on a major investment the

success of which depends on their use of the cooperative’s facilities. In such cases, members could

be temporarily restricted from seeking services elsewhere, and individual contracts might be

necessary to ensure stability.

65. Compliance with bylaws or statutes. Members should respect the bylaws or statutes, the

decisions taken by the general assembly, and the decisions taken by the board in accordance with

its powers.

66. Participation in cooperative governance and meetings. Members should participate in

cooperative governance. Additionally, regular attendance at meetings is fundamental for democratic

decision-making.

67. Abstention of detrimental activity. Members should avoid practices that conflict with the

objective of the cooperative or the interests of its members (for example, “side selling” product

rather than delivering it to the cooperative).

(b) Financial obligations

68. Contribute capital. Each member must subscribe to and pay for the minimum number of

shares fixed in the bylaws or statutes. In exceptional cases, and for a limited period of time, the

bylaws or statutes may require the payment of a membership fee and additional capital contributions

may also be required. Fees are payments for specific services and will not be reimbursed in case of

termination of membership.

69. Financial liability. Each member is financially liable for the debts incurred by the cooperative

during his or her membership, at a minimum with the amount of money to be paid for the shares

subscribed by him or her. If not specified in the law, the type of further financial liability of the

members may be specified in the bylaws or statutes in order to protect the interests of third parties

and to improve the creditability of the cooperative. Because of their legal person status, the

obligations of cooperatives do not commit the members; the members are liable towards their

cooperative only, and not towards the creditors of the cooperative.

70. Supplementary payments. The applicable laws and/or the bylaws or statutes may impose an

obligation to make supplementary payments. The same may apply in case the cooperative is unable

to pay its debts (so-called “liability to further call” or “reserve liability”). This may result in unlimited

financial liability of the members. Liability risks must be thoroughly explained to the members.

2. Members’ Rights

(a) Personal rights

71. Each member has the right to:

(a) Use the cooperative’s services. Each member has the right to ask for services that

further the objective of the cooperative (including education and training, use of the

installations of the cooperative, etc.);

(b) Vote and participate in decision-making. Every member typically has one vote,

regardless of how much they contribute. Members can participate in general assembly,

propose a motion therein, and elect the board of directors;

(c) Be elected. Eligible members can be elected for an office in the cooperative or in that

of a higher-level structure to which her/his cooperative is affiliated;

(d) Access information. Members can obtain at all reasonable times from the responsible

persons in the cooperative information on the situation of the cooperative, especially

UNIDROIT 2026 – Study LXXXC – Draft Chapter II 79.

such information that enables her or him to make use of his or her participation and

control rights. Members may review financial statements, annual reports and other

policies and records;

(e) Request a cooperative-specific audit. Members can request the supervisory council, if

any, and/or an independent cooperative auditor to exercise oversight over the board.

72. Joint rights. Jointly (with the necessary number to be determined in the bylaws or statutes),

the members can also convene a general assembly if the responsible persons fail to do so and/or

have a question inscribed on the agenda of the general assembly, as well as ask for an (additional)

audit.

(b) Financial rights

73. The members have the right to:

(a) Share in surplus. Receive a share of the surplus at economically reasonable intervals

in the form of patronage refunds, paid pro rata with regard to their transactions with

the cooperative, and/or a limited interest on the paid-up shares (see third ICA

Principle);

(b) Reimbursements. When terminating their membership, members have a right to be

reimbursed and may ask that the paid-up shares be reimbursed at nominal value.

Losses or devaluations may be deducted from this amount. The reimbursement may

be deferred in case it would otherwise endanger the viability of the cooperative.

However, this deferment must not undermine the right to withdraw;

(c) Share of funds. Members should receive, in the case of liquidation, a share of the

remainder, if any, except of those funds which were declared indivisible by the law or

the bylaws or statutes, and as required by strict cooperative principles (see third ICA

Principle). In this case, the remaining funds must be credited to another cooperative,

a cooperative structure of which the cooperative was an affiliate, or to a charitable or

public interest organisation (see Section X).

V. GOVERNANCE

A. Principles

74. Member control. If governance means the relationship between those who govern and those

who are governed, then cooperatives − centred on their members, as stated in their definition, values

and principles (see Section I) − must have a distinct form of governance compared to other

enterprise types. To protect members’ position and influence over business decisions, bylaws or

statutes should ensure members can effectively control the cooperative. This follows the second ICA

Principle, often insufficiently or falsely summarised as “one member, one vote”. Cooperative

governance is based on the overarching principle of democratic member participation, which includes

more than just voting rights. While voting helps prioritise the common interests of members, such

as processing or selling their products, cooperatives must also use other participation mechanisms

to fully support member control, unlike companies focused on capital ownership.

75. Governance structures. Compared to the shareholder model, cooperatives require distinct

governance structures due to their unique objective. Governance is simpler when members share

similar or complementary interests (homogeneous membership), but it becomes more complex as

interests diverge (heterogeneous membership).90 Additionally, as cooperatives grow larger and more

90 Heterogeneity of interests in cooperatives can be described in various ways: by farm size, age, product, etc.

80. UNIDROIT 2026 – Study LXXXC – Draft Chapter II

diverse in their activities, individual members’ influence typically decreases. Members must decide

how well their cooperative can accommodate diverse interests; if differences become too great,

forming a new cooperative may be considered.

76. Member participation. The functioning of cooperatives, as opposed to that of capitalistic

companies, depends on the participation of the members, who must be able to exert an effective

influence on the affairs of the cooperative. Nevertheless, as a legal entity operating as an enterprise,

its management must be able to act independently to a certain extent. The bylaws or statutes should

therefore provide for the principle of democracy and the principle of economic efficiency to be applied

simultaneously, i.e., they must cater to the two elements of the definition of cooperatives, the

association element and the enterprise element (for more on this dual nature, see below).

77. Management. The internal organisation and division of powers must reflect the cooperative’s

dual nature. Issues related to its associative character − such as elections and major decisions − are

handled by the general assembly, representing all members. Enterprise matters are dealt with by

the board of directors, which may delegate daily operations to a professional manager under its

supervision. This separation prevents inefficiencies caused by uninformed members over-managing,

and it avoids loss of member control when management acts without proper consultation with the

members. Governance tools like supervisory councils and cooperative-specific audits help mitigate

these risks. Clear power-sharing also clarifies legal responsibilities for those managing the

cooperative.

78. Cooperative-specific audits. Unlike a standard company audit, cooperative audit must relate

to the specific objective of cooperatives, which is to meet the economic, social and cultural needs

and aspirations of the members (see definition of cooperatives), hence not limited to financial

aspects; comprise management and social audit and, possibly, also societal audit (sustainability

issues); and it should include advice. This requires special qualifications for auditors. Access to such

special audit services is often not available. This is the reason why it should be a task of federated

structures (cooperative unions and/or federations) to make such services available to their

membership.

79. Decision-making. When cooperatives collaborate with other cooperatives − as encouraged

by the sixth ICA Principle − to offer better or more affordable services (e.g., selling apples

internationally) or access services on better terms, clear decision-making processes become

essential. Such collaborations often lead primary cooperatives (like farmers’ milk cooperatives) to

form secondary and tertiary cooperatives that provide services like tax advice, accounting,

marketing, or international sales (see Section VII.A). Managing decision-making complexity is crucial

because cooperation increases heterogeneity and requires specialised knowledge to enter national

and global markets. Cooperative systems can develop governance structures that maintain member

interests and uphold democratic principles.

80. Agreements. In addition to these organisational arrangements and the aforementioned

member agreements, further mechanisms that are less legally strict are typical. Often, they are of a

political nature only, in the sense of declarations of intent. Such agreements can be helpful in

adapting the cooperative system through which a value or supply chain is managed to challenges

that arise, for example, due to the complexity of the chain or due to innovation. Such agreements

can be comprehensive (e.g., measures to protect biodiversity in order to make the chain more

ecologically sustainable) or selective (e.g., regulation regarding the use of pesticides or genetically

modified organisms in order to be able to respond to changing consumer needs).

81. Organisational challenges. These challenges may be addressed through cooperative-specific

audits, enhanced transparency requirements, and targeted education and training for both

management and members. Members must understand market dynamics and recognise their

opportunities to influence decision-making. Conversely, managers should be attuned to members’

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needs and constraints, anticipating how decisions may affect them (and their families). Implementing

the cooperative objective requires balancing democratic control with managerial efficiency.

Supportive tools include tailored incentive systems for managers and members, governance

mechanisms aligned with the principle of member promotion, and ensuring the qualifications of

managers, supervisory bodies, and members. All actors must be adequately informed about the

market context in which the cooperative operates.

82. Cooperation among cooperatives. One might also consider the integration of cooperatives

into higher-level cooperative structures according to the sixth ICA Principle as part of the governance

of cooperatives. Domestic laws on cooperatives may use the term “integration” instead of the term

used in the sixth ICA Principle (“cooperation among cooperatives”) in order to signify the idea behind

this specific type of collaboration.91 In some countries, cooperatives may be legally requested to join

an audit association. This topic is dealt with in further detail in Section VII.

B. Bodies of the cooperative

83. Organisational bodies.Across jurisdictions, similar governance systems can be found. In

general, cooperatives are required to have a general assembly and a board of directors (monistic or

one-tier system). Some jurisdictions leave it to cooperatives to decide through their bylaws or

statutes whether to have in addition a supervisory council or committee; some require cooperatives

with a larger membership to have such a committee [dualistic or two-tier system]. The supervisory

council may be given co-decision powers, authorising it to approve or reject strategic decisions (e.g.,

construction of a new production facility exceeding a certain amount).

84. Membership composition. To ensure the interests of the members, it is necessary that in

principle only members be part of these bodies. Exceptionally, to a limited extent and with limited

voting power, persons external to the cooperative may be appointed to the board these might be

persons with particular expertise. Their presence might be viewed as necessary, as this enables the

inclusion of an additional, differentiated perspective in the decision-making process. Moreover, as a

temporary measure, external competences can also ensure the professionalisation of the cooperative

until board members acquire the necessary skills. Similarly, and rather restrictedly, non-users may

be admitted to participate in the general assembly (see Paragraph [85]).

85. Purpose. Whichever system is chosen, ultimately, it is a matter of finding suitable

mechanisms to ensure that members’ interests are protected. This is achieved, as roughly described,

on the one hand, through direct influence (member participation in various bodies/organs), but also

through specific transparency obligations, which are intended to ensure that management openly

demonstrates how the interests of the members are to be protected.

1. General assembly

(a) Composition

86. Composition.The general assembly, composed exclusively of the members of the

cooperative, is the supreme decision-making body of the cooperative. Third parties, especially

investors, may possibly participate in the general assembly, if admitted under specific restrictive

conditions, but they should not have voting rights. If they do, these voting rights must be limited to

matters which might impact their interests.

87. Decentralised assemblies. If the size of a cooperative in terms of territorial coverage or

number of members is such that the necessary quorum is difficult to attain, or that the organisation

or the proceedings of the general assembly become too cumbersome, or where in a multi-purpose

91 For example, laws on cooperatives in Central and South America.

82. UNIDROIT 2026 – Study LXXXC – Draft Chapter II

cooperative diverse interests so require, regional assemblies and/or assemblies by sections may be

formed. These decentralised assemblies elect their representatives to a delegates’ assembly, which

replaces the general assembly. In order to reinforce communication between the different parts and

ensure coherence, members of the board of directors and of the supervisory council, if any, should

have a right to participate in the meetings of these decentralised assemblies.

88. Technology and remote participation. New ways of communication do not require an

administrative centre or the physical presence of the members in order to hold a general assembly.

The members may decide so in their bylaws or statutes. Otherwise, they should be free to discuss

and vote using any technical device as long as abuses of rights can be avoided. What matters is

democratic control by the members, not their physical presence at meetings, although this may still

help to generate and regenerate the necessary reciprocal trust among the members.

(b) Powers of the general assembly

89. Division of powers. The above-explained dual character of cooperatives as associations and

enterprises is indicative of the way in which powers must be shared amongst the general assembly

and the board of directors. According to the definition of cooperatives, the members use the

cooperative enterprise to attain the three-fold economic, social and cultural objective (see Section I).

The board of directors or management must have the necessary freedom for efficient management

of the cooperative enterprise, whereas all decisions concerning the cooperative as an association

must be taken by the general assembly.

90. Exclusive powers. Starting from this basic distinction, one may draw a list of exclusive powers

of the general assembly. Generally, these powers may not be transferred to any other body or

person, not even by a unanimous decision of all the members, as they form part of the legally-

protected cooperative distinctiveness which, in turn, ensures legal clarity and security. Among these

powers the most prominent is the right and obligation to adopt and to modify the bylaws or statutes

within the limits of the law.

91. Bylaws or statutes. In the formation stage, potential members must prepare the bylaws or

statutes in such a way so that the essential features of the entity are clearly understood. The general

assembly has the power to draft and modify the bylaws or statutes, which may stipulate matters on

which the law is silent, where the legislator leaves a choice amongst several options or invites

specification of legal provisions, or when the members decide to rewrite certain clauses of the law in

order to make them easier to understand and/or more operational. Generally, the law on

cooperatives requires a minimum necessary content for the bylaws or statutes, and it suggests a

number of additional, non-compulsory matters to be included therein.

92. Mandatory content. Mandatory content generally includes the name and trade name of

cooperative, its duration, and the locality of its head office – along with its postal address and, where

applicable, the conditions for transferring it to another locality. It also covers the cooperative’s object,

specifying whether it is single-purpose or multi-purpose, as well as the criteria, conditions, and

procedures for admitting members and terminating membership. In addition, mandatory content

includes the value of shares and the minimum and maximum number to be subscribed by each

member, together with the procedures and conditions for their subscription and payment. Shares

may be contributed in cash, by retaining part of a member’s surplus within the cooperative, or in

kind, including work, industry, or services. The type of financial liability borne by members for the

cooperative’s debts must also be established.

93. The mandatory content further addresses the administration of cooperative registers and

required documentation, as well as the conditions and procedures for convening and conducting

general assemblies, including notice requirements, agenda setting, quorum, voting rules, and the

election of the session president. Bylaws or statutes should also specify the size of the board of

UNIDROIT 2026 – Study LXXXC – Draft Chapter II 83.

directors, eligibility and qualification criteria for its members, the duration of mandates,

reimbursement of expenses, and the rights, obligations, and decision-making processes of these

officers, along with those of the manager, if any. Mandatory content also includes provisions on the

conditions and procedures for convening the board of directors and any supervisory council, covering

quorum and voting requirements. Financial matters must be outlined, including capital formation,

the establishment of legal reserves and funds, the distribution of profits and surpluses, and the

coverage of losses. The distribution of assets in the event of termination of membership or dissolution

of the cooperative is also defined. The definition of the financial year is also a mandatory content.

94. Additionally, auditing requirements are also part of the mandatory content, covering

financial, management, social, and possibly societal audits. Bylaws or statutes must include

conditions and procedures for both voluntary dissolution and dissolution ex officio, as well as address

dispute resolution mechanisms, procedures for amending the bylaws or statutes, and any additional

matters required by law.

95. Non-compulsory content.As for the non-compulsory content, it generally includes the

geographical area of activity; affiliation to one or several secondary or higher-level cooperative

organisations; the nomination of a supervisory council; the nature and volume of transactions with

non-member users; the remuneration of office holders; the number of additional or supplementary

shares per member and the conditions of their subscription, payment and repayment; the

acceptance of investments by members or non-members and the rights and obligations attached

thereto − within such limits as to not jeopardise the autonomy of the user-members or the pursuit

of the objective of the cooperative; the formation of regional and/or assemblies by sections, their

decision making, voting and number of delegates to represent the regional or sectional assemblies

at the central level; participation of members in the general assembly by proxy; the establishment

and use of education and other statutory funds; the establishment of commissions/committees, their

tasks, their term, the qualifications of their members; and any other matter falling within the

autonomy of cooperatives.

96. Model bylaws or statutes. Some laws on cooperatives or government authorities provide for

model bylaws or statutes. Although this makes registration easier because of their assumed

conformity with the law, their adoption − unless compulsory by law − must be thoroughly considered.

The elaboration of the bylaws or statutes by the (potential) members is a unique learning/education

opportunity. The more time they devote to this joint elaboration, the less likely conflicts around the

interpretation of the bylaws or statutes will arise during the operational phase of the cooperative.

97. Additional powers.In addition to drafting and modifying the bylaws or statutes, the general

assembly has the power to decide the matters relating to keeping of minutes of its meetings; the

distribution of powers between the different organs or bodies and the adoption of internal regulations

for each of them; the election and dismissal of the members of the supervisory council, if any, and

the board of directors, unless the latter is to be nominated by the supervisory council; surplus

distribution and loss coverage;mergers, demergers, transformation of the cooperative into another

legal entity or dissolution of the cooperative; decisions concerning the possible limitation of loans,

deposits or investments; the nomination of auditors, the duration of their mandate, and their

remuneration; examination of the auditor’s report, as well as of the annual report of the board of

directors, including the yearly activity plan; giving or refusing the discharge of board members;

adoption of the annual budget; final decision on the admission and expulsion of members or the

suspension of membership; education and training measures for members and employees; extension

of the duration of the cooperative; the decision on whether the board of directors may appoint a

professional manager, member or not of the cooperative; and the possible creation of committees

with specific tasks, and the duration of their mandate.

84. UNIDROIT 2026 – Study LXXXC – Draft Chapter II

(c) Decision-making

98. Quorum. The mode of decision-making must respect the principles of democracy and

economic efficiency. Fixing a quorum, i.e., the minimum number of members who must be present

or represented for the general assembly to validly sit, deliberate, and vote, constitutes a compromise

between these two principles. This quorum, most often being expressed either as a percentage of

the number of members at the time of convening the general assembly or as an absolute figure, or

as a combination of the two, may therefore vary according to the topic on the agenda of the general

assembly.

99. Voting. In primary cooperatives, the basic rule on voting is “one member, one vote”,

according to the second ICA Principle. This also applies to legal-person members. Exceptionally, a

limited number of plural voting rights may be granted through the bylaws or statutes where the law

so allows and exercised when deciding on specified matters, in general, those relating to the

operations of the enterprise. The volume of transactions with the cooperative or other criteria might

be used when allocating plural voting rights. In no case, however, may plural voting rights be granted

on the basis of the amount of financial contributions by a member, and in no case must one single

member be in a position to take decisions by virtue of the number of voting rights he or she is holding

or representing.

100. Plural voting rights. In secondary and higher-level cooperative organisations, a system of

plural voting rights may be applied without the above-mentioned restrictions, but in line with

democratic principles (see second ICA Principle).

101. Voting rights of non-members. Should non-members or non-user members, usually

investors, have voting rights at all, then these must be regulated in a way to ensure that they cannot

outweigh regular user-members. It must, however, be emphasised that the admission of such

members and the attribution of voting rights constitute a deviation from cooperative principles as it

risks jeopardising the pursuit of the objective of cooperatives as well as their autonomy and

independence (see definition of cooperatives and fourth ICA Principle).

102. Voting by proxy. If voting by proxy is to be allowed, the proxy must be a member of the

cooperative and should not represent more than two or three members, including the proxy.

103. Majorities.Generally, decisions are taken by simple majority, if the required quorum of

members is present or represented. Decisions concerning the associative character of cooperatives

− be it, for example, a modification of the bylaws or statutes or a decision on merging, splitting,

dissolving, transforming, or affiliating the cooperative with a higher-level cooperative organisation −

must be taken by a qualified majority, generally at least a two-thirds majority.

2. Supervisory council

104. Principles.The supervisory council acts, on the one hand, as a representative of the general

assembly meeting (effectively as a limited version of the general assembly), exercising supervisory

functions in the interests of the members. It may therefore be qualified as having a middle position

between the general assembly and the board.

105. Powers.The supervisory council’s principal task is to control the activities of the board of

directors, of the managing director, if any, and of any commission. In order to be able to carry out

this task, it will have access to all information at all times. The supervisory council is only accountable

to the general assembly.

106. Exclusive powers. In addition to these broad powers, the supervisory council can have a

number of particular ones. For example, should the board of directors fail to convene a general

assembly, the supervisory council could do so, and it might elect the members of the board of

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directors in cases where they are not elected by the general assembly or in the case of a vacancy, if

it is impossible for the general assembly to take a rapid decision, subject to confirmation by the

latter.

3. Board of directors

107. Principles.The board members must have those qualifications which are necessary for their

specific cooperative. One of the differences between cooperatives and capital-centred companies is

that the responsible persons must be able to manage the assets of the cooperative, while at the

same time provide services to the members, within the limits set by the bylaws or statutes and the

decisions of the general assembly (see Chapter V of this Legal Guide, on comparing legal structures).

In exceptional and well-justified cases − within the limits of the fourth ICA Principle, by which non-

members or non-user members, mainly investors, have a right to sit on the board of directors − one

must ensure that these non-member directors are neither able to take decisions on their own, nor

that they constitute a blocking minority.

108. Powers and obligations.The board of directors is responsible for all matters not expressly

reserved to the general assembly. Its powers and obligations include representing, administering

and managing the cooperative; maintaining registers, books and minutes; ensuring that accounts

and balance sheets are prepared in accordance with applicable rules; supervising and facilitating the

audit process; concerning the general assembly and preparing its agenda; preparing the

management report, annual activity plan and budget; admitting, excluding or provisionally

suspending members; filling vacancies where authorised; safeguarding members’ rights and

obligations; appointing and overseeing a manager or director, while remaining ultimately responsible

for their actions; filing for bankruptcy proceedings where necessary; adopting joint liability in cases

of wrongdoing; and carrying out any other duties assigned by the general assembly or provided in

the bylaws or statutes.

109. Decision-making. Management decisions in cooperatives often have long-term implications,

and their outcomes may only become apparent over time. A decision taken today in good faith and

with the intent to promote members' interests may, in hindsight, result in unintended negative

consequences. However, this does not necessarily mean that the cooperative has failed in its

objective of member promotion. Rather, it underscores the importance of sound governance

structures that guide prudent decision-making, ensure transparency, and allow for accountability −

while recognising that entrepreneurial risk is inherent in any enterprise, including cooperatives.

110. Business judgment rule. The relationship between cooperative management and members is

reciprocal − both parties carry responsibilities essential to the success of the enterprise. In most

jurisdictions, decisions are assessed under the business judgment rule, which protects managers

from personal liability if they acted in good faith and in the cooperative’s best interest. However, if

it becomes clear that management did not act in the members’ interest, their actions must be

evaluated against this standard. If the business judgment rule was not followed, legal action may be

taken. If it was followed, then members must bear the consequences of the entrepreneurial risk,

such as reduced benefits or exposure to liability claims.

VI. FINANCIAL RESOURCES AND INCOME DISTRIBUTION

A. Principles

111. Financing.Like all enterprises, cooperatives require adequate financing to sustain and

develop their operations. However, they face several structural and type-specific challenges in

accessing capital. First, in today’s global economy, enterprises that can readily mobilise capital enjoy

a competitive advantage, particularly in knowledge-driven sectors. Yet even in less capital-intensive

industries, cooperatives often struggle to secure sufficient financing. A key reason is that cooperative

86. UNIDROIT 2026 – Study LXXXC – Draft Chapter II

capital is closely tied to membership: it fluctuates as members join or leave. Moreover, most

cooperative members − often smallholders or MSMEs − have limited financial capacity. Because

cooperative principles limit voting power per capita (notably the third ICA Principle) and restrict

returns on capital (second ICA Principle), there is little incentive for members to invest beyond the

required minimum, and even less for non-members to do so. Additionally, unlike investor-owned

firms, cooperatives are designed to meet the economic, social, and cultural needs of their members

− not to maximise financial returns. Benefits are typically distributed based on member participation,

not capital investment. This member-needs orientation, while foundational to the cooperative

identity, makes it difficult to attract external capital without undermining democratic control or

member benefit structures (fourth ICA Principle).

112. Challenges. The conflict between member-user interests and investor interests, which is to

be avoided by the cooperative model, is likely to emerge through any external financing mechanism.

Practices that do allow for investments and/or grant limited or unlimited member status to non-user

investors, or grant them voting rights in proportion to their contribution, as well as the acceptance

of any kind of external funding, have to demonstrate that they do not jeopardise the pursuit of the

specific objective or the autonomy of the cooperative, not to mention the effective exercise of control

by the members. One of the main challenges faced by cooperatives in accessing and retaining capital,

therefore is how to secure sufficient capital while guaranteeing autonomy and member control.92

B. Financial resources

113. The autonomy of cooperatives and control by the members flow from a system of carefully

balanced internal and external financing. For these reasons, the cooperative should explore internal

financing possibilities before looking for external ones.

1. Internal financing sources

114. Member share contributions. Member share contributions93 are not to be confused with

investor shares such as in shareholder corporations. The member shares do not constitute a gainful

investment. The paid-up shares constitute money which the members put at the disposal of their

cooperative for the time of their membership in order for the cooperative to attain the jointly fixed

objectives. These shares are nominative, indivisible, in principle non-transferable (unless decided

otherwise by the general assembly), not attachable, and non-negotiable; they do not contain the

right to receive dividends and may receive only limited other financial returns (see third ICA

Principle), and they do not appreciate, i.e., they are issued and reimbursed at nominal value, but

they may be reevaluated. In primary cooperatives, the amount of capital held by one member must

be limited so that the principle of equality of the members in real terms is not endangered. For the

reasons stated, the part of the capital constituted by the member shares will, in general, be small.

115. Reserve fund. The typical way for a cooperative to consolidate capital is by transferring parts

of the surplus generated on transactions with the members to a reserve fund. As mentioned, by

transacting with the cooperative, the members fulfil their most basic primary obligation that stems

from the very rationale why they formed or joined a cooperative (see first ICA Principle). At least

part of this surplus has to be transferred to a reserve fund, “part of which at least would be indivisible”

92 Capitalisation was one of five pillars of cooperative development during the Cooperative Decade, which followed the International Year of Cooperatives 2012. See International Cooperative Alliance, Blueprint for a cooperative decade 2011-2020 and ICA, The capital conundrum for co-operative.

For further consideration, see also the ICA’s Blue Ribbon Commission report entitled "The Capital Conundrum for Co-operatives" which explores ideas and options available to cooperatives that need suitable, long-term capital. The report examines the relationship between cooperative capital and cooperative principles, as well as the concerns cooperatives may have when seeking and/or using capital for growth and expansion. 93 With few exceptions and in line with the third ICA Principle, almost all jurisdictions make the subscription and at least part payment of membership shares a condition for membership.

UNIDROIT 2026 – Study LXXXC – Draft Chapter II 87.

(third ICA Principle). This phenomenon is also referred to as unallocated asset lock. While it is

available for cooperative activities, it is not available for distribution among the members, neither

during the lifetime of the cooperative nor at dissolution. According to a generally accepted principle,

that is not enshrined in the ICA Statement, the totality of the profit generated on transactions with

non-members also has to be transferred to the reserve fund.

116. Reserve fund amount. The reserve fund often exceeds members’ paid-in share capital, a

point sometimes criticised for obscuring the cooperative’s market value. However, this critique

overlooks the fact that member shares are non-transferable and cooperatives are not tradable

entities. Rare demutualisation cases are not acceptable exceptions to the cooperative principles. The

reserve fund provides critical advantages: it discourages speculative dissolution, enhances financial

stability, and shifts focus from financial returns on investments to member benefits based on

transactions. These patrimonial reserves underpin cooperative longevity by growing incrementally,

thus fostering intergenerational sustainability. While reserves may be deployed, their primary

purpose remains the promotion of members’ interests and sustainable development.

117. Additional member shares. To improve internal financing, cooperatives may issue additional

or supplementary shares to members. These may be designed flexibly − for example, without

creating further liability, with fixed interest payment rights, with the possibility to be reimbursed

upon request, and with rights to participate in indivisible reserves upon withdrawal where the

indivisibility of the reserves is waived for this specific case. Such instruments can enhance

capitalisation without undermining cooperative principles.

118. Supplementary payments. Some cooperative laws and bylaws or statutes allow, or require,

members to make supplementary payments. These may be triggered either as a general financial

obligation or in situations where the cooperative faces financial distress (e.g., “liability to further call”

or “reserve liability”). The calculation may be uniform per member, proportional to transactions,

aligned with surplus distribution formulas, or based on number of membership shares and/or

supplementary shares.

119. Minimum capital. Another strategy is to establish a minimum capital threshold below which

the share capital must not fall. This may result in delaying the reimbursement of departing members

or requiring remaining members to recapitalise through supplementary payments. While this

strengthens financial resilience and creditworthiness, it also shifts the cooperative’s financial

structure closer to that of capitalist enterprises.

120. Savings and credit unions and cooperative banks. Financing through savings and credit

unions and cooperative banks can be considered an additional internal financing mechanism,

belonging to what is described as the “cooperative eco-system” (described in Section VII.B).

Cooperative ecosystems function as dynamic systems that aggregate resources to create “economies

of aggregation”, encompassing data providers and financial institutions, and enabling collective

resource management and shared ownership. It is important to emphasise how these ecosystems

drive collective action and resource optimisation. Financial cooperatives play a critical role within

ecosystems of agricultural cooperatives, being essential for sustaining primary agricultural

cooperatives and addressing the financial needs of members. However, general banking regulations

must be observed.

121. Financial and economic stability. In parallel, the sustainability of cooperatives often depends

on internal financing instruments. Traditionally, members contributed not only capital but also bore

personal liability for cooperative debts − a practice no longer widespread, although some jurisdictions

still allow cooperatives to call on members to contribute financially in times of crisis. Crucially, capital

in cooperatives is primarily formed through member transactions that generate a surplus. These

transactions are central to the cooperative business model, as they directly reflect and reinforce the

principle of member economic participation. In this sense, capital formation is closely tied to the

88. UNIDROIT 2026 – Study LXXXC – Draft Chapter II

volume and quality of internal economic activity, further highlighting the importance of member

commitment and engagement in cooperative operations.

2. External financing sources

122. Risks and conditions.As previously noted, cooperatives should turn to external sources of

financing only after all internal mechanisms have been exhausted − and only insofar as such

financing does not compromise their autonomy. The board should ensure that a suitable, balanced

financing system is found. The use of external capital can easily erode the autonomy of cooperatives.

Ideally, members alone should be both the financiers and beneficiaries of the cooperative, in

accordance with the cooperative principle of identity of user and member (fourth ICA Principle). The

inclusion of non-user members and non-member users, while now widely accepted, constitutes a

departure from this principle. An even further deviation arises with the admission of investor

members and non-member investors. In some jurisdictions, cooperative shares may be listed on

stock exchanges, while membership shares hold merely symbolic value. Such arrangements risk

transforming the cooperative into a structure indistinguishable from a joint-stock company. Beyond

violating the identity principle, these developments may also jeopardise the cooperative objective of

member promotion.

123. Non-member transactions. Transactions with non-members relate to situations where the

cooperative also offers to non-members the services for its members. These transactions may be

considered a form of external financing. By definition, so-called “closed cooperatives” do not engage

in such transactions. Cooperatives composed of members connected by specific bonds − such as

savings and credit cooperatives established within a company or locality − also frequently limit or

exclude services for non-members. However, depending on their objectives and operational context,

cooperatives may choose to transact with non-members, provided they carefully consider the

implications for autonomy and member-centric governance. Since non-member users may not share

the same interests as member-users, it is essential to ensure such transactions do not disregard the

needs of the members and undermine the cooperative’s independence. To that end, some legal

frameworks and cooperative bylaws or statutes limit non-member transactions by setting a maximum

percentage of total turnover or prohibiting contracts that might place non-members in a dominant

market position. Some jurisdictions make a specific tax treatment of cooperatives dependent on the

volume of transactions with non-members not exceeding a specific threshold

124. External transactions. For legal and accounting purposes − particularly in matters of taxation,

surplus distribution, and reserve fund calculation − cooperatives must maintain a clear distinction in

their records between transactions with members and non-members.

125. Subsidiaries and cooperative groups. Some cooperatives have been experimenting

successfully with setting up so-called “cooperative groups”, i.e., capitalistic companies which can

more easily access the financial market because they do not have the same financing constraints as

cooperatives. Provided that such arrangements continue to serve the interests of the cooperative’s

members and remain under their control, this model may represent a viable solution within the

bounds of cooperative principles.

126. Debentures and subordinated bonds. A number of jurisdictions permit cooperatives to issue

debentures and negotiable subordinated bonds. When properly structured − ensuring no voting rights

or other forms of participatory control are attached − these instruments do not compromise member

autonomy. Moreover, technical safeguards and limits on the volume of external capital can mitigate

risks of dependency.

127. Investors. Another mechanism is the issuance of transferable investment certificates,

available to both members (internal financing) and non-members (external financing). These may,

in some cases, carry rights such as participation in the general assembly, board representation,

UNIDROIT 2026 – Study LXXXC – Draft Chapter II 89.

profit-sharing, or liquidation proceeds. Where such certificates grant no voting or decision-making

powers − or, in the case of members, no additional decision-making rights − this may be considered

a tolerable deviation from cooperative identity. However, if voting rights are granted, even on a

limited basis, the principle of member control may be at risk. At any rate, the investor will have

legitimate expectations to receive a high financial return on the investment. This will put pressure

on the management to meet this expectation and might therefore alter the objective of the

cooperative, which by definition (see Section I) does not have any financial objective. It might thus

“denaturalise” the cooperative.

128. Solidarity funds. Solidarity funds are mutual finance institutions, funded through mandatory

or voluntary contributions from cooperatives (for instance, a small share of annual income and, in

some cases, residual assets at liquidation). These funds provide loans, guarantees and equity-type

instruments to support start-ups and existing cooperatives and to finance training, research and

other activities for the cooperative movement as a whole. They operationalise a form of “external

mutuality”: while they are formally external to individual cooperatives, they remain collectively

owned and governed by the cooperative movement and are fully devoted to the long-term promotion

of member-owned enterprises. These solidarity funds are rare, but they could become a more

frequently used instrument.

129. Guarantee fund. These solidarity and reputational reasons have led some jurisdictions to

setting up inter-cooperative guarantee funds that may be accessed as a factor of creditworthiness

and to avoid insolvency or bankruptcy.

C. Income distribution

130. Surplus and profit. A fundamental distinction exists between surplus and profit. Surplus refers

to the excess revenue generated from transactions with members, effectively representing an over-

recovery of costs or a deferred payment to members. In contrast, profit typically refers to earnings

derived from transactions with non-members. While surplus may be returned to members as

patronage refunds or bonuses in proportion to their use of the cooperative’s services, profit from

non-members is typically transferred to indivisible reserves to maintain the cooperative's autonomy

and long-term sustainability. For a detailed comparison of financial structures across legal structures,

see Chapter V of this Legal Guide.

131. Distribution. Available net income after taxation, debt payments, investments, etc., may be

distributed in several ways: sums derived from profit are transferred to the indivisible reserve fund,

while any remaining surplus is partly allocated to the indivisible reserve fund and partly to voluntary

funds such as education and pension funds, where applicable; it may also be distributed as limited

interest on paid0up membership shares at a rate not exceeding that paid by commercial banks on

certain types of deposits as returns on any investments, as patronage refunds to members calculated

pro rata based on their transaction with the cooperative, and, where appropriate, as premiums to

employees.

VII. COLLABORATION AMONG COOPERATIVES AND WITH OTHER ENTITIES

132. Forms.For the purpose of this Chapter, two types of collaboration are considered: (i) non-

cooperative-specific collaboration and (ii) cooperative-specific collaboration.

133. Non-cooperative-specific collaboration. As for the non-specific type, cooperatives may

collaborate among themselves or with other entities for whatever purpose and in any way other legal

entities may do so – through contracts, joint ventures, networking, etc. Not all jurisdictions allow

them to do so. For more information see Chapter V of this Legal Guide).

90. UNIDROIT 2026 – Study LXXXC – Draft Chapter II

134. Cooperative-specific collaboration. As for the cooperative-specific types of collaboration, it is

important to recall that the cooperative form of enterprise itself is also a type of collaboration among

smallholders and MSMEs. As already alluded to (see Section V), collaboration in the form of a

cooperative might be made more effective by cooperatives collaborating in the form of “cooperation

among cooperatives” in the sense of the “structures” noted in the sixth ICA Principle. These

“structures” are of two kinds: horizontal and vertical.

135. Horizontal and vertical cooperation. Horizontal and vertical cooperation must not be confused

with “horizontal” and “vertical” integration as related to economic activities (production, distribution

and consumption). In this sense, “horizontal” integration focusing solely on the production and

“vertical” integration which integrates production, processing and distribution, are not necessarily

the same as “horizontal” and “vertical” cooperation among cooperatives. The latter are, at times,

intertwined. Where this collaboration in the form of vertically and/or horizontally-ordered structures

(cooperation among cooperatives) performs similar or even the same functions as non-cooperative

agrifood chains, farmers might have to choose between the two, possibly jeopardising the economic

standing of the other.

136. Agrifood chain. It might therefore be necessary to distinguish (i) where farmers might (have

to) join an agrifood chain, (ii) where an existing agricultural cooperative (has to) join such a chain,

and (iii) where such a cooperative will be formed mainly in view of joining an agri-food chain. In

addition to cooperating in the sense of the sixth ICA Principle, cooperatives of different sectors do

often relate to each other in a non-formalised, non-structured way and thus form a cooperative

ecosystem. Not all types of cooperation and collaboration are differentiated in a clear-cut way and

each one can be further sub-divided. Not the least for didactical reasons, they are kept separate

here.

A. Cooperation among cooperatives

137. Higher-level cooperative organisations. Cooperation among cooperatives in the sense of the

sixth ICA Principle is based on the same rationale as that set out in Sections I and III: primary

agricultural cooperatives might form secondary cooperatives (called unions, for example), and these,

in turn, tertiary cooperative organisations (called federations, for example), because this is a way to

more effectively address their common needs. If cooperatives integrate by sector of activity, the

highest organisation is at times called the “apex organisation”.

138. Governance. In such organisational arrangements, the lower level is to control the higher

level and the higher level is to serve the lower level, resulting in an improvement of the living

conditions of the members of the primary level.94 Independently of the legal form these higher-level

cooperative organisations adopt, they must not have their own interests or purposes, but be the

means through which the members of the primary cooperatives seek to address theirs.

139. Membership. Although not an essential part of their structure, membership in higher-level

cooperative organisations tends to be a factor of success for primary cooperatives. This is particularly

the case where smallholders and MSMEs are involved, as well as where farming activities are spread

out over vast and/or isolated areas.

94 Paragraph 6 (d) of ILO R. 193 is instructive in this connection. It reads “[…] Governments should provide a supportive policy and legal framework consistent with the nature and function of cooperatives and guided by the cooperative values and principles […], which would […] facilitate the membership of cooperatives in cooperative structures responding to the needs of cooperative members […].”

UNIDROIT 2026 – Study LXXXC – Draft Chapter II 91.

140. Autonomy. Joining forces horizontally or vertically is to avoid concentration and is a way to

preserve the autonomy and independence of the individual cooperatives (fourth ICA Principle), whilst

creating the advantages of economies of scale.

141. Independence. As is the case with the formation of primary cooperatives, the autonomy and

independence of higher-level cooperative organisations might be at stake where outsiders, for

example, buyers and larger enterprises that do not belong to the cooperative sector, or other actors,

such as international organisations, drive their foundation.

142. Functions. Higher-level cooperative organisations perform economic, representative,

advisory and/or control functions, coupled with knowledge transfer activities. In general, unions

perform economic and representative functions, whereas federations perform representative and

control functions. These functions include economic activities such as financial services; supply of

input (including seeds and fertiliser); provision of knowledge through extension services; production

collection and distribution of agricultural products; logistics and transport; processing; marketing;

and export and import of agricultural products, as well as data protection services. Representative

functions include representation at national, regional and international levels; promotion, education

and training; legal, financial and economic advisory services; development of inter-cooperatives

relations; and research and development. Control functions include arbitration and audit.

B. Cooperative eco-systems

143. Relationships. An unstructured yet impactful form of cooperation among cooperatives occurs

when cooperatives from different sectors or stages of the economic process engage with one another

based on a shared understanding of cooperative principles. For example, it is no coincidence that

cooperative banks, savings and credit unions primarily serve small and medium-sized enterprises,

including agricultural cooperatives. Similarly, consumer cooperatives increasingly source agricultural

products from producer cooperatives. These kinds of cross-sectoral relationships contribute to the

development of a broader cooperative ecosystem that supports mutual growth and reinforces the

cooperative model across the economy (see also Chapter V).

C. Integration into agrifood value chains

144. Emerging trends. The following trends can be seen worldwide:

(a) Accelerated internationalisation has led to small-scale farmers increasingly forming

associative and/or collaborative strategies that are continually being restructured due

to changes in other areas of the system;

(b) Large investor-owned firms (IOF) have modified relationships in the value chain, thus

affecting integration and collaboration;

(c) Cooperatives are very present in worldwide food distribution, but often, as a supplier

to large distribution and as a buyer from large suppliers (inputs), they are seen to

represent a weak link in terms of power in the overall monopolistic value chains or

systems;

(d) Competition among powerful retailers is transferred to squeezing the margins of the

farmer suppliers; and

(e) Cooperatives either concentrate or cooperate horizontally, but they must also engage

in vertical collaboration (cf. prior references herein to heterogeneity of member

interests/values/incentives).

145. Value chain integration. Where historically the idea was to organise agrifood chains

cooperatively, vertically and/or horizontally, from the producer to the consumer, the various

92. UNIDROIT 2026 – Study LXXXC – Draft Chapter II

functions − production, processing, commercialisation and retail − now seem to atomise and to

integrate separately ever more intensively into global value chains, which the factors of globalisation,

digitisation, digitalisation and tele-transferability of data require and allow. The integration into value

chains, instead of integrating into cooperative structures, bears the risk of weakening the structure

of primary cooperatives and makes it ever more difficult to respect the cooperative identity,

especially as expressed in the fourth ICA Principle (autonomy and independence).

146. Barriers. These significant changes in competition, distribution of market power, and

governance structures of agrifood chains lead to complex decisions as to which relationships to build

on and how. Between vertical market structures, cooperative principles, and hierarchical governance

structures, agricultural cooperatives have been continually adjusting alternative governance

structures, new financial instruments, and different organisational arrangements. This has led to a

concern over the loss of cooperative “DNA”, most importantly member engagement, and has led to

discussions on the barriers to enabling environments for cooperatives and whether cooperatives risk

becoming a “firm” independent from members.

147. Collaborative arrangements. Cooperatives are embedded in different inter-organisational

collaborative arrangements within the agrifood system through:

(a) a diversity of activity (supply and services, production, logistics, transformation and

processing, marketing, consumer interaction, data management, etc.);

(b) engagement of entities from different stages of the value chain (upstream or

downstream collaborations);

(c) involvement of heterogeneous players from different sectors;

(d) horizontal and vertical interdependencies with respect to economic, technical

(especially digital), knowledge (Agricultural Knowledge and Innovation Systems),

investments, scale, bargaining power, risks, etc.; and

(e) technological (digital), organisational, institutional changes and innovations.

148. Implications. These inter-organisational collaborative arrangements have implications for the

distribution of benefits and governance and raise questions about the purpose of the value chain as

a whole. Cooperatives are organisational business models based on principles and values, as set out

in Section I, and the plural value dimensions and institutional logic in heterogeneous supply chains

create trade-offs that are not straightforward, even in a typical horizontal and vertical collaborative

value chain. This is further complicated by a shift away from traditional value chains, where there

are a range of additional influences and demands that mediate the relationship between farmers,

their cooperatives and the consumer (e.g., environmental and sustainability certification

requirements).

149. Implications vary by actor. The types of collaboration may have different implications for

farmer members and their cooperatives. In general, the implications vary according to the actor

leading the collaboration:

(a) when collaboration is led by downstream actors (processors, retailers) − farmers are

not involved in knowledge exchange, R&D, or joint investment in production and

marketing;

(b) when collaboration is retailer-led, there is no pooling of resources by farmers, but there

is the existence of horizontal collaboration amongst consumers (consumer

cooperatives), while farmers are relegated to being suppliers, and decision-making is

controlled by consumers, with little knowledge exchange on agricultural practices;

(c) when collaboration is farmer-led, actors differ greatly, but such collaboration includes

knowledge and research entities;

UNIDROIT 2026 – Study LXXXC – Draft Chapter II 93.

(d) when collaboration is with traders, farmers are highly engaged in knowledge exchange,

R&D, joint planning on production, marketing and joint investment;

(e) when intermediaries lead collaboration, farmer involvement is limited to intangible

resources (knowledge, R&D); and

(f) where there is systemic collaboration led by production actors (e.g., cooperatives),

this leads to the pooling of decision rights on production and marketing, as well as the

pooling of financial resources (joint investment).

VIII. REMEDIES, DISPUTE PREVENTION AND RESOLUTION

A. Types of breaches and disputes

150. Sources.Disputes may arise because of differences in the interpretation of the law, the

bylaws or statutes, the member agreements, or any other instruments that govern the organisation

and/or the operations of cooperatives, i.e., the execution of the collaborative project.

151. Types of breaches. Breaches of rules concerning cooperative organisation and breaches

related to collaborative projects need to be distinguished. In addition, a distinction needs to be made

between (i) a specific fundamental breach (as determined by the bylaws or statutes) leading to

expulsion or other specific sanctions and (ii) other breaches. Generally, a member seriously breaches

his or her obligations if he or she acts contrary to a cooperative’s interests. In fact, such behaviour

does not permit a trustworthy continuation of the business relationship with the member, as trust

between members and cooperatives is an essential feature of cooperatives. Trust is supported and

built by an appropriate system of good governance (e.g., by means of transparent, comprehensible

decisions committed to the members), which, in turn, can facilitate decision making.

152. Examples of breaches. The most common breaches of obligations established by the law and

specified in the bylaws or statutes may include the non-payment of financial contributions, the failure

to participate in meetings and voting on important matters, and the misuse of cooperative resources

for personal gain or purposes contrary to the cooperative’s objective.

153. Violations of other rules. Disputes may also take place in cases of violation of other rules and

policies that relate mainly to non-compliance with quality or environmental, social and sustainability

standards.

B. Principles of dispute settlement

154. Principles.Conflicts can be resolved “statically”, with the result that sanctions are imposed

immediately if rules are broken, or “dynamically”. The latter is certainly the better solution to

maintain collaboration. Because of the importance of good personal relations for the success of

cooperatives, disputes within cooperatives, i.e., disputes exclusively involving members, the

organs/bodies of the cooperative, the cooperatives themselves or their higher-level organisations,

should be subject to reconciliation, mediation and/or general or special arbitration procedures before

the parties may access a general or special court of law. Most jurisdictions therefore even provide

for the obligation to resort to such out-of-court procedures before a dispute may be submitted to a

court of law. Because of the importance of finding non-disruptive solutions, few disputes end up in

external dispute resolution procedures.

94. UNIDROIT 2026 – Study LXXXC – Draft Chapter II

C. Remedies and sanctions

155. Right to cure. Remedies that support the continuity of collaboration should be prioritised

before imposing more severe sanctions like termination or expulsion. The “right to cure”, as a

corrective measure within the remedial process, refers to the opportunity given to a cooperative

member to remedy or correct the breach of an obligation before facing more severe consequences,

such as termination of membership. For example, a farmer who does not deliver according to the

agreed quality would be allowed to replace the delivered goods with goods of adequate quality. This

type of provision would keep the relationship between the cooperative and members flexible enough

to ultimately strengthen collaboration.

156. Scope. It is necessary to determine to what extent a breach of obligations interferes with the

cooperative's member promotion activities. Non-compliance with cooperative obligations may be

addressed through different types of remedies, including corrective remedies such as warnings,

disciplinary measures, training, and opportunity to cure, but also possibly stricter remedies such as

suspension of membership or exercise of rights, termination of membership, mediation, conciliation

or legal action if necessary. If the non-compliance leads to the suspension or expulsion of the

member, the decision on the suspension or expulsion must be sufficiently substantiated to explain

why the requirements for membership are no longer met or how a central obligation from the bylaws

or statutes or a decision of a board has not been fulfilled. Expulsion is possible, for example, if a

member does not participate sufficiently in the development of the cooperative (e.g., by not using

the services of the cooperative) or if a member no longer fulfils other criteria of membership and

does not withdraw voluntarily.

157. Sanctions. Breach of members’ obligations can lead not only to expulsion but also to the

payment of a fine or the freezing of administrative rights. This can be the case, for example, if the

agreed quality of the products is repeatedly not achieved, for example, in a milk-processing

cooperative. In such cases, the cooperative can take direct action against the member to redress

and restore collaboration rather than punishing or adopting a compensatory measure.In addition,

the cooperative law may establish a list of acts liable to penal sanctions. This is to exclude any

practice whereby cooperatives incriminate certain acts in the bylaws or statutes as if they constituted

a criminal offence.

158. Dismissal. The functioning of cooperatives may be disrupted not only by members not

following the rules, but also by those responsible for its operations not acting according to the rules.

Therefore, the bylaws or statutes provide for the criteria specifying when members of the board of

directors or of the supervisory council, if any, may be dismissed. As these persons are elected, they

may also be dismissed without giving any reason. Labour laws will apply to cases related to the

misbehaviour of employed managing directors.

IX. MERGERS, DEMERGERS AND TRANSFORMATION

159. Principles. As the members are free to dissolve their cooperative (see Section X), they must

also be free to merge with each other or with other entities, split or transform into another type of

enterprise, as long as third-party interests and the rights of the members who do not agree to such

a change are protected.

160. Types of mergers. Mergers are of two types: (i) one or several cooperatives are absorbed by

another or (ii) a new cooperative is established by merging two or more cooperatives.

161. Challenges. Often, expectations as to the economic effects (rationalisation of management

and administration, economies of scale, etc.) are not met and/or identification of the members with

the new entity fails, resulting in demotivation and difficulties in decision-making. In any case,

UNIDROIT 2026 – Study LXXXC – Draft Chapter II 95.

governance tends to become more complex with the size of the cooperative, so before deciding to

merge, the cooperatives should therefore consider integrating horizontally (see Section VII.A).

162. Demergers. A cooperative may split into two or more cooperatives. In this case, members,

assets and debts have to be split, including the reserve fund.

163. Transformation. Cooperatives may transform into another form of enterprise (such as a

company) within the limits of the legal provisions relating to the new organisation. This right must

not be restricted, as is often the case, as cooperatives cannot be prevented from dissolving, with

members establishing another type of enterprise. However, the legal reserve fund of the cooperative

cannot form part of the capital of the new organisation, unless it is divisible or divisible in the specific

case of transformation decided on non-speculative grounds. In any case, this leads to complex issues

if surplus monies transferred to the reserve fund were not taxed, as they should be. Moreover, the

legitimacy of such a transfer to another entity might be questionable where the reserve fund was

not built up by those deciding its divisibility.

X. DISSOLUTION AND LIQUIDATION

A. Instances of dissolution

164. Conditions.Relevant legal regulations and the cooperative’s governing documents typically

define the conditions under which a cooperative may be dissolved. Common grounds for dissolution

include:

(a) The will of the members;

(b) Achievement of the cooperative’s objective;

(c) Impossibility of achieving the objective;

(d) Expiration of a predetermined duration without renewal;

(e) Failure to meet registration requirements, such as maintaining the minimum number

of members over a specified period;

(f) Insolvency; or

(g) Violation of the law.

165. In all cases, the cooperative’s governing bodies must decide on dissolution (see Section V).

If they fail to do so − except when dissolution is initiated by members − the cooperative may be

dissolved by government authority (ex officio). Throughout the process, the rights of third parties,

especially creditors, must be protected. Creditors may object to the dissolution until their claims are

fully satisfied. Additionally, under the right to freedom of association, dissenting members retain the

right to withdraw from the cooperative in cases of voluntary dissolution.

166. Consequences. The dissolution of a cooperative can also have consequences for other

cooperatives if they are all part of a cooperative system and thus depend on each other, as this

generally means fewer resources upstream, e.g., fewer apples to sell, but also downstream, e.g.,

fewer customers for services provided by secondary cooperatives, with the consequence that costs

for remaining cooperatives increase.

B. Liquidation

167. Procedure.Similar to the liquidation process for other enterprise types, that applicable to

cooperatives follows a specific order beginning with the determination of assets and the payment of

96. UNIDROIT 2026 – Study LXXXC – Draft Chapter II

debts. This is followed by the repayment to members of their contributed capital, generally at nominal

value. In exceptional cases where the legal reserve funds is divisible, it may also be distributed

among the members according to the method used for distributing a surplus at the end of the

financial year, potentially taking into account the seniority of membership as an additional criterion.

Any remaining balance is then distributed in accordance with the principle of disinterested dissolution.

In some jurisdictions, this principle is mandatory, while in others it can be stipulated in the bylaws

or statutes. In this case, the remainder after liquidation is to be allocated to cooperative-specific

activities, such as contributing to a fund for the promotion of the cooperative system. Where this

principle does not apply, the remainder can instead be distributed among the members, usually in

proportion to their financial contributions and/or to their transactions with the cooperative over a

given period of time.

XI. DIGITALISATION

168. Reorganisation.Agricultural value chains have undergone profound reorganisation, and this

process is continuous. Decentralised chains become centralised; new food chains emerge; and digital

technologies change the nature of chains to networks through retail platforms.

169. Application. Digitalisation processes are intertwined with almost all processes of value chains

and horizontal and vertical collaboration. Some examples include traceability, quality standard

implementation, production scheduling, logistics, consumer communications, environmental

monitoring and collection of production data for prediction and control, market predictions, etc.

170. Benefits. The utilisation of Big Data and ICT technologies on a large scale in agriculture is

seen to be a solution for dealing with climate change, environmental degradation, land and water

constraints, the necessity to optimise resources and reduce costs, and increase traceability and food

safety, amongst other compelling arguments. However, it has also resulted in imbalances in power,

investment barriers, and the decreasing ability of smallholders and agri-MSMEs to control and benefit

from their agricultural-related activities.

171. Challenges. While agricultural data and their use for better decision-making and innovation

are at the core of the digital transformation of agriculture, there are serious and legitimate concerns

for small farmers, agri-MSMEs and agricultural cooperatives. The first of these are fragmented and

unclear data governance arrangements, the protection of privacy and confidentiality of agricultural

data, and protection of farmers’ economic interests in such data. Secondly, with this lack of clarity

comes the real risk of power imbalances and the use of farmers’ data without any reciprocal benefit,

and indeed, possible harm (e.g., anti-competitive behaviour, lock-ins, misuse of sensitive economic

or compliance information).

172. Data governance. This is a different approach from that used by contracting and licensing

advocates. These latter efforts have not been able to address imbalances in the contractual

relationship between farmers and service providers due to information asymmetries, power

imbalances and a lack of the requisite literacy among farmers. The thought that an individual farmer

could bargain with a multi-national behemoth beggars belief, yet farm machinery consortia and

certain agricultural cooperative representative bodies rely on codes of conduct and contracting “good

practices” with the argument that innovation should not be thwarted by not allowing access by

companies to such data. Competition law also seems rather ill-suited to deal with these farmer-tech

platform power imbalances, given that it has been an ineffective tool to control such entities in other

areas. However, while the cooperative legal structure is very promising with respect to the collective

use of farmer data, there are still various issues to consider: compatibility of standards and

interoperability, different regulatory approaches to data sharing and use, whether the law allows

cooperatives to develop such services and/or to contract for such services, etc.

97. UNIDROIT 2026 – Study LXXXC – Draft Chapter III

CHAPTER III

COMPANIES

TABLE OF CONTENTS

I. INTRODUCTION 98

II. OBJECTIVES OF COMPANIES 100

III. FORMATION 102

IV. SEPARATE LEGAL PERSONALITY 105

V. SCOPE OF LIABILITY OF THE MEMBERS 107

VI. ASSET PARTITIONING 108

VII. MEMBERSHIP 109

VIII. MEMBERS’ CONTRIBUTIONS AND CAPITAL 110

IX. GOVERNANCE 111

X. DECISION-MAKING 114

XI. MANAGEMENT 115

XII. FINANCIAL RIGHTS 119

XIII. TRANSFER OF RIGHTS 120

XIV. EXIT AND WITHDRAWAL OF A MEMBER 121

XV. DURATION AND DISSOLUTION OF A COMPANY 122

XVI. CORPORATE GROUPS 122

XVII. REMEDIES, DISPUTE PREVENTION AND RESOLUTION 123

A. NON-STATE MECHANISMS 124

B. STATE MECHANISMS 126

C. REMEDIES 126

98. UNIDROIT 2026 – Study LXXXC – Draft Chapter III

I. INTRODUCTION

1. Scope. This Chapter focuses on business organisations for collaborating in agrifood value

chains whose foundational objective is to generate profit and that operate under a legally recognised

form (“companies”).95 Although it is nearly impossible to define and categorise the various legal

structures available to profit-oriented business organisations for collaborating in agrifood value

chains, most jurisdictions offer a range of legal structures that includes some variation of

partnerships and investor-owned legal entities, such as corporations and limited liability companies.

Moreover, globalisation and the expansion of corporate activity have contributed to convergence

between legal traditions in the use of partnerships and investor-owned entities as organisational

forms. Many jurisdictions have adopted “hybrid” business forms that combine elements of company

and partnership law, such as the limited partnership, Limited Liability Companies (LLCs), and

simplified business organisations, thus blurring traditional divisions between partnership and

company law.

2. Sector-neutral and agriculture-specific company legal structures. In many countries, the

above-listed forms may be used by agricultural enterprises to structure their collaborative

endeavours, including by smallholders and agri-MSMEs. Under this approach, which reflects the trend

globally, company law treats agriculture and agrifood operations as any other business or commercial

activity. It is through other bodies of law such as land law, environmental law, fiscal law that the

practice and effects of agriculture and agrifood operations per se are regulated. Under a second

approach, sector-neutral company forms are available for agricultural enterprises as well as

agriculture-specific legal structures that are not mandatory but often incentivised. Under a third, less

prevalent approach, specific legal structures are mandated for profit-seeking agricultural enterprises.

Where agriculture-specific company forms are prescribed, conditions must be fulfilled to register as

such.

3. Single-member and multi-member business organisations. Although collaborative projects

are by nature between a minimum of two persons, this Chapter includes consideration of single-

member business organisations. A significant proportion of farms and enterprises operating in

agrifood value chains are individually owned and, in several jurisdictions, operate informally. For

many such enterprises, formalisation into single-member business forms is likely to be the first step

towards participation and collaboration within agrifood value chains.

4. Sole proprietorship. The sole proprietorship is a legally recognised business organisation

carried on by an individual natural person. With minimal legal requirements for its formation and

operation, it is the simplest form of doing business recognised by the domestic law in most

jurisdictions and offers an accessible legal structure that may potentially be used as a stepping-stone

toward collaboration. Moreover, in many countries, the sole proprietorship is a legal structure

commonly used by farmers and agri-entrepreneurs by virtue of the very few formalities required to

form the business.

5. Partnerships. A traditional or “general” partnership96 is a trust-based association or

relationship between two or more members (“partners”) who jointly operate a business with a view

to profit and where partners are in principle personally liable for the obligations of the partnership to

its creditors. By their very essence, partnerships are collaborative legal structures. They require a

limited number of conditions to be formed. Freedom of contract in this type of association provides

significant leeway, so that parties can set up tailor made provisions to govern their undertakings.

95 This Chapter refers to profit-oriented business organisations and companies interchangeably. The term “company” is used in a very broad sense to include partnership-like structure. 96 General partnerships can be distinguished from limited partnerships. In this Chapter, the adjective is not used, and the term “partnership” refers to the general partnership.

UNIDROIT 2026 – Study LXXXC – Draft Chapter III 99.

These features of partnerships account for their prevalence amongst small-scale, family-run or early-

stage agri-businesses. For larger agrifood operators, the unlimited liability of the partners in a

partnership coupled with governance complexity and other scaling considerations often represent a

significant deterrent. In specialised or strategically chosen situations, partnerships may be useful

for larger collaborative ventures in agriculture because of the broad flexibility for private ordering

afforded to partners.

6. Limited partnerships.97 A limited partnership is a profit-based business association between

one or more general partners and one or more limited partners whereby the general partners agree

to contribute their work, experience and expertise, and the limited partners agree to make capital

contributions to the partnership. In a limited partnership, general partners are the only members

authorised to administer and bind the partnership. They are jointly and severally liable for the

partnership’s debts and normally bear unlimited liability. The limited partners’ liability for the

partnership's debts is limited to their contribution. As a result, if a limited partner has already

contributed all that they committed to contribute to the limited partnership, that limited partner has

no further exposure. Limited partnerships are unevenly used worldwide as vehicles for structuring

collaboration in agrifood value chains. Sometimes perceived as higher risk and more complex

structures, their prevalence varies considerably depending on inter alia the jurisdiction and the

segment of the value chain one is dealing with.

7. Shareholder corporations. Corporations are separate legal entities that exist indefinitely, and

act in their own name. They may sue, be sued, lend, and borrow. In for-profit corporations, ownership

interests are typically divided into shares, and the holders of those shares are referred to as

shareholders. These types of corporations may be referred to as “shareholder corporations” or as

“share capital corporations”. Shares consist of bundles of legal rights that shareholders can assert

primarily against the corporation. These shares do not, however, give the shareholders legal title to

the assets of the corporation. It is the corporation, as a separate legal entity, that has legal title to

the assets. Shareholders typically benefit from limited liability, meaning that the corporation itself

is responsible for its debts and obligations rather than the shareholders. In agrifood chains,

shareholder corporations are generally more prevalent amongst enterprises operating at the mid-

and downstream levels. At the primary agriculture/production level, in most regions of the world,

the majority of operators are smallholders and agri-MSMEs that tend to structure collaborations

through cooperatives and partnerships.98

8. Partnerships and corporations – civil and common law distinctions. In some jurisdictions,

primarily those of common law tradition, partnership law and company law usually constitute distinct

bodies of law. In other jurisdictions, primarily those of civil law tradition, the distinction between

partnerships and companies is frequently governed under a unified set of general rules, in part

because both forms are governed by more unified legal frameworks (such as codes). Nonetheless,

both common law and civil law jurisdictions have adopted “hybrid” business forms that combine

elements of company and partnership law, such as the limited partnership, limited liability companies

(LLCs), and simplified corporations, thus blurring traditional divisions between partnership and

company law.

97 In some jurisdictions, the term “limited liability partnership” (LLP) refers to a special form of basic partnership that was created for large professional services organisations (such as law firms) that for regulatory reasons are required to function as a partnership and where it was thought that there should be some limitations on one partner’s responsibility for another partner’s acts. In the Guide, the term “limited partnership” is used to avoid being perceived to have conflated limited partnerships and limited liability partnerships. 98 In closely held corporations (one where the majority of shares are held by a few persons and that is not traded publicly), shareholders can provide for rights of first refusal for the negotiation of shares (i.e., the right to acquire shares from another shareholder that wishes to sell those shares, thereby limiting the ability to sell those shares to a third party) among other share transfer restrictions. Likewise, trading shares of listed corporations in securities markets may be subject to rules governing how, when and to whom they may be sold, and other requirements.

100. UNIDROIT 2026 – Study LXXXC – Draft Chapter III

9. Limited liability companies. In certain jurisdictions, a type of corporate entity referred to as

a “limited liability company” (LLC) ) is also available to profit-oriented ventures, including in

agriculture. The entity combines features of partnerships and corporations the members can elect to

treat it as a partnership for tax purposes99. This allows the income of an LLC to be treated as income

of the members and taxed in their hands rather than it being income that is taxed at the corporate

level. This can be beneficial for its members. Although a partnership or limited partnership often

provides this sort of flow-through tax treatment, an LLC also has a separate legal personality, thus

providing limited liability to its members. Where LLCs are available, this combination of features may

be attractive for farmers and other agri-businesses operating in sectors such as greenhouse

operations and speciality crops where personal liability can be high and/or in jurisdictions where

litigation risks are high. Where treated as tax-transparent entities, LLCs generally avoid the entity-

level and shareholder-level taxation commonly associated with conventional corporations. The

attractive features of LLCs should nonetheless be balanced against the possibility of increased tax

complexity, less legal predictability and standardisation, potential investor and financing limitations

as well as potential international incompatibility.

10. Simple and simplified legal structures for business organisations. The importance of simpler

and more easily accessible legal structures that respond to the needs of the smallest and most

vulnerable enterprises has been recognised internationally and has prompted the development of

models and international legal instruments meant to facilitate the operation of MSMEs throughout

their lifecycle.100 It has also led to the adoption of simplified legal structures for business

organisations in various jurisdictions. These forms are used across different sectors, regions, and

stages of production, reflecting their relevance for MSMEs. This includes agri-MSMEs and in particular

farm-operated ventures, which commonly use simplified structures due to their relatively low

administrative complexity and governance flexibility. Simplified corporations are also increasingly

being used by larger businesses precisely because these simpler rules of formation and operation

are also useful for large enterprises; however, listed companies are generally not permitted to adopt

such forms. Their formation requirements are discussed in Section III, Formation, below.

11. Chapter contents. This Chapter considers how the following features of profit-oriented

business organisations may affect and/or facilitate collaboration in agrifood value chains: (i)

objectives of companies; (ii) formation; (iii) separate legal personality; (iv) scope of liability of the

members; (v) asset partitioning; (vi) membership; (vii) member contributions and capital; (viii)

governance, (ix) decision-making; (x) management; (xi) financial rights; (xii) transfer of rights; (xiii)

exit and withdrawal of a member; (xiv) life and dissolution of the company; (xv) company group

structures; and (xvi) dispute prevention and resolution..

II. OBJECTIVES OF COMPANIES

12. View towards profit. Companies within the scope of this Guide are organisations that have as

their objective the pursuit of a business or commercial activity in the agrifood sector with a view to

profit. The pursuit of social, cultural, community and/or environmental goals (“sustainability goals”)

may also be part of their objectives.

13. Profit defined. The term “profit” in this Chapter means any surplus that remains on amounts

earned (e.g., revenues or income) after all amounts spent in the operation of business or activity

(operating expenses) have been deducted. The pursuit of profit for companies should not be

automatically equated with the intent of distributing that profit to members. Profit in companies may

be distributed to members but may also be reinvested in the company. While this may also be the

99 The Common Law LLC must not be confused with the French Société à Responsabilité Limitée (SARL)or the German Gesellschaft mit beschränkter Haftung (GmbH). These are different types of companies, the regulation of which is generally not driven by tax considerations. 100 See discussion below at Section […].

UNIDROIT 2026 – Study LXXXC – Draft Chapter III 101.

case with surplus for other legal vehicles such as cooperatives, the reference to a focus on profit

generation as a foundational objective is intended to underline the emphasis that companies place

on this objective not simply as a means to an end but also as an end in and of itself. This may be

contrasted with other legal vehicles considered in this Guide that do not place the same emphasis on

the pursuit of profit.

14. Evolving purpose and legal structures. The role and objectives of companies have evolved

both in practice and in theory. In many jurisdictions, legislatures and courts have sought to reconcile

the historical focus on the importance of generating profit and, in turn, a return for investors with

more current concerns that this not obscure the reality that companies have an important impact on

other stakeholders and on society at large. As a result, in some countries the rules governing classic

for-profit company forms have been modified to varying degrees to accommodate new legal duties

to consider the interests not just of shareholders (including minority shareholders) but also of other

stakeholders. At the same time, some countries are also creating new legal structures that explicitly

shift the focus from a profit-centric legal model to models that permit or require the organisation to

pursue other purposes (social, cultural, community, economic and/or environmental) in conjunction

with or ahead of profit (“mission-driven companies”). These developments have resulted in a relative

blurring of what were once much clearer boundaries between companies and other types of legal

structures such as cooperatives. However, unlike cooperatives where “sustainability” goals concern

the improvement of the situation of the members and/or of their community, the sustainability goals

that companies are being asked to pursue are very often described as goals designed to improve the

greater public good. It should be clear, then, that the universe of legal structures is not static and

that over time the nature and range of legal structures evolve in response to concerns about the

strengths and weaknesses of those that were created in the past.

15. Mission-driven companies. Under a growing trend across jurisdictions to create specific legal

structures for mission-driven companies, businesses that register as such are subject to specific

reporting requirements and may be granted special fiscal treatment or other incentives. Generally,

compliance with Corporate Social Responsibility (CSR) or Environmental, Social and Governance

(ESG) principles − whether voluntary or mandatory − is insufficient; for a company to be considered

mission-driven, sustainability and/or advancing a social good must be central to its objective.

Mission-driven companies exist in various sectors, including in the agrifood sector. For example, a

company may have as a socio-economic objective the production, transformation, and marketing of

agricultural, livestock or forestry products to implement improvements in the rural environment, for

agricultural promotion and development, as well as in the provision of common services. It is

important for any business considering which of the existing legal structures is best suited to its

needs to consider the comparative strengths and weaknesses of different available models (see

Chapter V of this Legal Guide).

Broad objective clause. A company is not an advocacy, political or charitable organisation; it is a

business.101 As such, the carrying out of business or commercial activities is considered central to

the purpose of a company. In accordance with international guidance, limitations on the scope or

lists of permitted activities are discouraged by international instruments.102 Although this applies

equally to companies operating in agrifood value chains, in some jurisdictions, certain activities are

restricted or prohibited due to land use regulations, or the political, economic and legal context that

favours other legal structures in the agricultural sector. For example, some States have a tradition

of State-owned and collective agricultural systems that strongly restrict the ability of farms to register

as private companies. Moreover, as noted in the introduction, some jurisdictions have adopted

101 A business organisation may engage in lobbying, political, or charitable activities; however, these are not its primary purpose or activity. Specific rules, requirements, and sometimes distinct legal structures apply in most jurisdictions to organisations engaging in such activities. 102 UNCITRAL Legislative Guide on Limited Liability Enterprises (LLE). Recommendation 2 “The law should provide that an LLE may be formed for any lawful business or commercial activity.”

102. UNIDROIT 2026 – Study LXXXC – Draft Chapter III

sector-specific company legal forms for businesses whose purpose is to conduct agricultural or agri-

food activities.

16. Collaboration as objective. Certain kinds of companies (e.g., partnerships) are designed and

structured to facilitate collaboration. Collaboration may also be one of the central objectives for which

members decide to form a company. As discussed further below, in many countries statutes that

govern modern business organisations provide legal forms that allow for considerable flexibility and

efficiency when structuring collaboration. This is true both within the corporation, where the

collaborative relationships between those working with the corporation can be organised in many

different ways, and with respect to collaborative relationships between the corporation and third

parties that are integral to the success of the business, such as providers of capital, customers and

suppliers.

17. Objective informs choice of company form. Where agri-entrepreneurs select the company as

a preferred legal structure, based on inter alia profit-making as their primary goal, a decision must

be taken on the particular company form under which to operate. Here too, the proposed purpose of

the agri-business may influence choice. For instance, several individual producers may wish to form

a company with the retailer that purchases their agricultural products for sale to third-party

customers, such that the business to be conducted by the company remains distinct from the

individual business of each member. Prima facie, the logical choice of company form in this case

would be one that provides for the creation of a distinct legal entity that does not expose the

producers to unlimited liability, for example a corporation comprising several individual producers

and a retailer (possibly itself a company). In another case, several agricultural companies of similar

or different sizes (either partnerships or corporations with several shareholders or single-member

business organisations) may wish to form a company (either a partnership or corporation) with the

objective of penetrating a new market (domestic or international), developing a new or improved

product, or offering customers a new medium or technique of purchase of their products. In this

arrangement, all members in the new company are companies.

III. FORMATION

18. Overview. While identifying purpose is a fundamental starting point for the choice of legal

structure, possibly of equal importance is consideration of the elements relating to the formation of

the chosen legal structure. If the formation process is perceived as complex and expensive,

smallholders and agri-MSMEs are unlikely to consider that collaborative legal structure. Thus,

consideration of the elements of formation will help identify the legal structure that would best

address the needs of a particular project.

19. Elements of formation. Issues to consider in the formation of a company include the

following: (i) number of members required to form the company; (ii) whether membership in the

company is open to both natural persons and legal persons or natural persons only; (iii) the moment

at which a company comes into legal existence; (iv) the time, cost and nature of formalities that

must be completed (including sustainability requirements where applicable); (v) minimum

capitalisation requirements;103 (vi) the possibility to form a company using digital tools and

platforms, together with their related advantages and disadvantages; (vii) and, the impact of one

company form in comparison with another on the ability to access credit. Availability of a simplified,

inclusive and affordable non-discriminatory process of formation is also a consideration.

20. Number of members. General and limited partnerships must have at least two members from

the time they are formed until dissolution. As noted above, by their very nature, they are a

collaborative legal form. Corporations are required to have at least one member; some jurisdictions

103 Minimum capitalisation requirements are often seen as a significant obstacle for the formalisation of business enterprises. See Section V below.

UNIDROIT 2026 – Study LXXXC – Draft Chapter III 103.

provide for the single-member company, which as the name indicates, requires no more − and no

less − than one member at all times. For the purposes of collaborating in agriculture, a corporation

would be formed with at least two members unless it was created for entering into a venture with

other legal or natural persons or as an initial step within a staged collaboration endeavour. Moreover,

as explained in Chapter V of this Legal Guide, because partnerships are founded on relationships of

trust they generally considered to be better-suited for endeavours involving small numbers of

participants. On the other hand, the corporate form accommodates ventures involving any number

of members because it separates ownership from management and allows ownership interests to be

standardized and transferred efficiently.

21. Types of members. When deciding upon which company form to use for collaborating,

founding members should consider whether they wish membership to be open to both legal persons

and natural persons or to natural persons only. The capacity of a natural or legal person to be a

member of a company is usually governed by State laws. It is important for members of a company

to understand the concept of a legal person as well as the implications and possible benefits and

disadvantages associated with legal persons being members of a company (see Sections IV Separate

Legal Personality and VII Membership).

Moment of formation. Legal rules indicate the moment at which the company is formed. This provides

legal certainty as to when a company comes into existence. Rules on the time of formation of a

company vary depending on the type of company and the jurisdiction. 104

22. Time of formation of corporations, limited liability companies and simplified company forms.

Most jurisdictions provide that corporate forms come into existence upon effective registration in a

business registry (e.g., issuance of articles of incorporation or bylaws). State laws generally specify

the conditions under which registration becomes effective. These conditions vary depending on the

legal form of business being registered.

23. Time of formation of partnerships. Unlike for corporations, state registration is generally not

required for a partnership to be formed. A partnership legally comes into existence when the

conditions that define a partnership in that jurisdiction are met. The key legal requirement for

creating a partnership is for members to agree, explicitly or by conduct, to carry on an enterprise

together with a view to profit. There is no requirement for an upfront resource contribution. This may

be advantageous for smallholders and other agri-MSMEs.

24. Formation of limited partnerships. A limited partnership is generally considered legally

formed upon conclusion of a limited partnership agreement; however, the full legal effect often arises

only once a certificate of limited partnership or similar document has been issued by the business

registry. Other steps may then be required for the limited partnership to become operational.

25. Partnership and multiparty contracts. In some jurisdictions, a partnership relationship can

come into existence without being subject to registration requirements, simply upon start-up, by

virtue of the way in which participants are working together, and regardless of whether they

consciously intend to enter into a partnership (e.g., société de fait). It is important for participants

to such a form of collaboration to be aware of this, particularly given that members of a partnership

are in principle personally liable for the obligations of the partnership to its creditors. In many of

these jurisdictions, it is not possible to “contract out” of the partnership law; a contractual clause to

the effect that the parties do not intend their relationship to be a partnership will not suffice, and the

relationship would have to be structured either as another legal structure (e.g., a corporation), or in

104 In some jurisdictions, incorporation may occur before any shares are issued, with membership to be completed at a later stage. While such a company cannot operate until at least one share is issued and a shareholder exists, this allows for pre-emptive incorporation so that an entity is legally constituted and ready to commence activities once shares are allotted.

104. UNIDROIT 2026 – Study LXXXC – Draft Chapter III

ways that clearly do not fall within the partnership definition. Similarly, parties wishing to collaborate

using a multiparty contract structure rather than a partnership structure should be aware of the

distinctive features of each type of legal structure and be careful to organise their collaboration

accordingly (see Chapter I on Multiparty Contracts).

26. Formalities. The type of information, documents and procedure required to form a company

depends on the legal structure adopted. These formalities are specified by law and are meant to

serve multiple purposes, including providing legal certainty on the existence of the company, making

the company visible to the State and third parties, and protecting the company, its members and

third parties from abuse and fraud. Similarly, the cost, level of complexity and necessary time to

comply with formal requirements will vary depending on the particular company form and

jurisdiction. These variables may also be influenced by cultural and customary norms, bureaucracy

and the broader national legal infrastructure of a State.

27. Incorporation. Formation of an incorporated company usually requires filing articles of

incorporation, public deeds or other constituent documents with an authorised office. These filed

documents generally form part of the public record. Under certain regimes, the drafting of by-laws,

appointment of directors, approval of promoters’ benefits, as well as other follow-up steps, are also

needed to complete the formation process. In addition to these foundational documents,

shareholders can also execute other private agreements, such as shareholder agreements and voting

trusts to govern matters not addressed in the articles or by-laws (discussed in Section XX).

28. Consequences of formation. Formation has several legal effects. In addition to the general

ones stated in the above paragraphs (e.g. legal certainty, visibility, protection), specific legal effects

may include the following. In the case of a corporation, at the moment of incorporation, the entity

acquires its own separate legal personality, with the attendant consequences of asset partitioning

(i.e., separation of the company’s assets from those of its members), the possibility to acquire its

own rights and obligations, the ability to sue and be sued, and protection of members from the claims

of the company’s creditors (discussed in Sections XX below). By comparison, company forms without

distinct legal personality (e.g., in many jurisdictions this is the general partnership), formation would

not have this effect. Secondly, formation may initiate obligations of the company to comply with

specific tax, environmental, ESG, health, safety and other laws and regulations, licensing and permit

requirements. For example, environmental impact assessments might be required as a precondition

for starting operations. Where a collaborative agricultural enterprise includes foreign partners,

restrictions on ownership of agricultural land might require specific authorisation by government

agencies.

29. Discriminatory prohibitions. Some jurisdictions still impose legal restrictions on the ability of

certain groups (such as women, minority groups, indigenous peoples) to register a company despite

international efforts to discourage such measures. Discrimination may be based on gender, race,

ethnicity, nationality, religion, caste, political affiliation, marital status, language, social origin,

property, birth, disability or other status. For example, in some jurisdictions, women may need their

husband's or guardian's permission, signature, or consent to register a company, sign contracts, or

open a bank account. In the context of extractive industries and agribusiness operations, indigenous

peoples also face challenges to their ability to register and operate a company due, inter alia, to

difficulties in asserting their rights to lands, territories and resources, many of which are not legally

recognised.

30. Facilitating formation, simplified business registration. As explained in the Introduction to

this Guide, across the world, MSMEs, including smallholders and agri-enterprises, make significant

contributions to gross domestic product and towards generating employment. Nevertheless, in many

jurisdictions, many of these enterprises continue to operate either completely informally or without

being fully compliant with legal requirements applicable to their business for reasons discussed in

UNIDROIT 2026 – Study LXXXC – Draft Chapter III 105.

the Introduction. Informality, particularly of MSMEs, has been associated with increased vulnerability

and daily operations being hindered by various obstacles. Accordingly, an increasing number of

jurisdictions offer simplified business registration and simplified company forms that may be used by

smallholders, MSMEs and others operating in agrifood value chains. Recognising the hurdles faced

by MSMEs in particular to legal formation, over the past decade, international organisations have

developed guidance aimed at facilitating formation of legally recognised businesses. In jurisdictions

across the globe, legislators have promoted law reforms in alignment with these international

models.105 To further facilitate the establishment of business organisations, some jurisdictions

provide model formation documents prepared by business registrars or other public authorities to

simplify and expedite the formation and registration process (See Chapter IV on Digital Platforms).

31. Digital formation, digital divide. Digital platforms for business formation and registration may

present advantages, including for the smallest and most vulnerable operators, as well as challenges.

While digital platforms are intended to make business formation more accessible and convenient,

and less costly and time-consuming, this may be the case only where internet infrastructure is

adequate and where users have easy access and sufficient levels of legal, digital and general literacy.

The “digital divide” constitutes an additional obstacle for smallholders and agri-MSMEs that limits

their ability to use and benefit from digital business tools.

IV. SEPARATE LEGAL PERSONALITY

32. Definition. Separate legal personality is the principle that a legal entity exists as a distinct

person in law, separate from its members, and can act in its own name. An important consideration

when deciding upon the appropriate company form is whether that form is imbued with a separate

legal personality under the relevant domestic law and whether this aspect is essential to the

collaboration. The principle does not apply to every company form; whereas corporations and limited

liability companies typically have separate legal personality, this varies for partnerships across

jurisdictions and depending on the applicable statutory regime.

33. Consequences of separate legal personality. Separate legal personality of the company form

has important consequences both for members and the company itself. For agri-MSMEs and

smallholders collaborating in a venture, separate legal personality can facilitate collective ownership

of assets, contracting, access to finance and markets, continuity of the venture, and it may allow the

venture to operate separately from changes in membership. It has a significant impact on members’

liability and on their financial exposure, also to creditors’ claims and overall business risk.

34. Separation of personal assets. Save for cases that require piercing the corporate veil,106 the

separate legal personality attached to corporations and limited liability companies facilitates the

separation of personal assets of members as distinct from company assets (see Section V below).

35. Legal personality and asset partitioning - partnerships. Irrespective of whether a partnership

has a separate legal personality, a typical feature of this form is strong asset and liability pass-

through to its members. In most jurisdictions, creditors of a partnership can be paid from partnership

105 At the international level, this has resulted in guidance adopted by UNCITRAL – the Legislative Guide on

Key Principles of a Business Registry (2019) and Legislative Guide on Limited Liability Enterprises (2021). These Guides are complemented by UNCITRAL’s Guide on Access to Credit for Micro, Small and Medium-size Enterprises (2023), UNCITRAL’s Model Law on Secured Transactions (2016) and UNCITRAL’s Legislative Guide on Insolvency for MSMEs (2018). Similar efforts have been undertaken at the regional level in the Americas with the Inter- American Model Law on Simplified Corporations (SAS), which has resulted in a wave of harmonisation of company law across Latin America. OAS, OEA/Sec.GNl, DDI/doc.3/21 rev. 1, 14 June 201, Model Law on the Simplified Corporation: Status of Reforms in the Region. The SAS takes a practical approach to incorporation, governance structure, limited liability and contractual freedom. The simplified model rules have made it possible to facilitate expeditious constitution, excluding the need for excessive procedures and formalities. 106 Where the corporate form has been used in a fraudulent manner to shield shareholders, the law in most jurisdictions allows the court to “pierce the corporate veil” and attribute liability to the shareholders.

106. UNIDROIT 2026 – Study LXXXC – Draft Chapter III

assets and in many cases may also be able to claim against the personal asset of the partners. In

practice, partnerships are seen as transparent business structures, where the financial risks and

obligations are ultimately borne by the partners, although specific legal rules vary across

jurisdictions.

36. Access to credit and subsidies. Companies with a distinct legal personality are likely to have

access to better credit (e.g., better terms, larger loans, credit from established and/or formal

institutions) and may be able to apply for government subsidies not otherwise available. The reasons

are further described below (see paragraph […]).

37. Better record-keeping. Businesses with separate legal personality are required to maintain

financial records distinct from the personal finances of their members and are subject to stricter

financial and other record-keeping obligations. This makes it easier for financiers to assess the

financial health and creditworthiness of such businesses, increases transparency and accountability

of the business, and ensures that it effectively partitions business assets from those of its members

and the members’ personal creditors (See Section VI on Asset Partitioning). In turn, this is likely to

increase the trust of financiers and their willingness to extend credit on better terms.

38. Capacity for ownership. Separate legal personality imbues the entity with capacity to own

immovable and movable assets in its own name and, subject to exceptions and limitations provided

by the law,107 to use such assets as collateral to secure business credit. This helps make clear to

third-party credit provider which assets belong to the business and can be pledged in exchange for

credit provided to the business, without running the risk that these assets will also be available to

the members’ personal creditors. In contrast, financiers may be more reluctant to provide loans to

companies without separate legal personality; in such companies, particularly the smallest, business

and personal assets are often intertwined, leading to a greater risk of disputes over ownership (and

which assets are available to which creditors), valuation and liquidation, and making enforcement

more complicated and costly.

39. Distinct credit history. Businesses with a separate legal personality can build a credit history

independent from that of their members, which can be used by financiers to assess the

creditworthiness of the business. This can be advantageous, particularly where the personal credit

history of one or more members is weak or absent.108

40. Perpetual existence. Separate legal personality of a company may make it easier for a legal

system to provide that companies may have perpetual existence,109 which can be advantageous to

agrifood businesses for various reasons, including succession planning. This is particularly relevant

for collaborative agricultural endeavours involving family farms.

41. Higher profile and levels of trust. Separate legal personality may help raise the business

profile of a company before its customers, financiers and other actors of the agrifood value chain.

This, together with the observance of more stringent governance, record-keeping and formation

formalities attached to the creation and operation of companies with a separate legal personality,

may contribute towards increasing levels of trust in the business by these actors.

107 For example, agricultural land situated in protected areas may be unseizable and thus prevented from being used as collateral. 108 In many countries, women often face more difficulty than men to build a formally recognised credit history for a number of reasons: they may lack formal identification documents due to asymmetric burdensome requirements or social and customary beliefs that women should not have or do not need such documents; they may not have an account with a formal financial institution and are even less likely to use a credit card. In such circumstances, building a credit history that financiers will feel confident in relying upon proves difficult. 109 In some jurisdictions, legal personality does not entail perpetual existence. For example, certain jurisdictions require companies to establish a fixed term of duration, often not exceeding 99 years.

UNIDROIT 2026 – Study LXXXC – Draft Chapter III 107.

42. Drawbacks. Despite significant advantages as explained above, for certain agri-

entrepreneurs and smallholders, company forms that offer separate legal personality may prove

overly complex, costly and burdensome. Entities with separate legal personality can be subject to

numerous and more stringent legal formalities, such as registration, annual filings and members’

meetings, audits and other requirements, often at a cost that is prohibitive for the smallest and most

vulnerable agrifood businesses and can appear complex for those with lower levels of financial, legal

and digital literacy. Moreover, the principle of separate legal personality and its implications may be

difficult for these actors to appreciate.

43. Considerations. As such, smallholders and agri-MSMEs should carefully consider the financial,

legal and economic consequences of a separate legal personality in order to choose the company

form – or other legal structure - that best corresponds with their needs. Tax incentives and

implications should also be considered. In endeavours that involve higher-risk activities, plans for

growth and expansion or where succession planning is important, company forms with separate legal

personality may be the preferred option. In smaller projects that involve actors with fewer means,

lower levels of legal and financial literacy and a desire to establish a collaborative legal structure

quickly, forms without separate legal personality may be better suited.

V. SCOPE OF LIABILITY OF THE MEMBERS

44. Limited liability. Company forms with separate legal personality are usually accompanied by

limited liability for members; most domestic laws that provide for separate legal personality also

provide that some or all of the company’s members are not personally liable for the obligations and

debts of the company (with certain exceptions110). The risk of a member is limited to a fixed sum

which is usually the member’s contribution to the capital of the company.

45. Available to multi- and single-member companies. Limited liability is neither dependent upon

the size of a company nor the number of its members. Provided that the single-member limited

liability corporate form is available (which is not the case in all jurisdictions), the fact that there is

only one member does not alter the basic principles of separate legal personality, asset partitioning

and limited liability. Indeed, one of the main incentives to establish a single-member company may

be the desire to limit one’s business risk and shield personal assets from the claims of company

creditors, as described above. In some jurisdictions, however, there is no need for a separate legal

personality to obtain the benefits of limited liability.

46. Liability in partnerships. By comparison, generally all partners are personally liable for the

obligations and debts of the partnership. The partners can seek to limit their liability under a contract

through provisions that, for example, prevent the counterparty to that contract from having recourse

to assets other than those used in the business and thereby try to insulate personal assets. But it is

not possible to limit liability as a partner when there is no contractual relationship with a third-party

and liability arises because of a wrongful or negligent act that causes harm to that third-party.

Indeed, in many jurisdictions, partnership law stipulates that a partner is responsible to third parties

for wrongful acts or omissions and without the ability to opt out of the applicable statutory provision.

Recalling, however, that separate legal personality and limited liability are distinct attributes that do

not always coincide, in some jurisdictions the partnership form has a separate legal personality but

no limited liability, while in others it has no distinct legal personality and yet offers limited liability to

limited partners.

47. No minimum share capital. The contribution of members to the company, in the case of the

corporate form, is commonly referred to as “share capital” because in exchange for such contribution,

110 In many jurisdictions, members of a shareholder company, particularly if serving in the capacity as directors, can be held liable for certain specific debts and obligations for the company, such as taxes, wages, etc.

108. UNIDROIT 2026 – Study LXXXC – Draft Chapter III

the member (“shareholder”) receives one or more “shares” issued by the company, with the share(s)

often providing an entitlement to a proportional share in profits when distributed. The original

purpose of share capital was to protect third parties and also to serve as an incentive and proof of

the viability of the business. Minimum share capital has traditionally been required in an amount

prescribed by law. International guidance, however, recommends that the law should not require

minimum capital,111 and many jurisdictions have significantly decreased the amount of minimum

share capital, notably in private limited liability companies, with the trend towards the elimination of

any such requirement (a phenomenon now seen in a number of jurisdictions).

48. Protection of creditors. The issue of minimum share capital, and limited liability more broadly,

should also be considered and evaluated within the context of creditor protection. These are

considerations that are connected to the range of legal mechanisms that a country makes available

to creditors to secure and enforce claims against a debtor company (e.g., personal guarantees, bank

guarantees, suretyship, etc.).

49. Advantages. Limited liability protects the members of a company as it enables members to

invest without the fear of putting their personal assets at risk. Limited liability may also facilitate the

raising of capital since the pool of investors is likely to be larger if investors know they will not be

liable for more than the amount they have agreed to invest in the business. This enhanced ability to

raise capital may encourage companies and their members to engage in bolder transactions which,

in turn, promotes innovation, creativity in business operations and entrepreneurship. This is one of

the reasons why so many countries have enacted legislation for companies with limited liability.

50. Disadvantages. As with separate legal personality, a company form with limited liability may

require more numerous and complex formation and operation formalities than a company form that

does not distinguish members’ liability from that of the company.

51. Considerations. To sum up, company forms that offer limited liability should be considered

where the following are important objectives or business considerations: protecting members’

personal assets; attracting investment for business growth; and increasing the membership.

VI. ASSET PARTITIONING

52. Asset partitioning.One of the advantages of separate legal personality is asset partitioning,

whereby there is a clear division between assets of the company and the personal assets of its

members.112 Members of the company may not dispose of the assets of the company even though

they may have some influence on asset disposition within their competences as members. Asset

partitioning allows, on one hand, members of the company to be shielded from claims of the creditors

of the company. On the other hand, the company and its assets are protected from claims of the

personal creditors of the members.

53. Not applicable to partnerships. A prospective member may invest personal assets (e.g.,

money or property) to acquire membership in a company; however, a prospective member of a

partnership is not always required to make a contribution to become a partner. The reason for this

difference is because the member of a partnership is liable for the obligations and debts of the

partnership. Thus, there is simply no need for partners to make contributions, nor for the partnership

to have separate assets, since creditors are protected by the fact that members of the partnership

are personally liable to the creditors of the partnership.

111 UNCITRAL Legislative Guide on Limited Liability Enterprises (2021), Recommendation 5. 112 As used in this Chapter, asset partitioning refers to separation between the assets of the company and those of its members. Asset partitioning can also refer to distinguishing assets within the company, i.e., the possibility of designating specific assets for different creditors. Asset partitioning can also be arranged through other legal or contractual tools.

UNIDROIT 2026 – Study LXXXC – Draft Chapter III 109.

54. Separate patrimony. Ordinarily, both in common law and civil law jurisdictions, as soon as

the legal process to establish a business organisation has been completed, a legal entity arises that

is distinct and separate from the individuals that have created it. This enables asset partitioning as

described above, or what civil lawyers refer to as “separate patrimony”, which involves the

demarcation of a pool of assets that are distinct from other assets owned by the entity’s owners. As

a result, the legal entity has entitlements of ownership over its designated assets that include the

rights of use, sale, and to pledge them as collateral for credit.

VII. MEMBERSHIP

55. Natural and legal persons. In most States, membership in a company is open to both natural

persons and legal entities; exceptions may be found in some jurisdictions for certain types of single-

member companies. Company members may be individuals, partnerships, corporations, or other

legal entities, depending on the rules of a particular jurisdiction.

56. Uniformity of members. If members are all of similar size and financial strength, membership

rules and relations may be simpler and more straightforward. This might be the case for family farms

or other family-run agribusinesses. However, if members vary significantly in financial strength and

market power, it is essential that membership rules adequately ensure the protection of the weaker

party. Such rules could be provided by domestic law or supplemented by contract.

57. Number of members. Most jurisdictions do not provide restrictions on the minimum or

maximum number of members in a corporation. By contrast, a partnership may not be formed by a

single member, and legal rules require at least two members throughout the partnership lifecycle.

58. Minority protection provided by law. In the corporate form, it is possible for one or more

shareholders to obtain a controlling interest (often referred to as “controlling” or “majority”

shareholder(s)), with other shareholders then considered as “minority” shareholders. Most legal

systems have adapted the corporate law to provide rules aimed at the protection of minority

shareholders and their investments. Some of these entail mandatory rules that are provided either

by statute or case law and that define basic prerogatives to which minority shareholders are entitled.

Such protections and their enforcement are relevant for both publicly-traded and closely-held

entities. The scope and robustness of these protections can vary from one jurisdiction to another.

Regard should therefore be had to the statutory protections and associated remedies that are

available when deciding whether these may need to be supplemented by contract (see the discussion

of Remedies in Part XVII of this chapter).

59. Protection by contract. In addition to protections under the law, members may also resort to

contractual devices such as partnership agreements or shareholder agreements (discussed below)

to protect their interests during the lifespan of the corporation. They may also negotiate for

protections to be included in a corporation’s organisational rules (such as its bylaws). Although

parties usually bargain efficiently in their own interest, sometimes circumstances arise, such as

information asymmetries or other imbalances, that can leave minority shareholders unprotected and

vulnerable and though therefore needs to be given to how best to ensure that an appropriate mix of

statutory and contractual provisions are in place to protect their interests.

60. Fiduciary duties. As further described below in Section XI, apart from legal and contractual

protection, fiduciary duties provided for under a jurisdiction’s governing law may play a role in

preventing actions that are harmul to minority shareholders. For example, in jurisdictions that

provide that controlling shareholders have specific fiduciary duties to minority shareholders, these

duties provide an important safety mechanism to protect investors against the abusive tactics of

controlling shareholders. If the duties are more open-ended (e.g., owed only to the company and

not to minority shareholders), however, fiduciary duties may be less effective as protection for

110. UNIDROIT 2026 – Study LXXXC – Draft Chapter III

minority shareholders, especially in countries with courts and legal systems that have not developed

robust protections for minority shareholders.

61. Minority shareholder rights. Included within the traditional catalogue of minority

shareholders’ rights, inter alia, are the following: i) to participate in meetings of the general assembly

of shareholders and to vote in such meetings (which in turn may give rise to the right to elect

members of the board of directors, auditors and other company officers); ii) to receive a proportional

share of profits or dividends; iii) to inspect books and records under certain conditions; iv) to

negotiate the sale of shares of stock, unless a right of first refusal has been included in the by-laws;

v) to request the calling of a meeting of shareholders, provided that certain conditions are met; vi) to

request management to include topics for discussion at the shareholders’ meeting; vii) to exercise

shareholders’ dissenters’ remedies whenever a structural change takes place (such as a merger, split

up or anticipated dissolution); viii) to file complaints against directors or officers of the corporation

before courts or administrative agencies; ix) to seek the nullification or avoidance of decisions taken

by a corporation’s board of directors, and x) to receive a liquidation quota (after creditors have been

paid in full) after dissolution.

62. Minority shareholder remedies. In some instances, minority shareholders of a closely-held

corporation are entitled to a buyout process, by means of which a shareholder can request

reimbursement of their equity in the corporation. This option provides the minority shareholder with

an exit opportunity and the return of the fair value of their investment, which is rare in small

corporations where third-party purchasers are usually unavailable. A more extreme option is the so-

called liquidation remedy, which may be available in cases where minority shareholders have been

subject to unfair treatment. This is the power of the court to order the compulsory winding up of the

company, if the court thinks it is “just and equitable” to do so (See Section XVII on Remedies, dispute

prevention and resolution).

VIII. MEMBERS’ CONTRIBUTIONS AND CAPITAL

63. Types of contributions. Members’ contributions may, depending on the jurisdiction, comprise

money, tangibles, intangible assets (such as intellectual property rights), and services. In some

jurisdictions, the provision of services is not an acceptable contribution or may be subject to certain

conditions, such as the stipulation that only past services can be considered. In general, however, in

most jurisdictions, members may agree on the type, timing and value of their contributions.

64. Importance of in-kind contributions. In-kind contributions can be made for strategic,

operational, financial, fiscal or other reasons. The option provides companies with the flexibility to

pool resources from a wider range of members who, contemporaneously, are able to form and

participate in a company through means other than by monetary contribution. For example, a

member might lack financial capital but could contribute software, equipment or property that is

critical to the company's operations. In the agricultural sector, where physical resources often

constitute a significant part of the capital, contributions of land, machinery, or other tangible assets

are highly relevant. With the growing use and importance of IT and AI in agriculture, intangible

contributions such as databases, digital platforms and applications are becoming increasingly

valuable.

65. Contributions of tenure rights. Where contributions in the form of land or water rights are

contemplated, the legal nature of these rights and the identity of tenure rights holders should be

carefully verified, given that such rights may conflict with those of legitimate tenure rights holders.

Founders and members of agricultural companies should ensure that the rights and interests of both

UNIDROIT 2026 – Study LXXXC – Draft Chapter III 111.

legal and legitimate tenure rights holders are taken into consideration, as more fully explained in the

UNIDROIT/IFAD Legal Guide on Agricultural Land Investment Contracts.113

66. Valuation of in-kind contributions. Valuation of in-kind contributions presents unique

challenges due to market fluctuations and the subjective nature of asset worth; therefore,

transparent valuation processes are essential. In some jurisdictions, depending on the company type

and size, independent third-party assessments of non-monetary contributions may be required by

law, but even where not mandatory, these may be recommended to ensure fairness, particularly

where there is a power imbalance.

67. Voting rights and decision-making. Valuation of contributions is important, as it typically

determines members’ rights and distributions, such as voting power and profit sharing. Voting power

in company forms where members benefit from limited liability is often linked to the value of the

capital, property or services contributed rather than operating on a “one member – one vote” model.

As a consequence, some company forms may provide those investors who benefit from limited

liability with very little input into the management of a business (e.g., limited partnerships), whereas

other forms may allow input on the selection of management and fundamental changes (e.g.,

corporations). Nonetheless, in some companies, in-kind contributions such as land or equipment can

provide significant decision-making power to members who lack liquid assets, fostering broader

participation in the collective success of the enterprise.

68. Protection of other personal assets. In company forms where members enjoy limited liability

and are only exposed to the extent of their contributions, whether monetary or in-kind, all remaining

personal assets are protected from the company’s creditors. This reality may influence a member’s

decisions on whether to invest in the first place, and then on the type and amount of its contributions,

an issue that is closely connected with limited liability and asset partitioning (discussed in Sections

V and VI).

IX. GOVERNANCE

69. Dependent by default on company form. Governance of the company depends on the specific

legal form and the general rules applicable to that particular legal form. Such rules apply by default

unless otherwise agreed by members. For example, depending on whether the vehicle chosen is a

partnership or corporation, such rules may provide that:

(a) all members have equal rights, irrespective of their contribution to the company or,

instead, the rights that members have are in part a function of the value of the capital,

property of services they contribute to the company;

(b) decisions must be agreed to unanimously or, instead, decisions are made based on a

majority vote of the members (with voting power potential being a function of the

value of the capital, property or services contributed to the company);

(c) members have equal financial rights and profit is distributed equally among all

members or, instead, financial rights and profit are distributed based on the value of

the capital, property or services contributed to the company; and

(d) all members are authorised and expected to manage the company (day-to-day

decisions) or, instead, the power to manage rests in the hands of a smaller group of

members and/or non-members who are entrusted with the responsibility to run the

company’s day-to-day affairs.

113 UNIDROIT/IFAD, Legal Guide on Agricultural Land Investment Contracts. See also, Principles for Responsible Investment in Agriculture and Food Systems and Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security.

112. UNIDROIT 2026 – Study LXXXC – Draft Chapter III

70. Basic governance distinctions between company forms. While it may be possible to deviate

through contractual arrangements from the default model set out in the governing statute and to

provide in both a partnership or a corporation for any of the alternatives in a) through d) above,

partnership statutes tend to favour equal rights and equal voice for members, whereas corporate

statutes tend to favour concentration of decision-making authority in a board of directors and

management team, as well as voting power being a function of the value of a member’s contribution

of capital, property or services to the business. Once again, this is a feature of the corporation that

differentiates it from a cooperative (which typically follows a one member, one vote principle), and

it is one reason why third-party equity investors often find the corporate form particularly attractive

when considering which kind of legal vehicle to invest in.

71. Written organisational rules. It is advisable for a company to have organisational rules in

written or recorded form to ensure legal certainty and help avoid disputes between members and/or

between members and the company. Although in many countries a significant number of participants

in agrifood value chains have low levels of formal education and literacy, the law should stress the

importance of clear agreement on core organisational rules and record-keeping; efforts to facilitate

simplified incorporation and registration throughout the lifecycle of MSMEs, as discussed at paras **

- **, are a significant step in that regard.

72. Deviation by contract. In addition to governance of the company pursuant to the law and

internal rules, some topics may be addressed in contractual form. For incorporated entities, aside

from the articles of incorporation, public deeds or bylaws, members can enter into additional private

agreements outside of these foundational documents, for example, shareholders agreements, voting

trusts and shareholder pooling agreements, which are usually entered into by all members of an

incorporated entity and which must be in compliance with the provisions of the organisational rules

and bylaws of the corporation. Acting in contradiction to the shareholders’ agreement might be

considered a breach of contract that could result in a right to damages for the injured party.

73. Mandatory rules. Autonomy of members to depart from rules that apply by default may be

extensive, depending on the chosen legal form. To that effect, it is important to determine which

rules are mandatory and where variation is possible. It is also important to determine the formalities

that are required: for example, whether written form is required or if oral agreement will suffice.

74. Shareholder agreements. When a corporation does not have a large number of shareholders,

it is possible for all shareholders to enter into an agreement commonly referred to as a unanimous

shareholders’ agreement (USA). Corporate statutes in many jurisdictions allow shareholders to take

decision-making power away from a board of directors by entering into a USA that specifies the

matters over which shareholders are assuming decision-making power. Shareholders will in turn

often be statutorily required to assume the statutory responsibility and potential director liability

associated with those powers. Shareholders may also choose to deal with other matters in a

shareholder agreement (regardless of whether they wish the agreement to be a USA that removes

powers from the directors): for example, how directors will be nominated and whether they will vote

their shares to support these nominees; or matters where shareholder approval must be obtained

before the corporation can proceed and what approval levels will need to be obtained (e.g., with

respect to a decision to proceed with a significant acquisition or disposition, or the entering into of

major contracts).

75. Voting trusts. In a voting trust, shares of stock of the participating shareholders are

contributed to a trust in such a manner that legal and equitable title to the stock are separated; the

trustee then has legal ownership and must exercise voting power according to the terms of an

agreement for the duration of the trust. The usual purpose of the agreement is the transfer of voting

rights to the trustee for a specific period of time; it may contain additional stipulations, as long as

these do not violate the law or contradict the purposes intended by the parties. The transfer of legal

UNIDROIT 2026 – Study LXXXC – Draft Chapter III 113.

title to the shares of stock provides parties with a high level of certainty regarding the instructions

that the trustee must undertake under the agreement.

76. Pooling agreements. These agreements entail the exchange of promises made by members

to exercise their right to vote in a specific manner or collectively, in accordance with the guidelines

drawn up by a specific group. In anticipation that a disagreement may arise during shareholders’

meetings, the parties specify in the agreement the manner in which the votes must be cast. It is also

common for a dispute resolution mechanism (such as mediation or arbitration) to be included. Such

pooling agreements are less cumbersome to execute as compared to voting trusts but offer a lower

level of legal certainty for the subscribing parties. In fact, compliance with their provisions depends

upon the willingness of the parties to fulfil their obligations under the agreement and not on the

precise instructions given to a trusted third party (thetrustee).

77. Legal requirements. Voting trusts and pooling agreements are subject to compliance with

certain formal requirements that arise from the law in force in each country. A common requirement

is that the agreement be made in writing, and, in some cases, a copy must be deposited in the

registered offices of the company along with a list of the subscribing shareholders. The agreement

must bear some relation to the matters subject to voting, be of defined duration and cannot include

purposes contrary to law or situations of oppression or fraud with respect to the other shareholders

or corporate creditors. It can only be modified by unanimous consent of the signatories.

78. Flexible regulation. Generally, the obligations contained in voting trusts and pooling

agreements only bind the subscribing shareholders to vote or act in a determined way. However,

provisions are usually included in which board members are also engaged to undertake certain

commitments provided in such agreements. These clauses can be useful to align the interests of

directors and shareholders and to ensure the adoption of certain corporate governance guidelines.

In some jurisdictions, legislative developments have led to the promulgation of flexible regulations

regarding these agreements. Contractual freedom has facilitated their frequent execution and rapid

enforcement, particularly in closely-held corporations.

79. Use and application. Voting trusts and pooling agreements can be a useful device to define

the relationships between landowners and suppliers of labour. Many intra-company conflicts can be

avoided through the provisions contained in such agreements, particularly where the number of

shareholders is small and there is high potential for deadlock.

80. Specific mechanisms of voting trusts and pooling agreements. These types of arrangements

can contain provisions for a number of mechanisms, as follows:

(a) Pre-emptive rights and rights of first refusal. These are restrictions for the subscription

or negotiation of shares of stock that are granted in favour of subscribers to the

agreements and are designed either to keep the entity closely held or to prevent the

entry of new parties. A pre-emptive right will allow incumbent shareholders to acquire

shares of stock upon issuance with preference over any third party; it enables

shareholders to keep their proportional interest in the corporation’s capital unaltered

whenever it is increased by order of the board or any other corporate body and thereby

acts as an anti-dilution provision. Pre-emptive rights are sometimes provided for in the

governing corporate statute, but when they are not it is necessary to consider adding

them to the articles of incorporation, the by-laws or to build them into agreements

governing arrangements such as a voting trust or a pooling agreement. A right of first

refusal arises on a proposed transfer of shares whereby a shareholder is bound to offer

its shares for purchase by the corporation and/or fellow shareholders, prior to third

parties. Both pre-emptive rights and rights of first refusal can be waived by the

subscribing parties whenever the circumstances provided in the agreement so dictate.

114. UNIDROIT 2026 – Study LXXXC – Draft Chapter III

(b) Minority shareholder protection. Certain provisions can be included that allow

minorities to effectively protect their rights by, for instance, blocking detrimental

decisions, such as the corporation’s abusive capitalisation or unexpected dissolution.

(c) Exit rights. Commonly used exit clauses are puts and calls. A “put” is an option to sell

shares of stock or other securities issued by the corporation at a stated price and for

a stated period. A “call” is an option to buy shares of stock or other securities at a

stated price for a stated period. When the call option is exercised, the resulting

transaction (execution of the purchase contract) occurs even against the will of the

owners of the shares.

(d) Buy/sell agreements. These coercive share purchase agreements are useful in disputes

that cannot be resolved amicably between the subscribing members. The agreement

operates through the formulation of an offer to sell shares by one or more of the

subscribing members. If the sale offer is not accepted by the other shareholders, it is

understood that they have automatically formulated a counterproposal to sell their

shares to the initial offeror. This counteroffer is understood to be formulated tacitly,

under the same terms and conditions of the initial offer. Thus, shareholders who do

not agree to buy shares from the initial offeror will be forced to sell all or part of their

shares in the corporation.

81. Enforcement – pooling agreements vs voting trusts. Generally, pooling agreements are not

self-enforcing. Remedies for breach are subject to the legal proceedings provided under contract law.

One disadvantage concerns the enforceability of such agreements vis-à-vis the corporation (i.e.,

whether the corporation can be party thereto). Aside from this issue, the time-consuming nature and

uncertainty of judicial proceedings against shareholders in breach suggest that such agreements can

be of doubtful enforceability. This is particularly true in jurisdictions with a less developed judiciary.

By contrast, a voting trust provides significant enforcement advantages; it locks the parties into a

voting arrangement with no need for court-ordered specific performance.114

X. DECISION-MAKING

82. Voting rights. Every member is, in principle, entitled to vote on certain fundamental matters

affecting the company. Voting rights may depend on the financial value of the contributions made

by members, an issue that is largely left to the autonomy of the members. The percentage of votes

that are required to make decisions, whether by absolute majority or otherwise, also depends on the

company form, type of decisions and governing rules. Members who are economically weaker should

be very cautious when deciding on the majority voting thresholds that will be required, particularly

if voting rights are determined by the value of members’ contributions.

83. Governance vs management. It is important to distinguish decisions regarding governance,

which remain with members,115 from decisions relating to management. Governance concerns the

existence and structure of the company and includes election of directors (where the corporate form

requires one or more directors) and decisions relating to the adoption and amendment of the

governance rules that address core issues such as how members’ meetings must be run, the

organisation's management structure, and the decision-making responsibilities being entrusted to

the managers; determination of members’ contributions, if any; and whether members are to have

114 By way of illustration, in a three-shareholder corporation, two may enter into an agreement by means of which they contribute their shares of stock to a trust with the expectation of retaining control through the exercise of majority voting rights. The trust agreement includes precise instructions to the trustee as to the manner in which the votes must be cast at the shareholders meeting. Once the shares have been transferred to the trust, the subscribing parties are bound by such instruction for a fixed period. Even if one of the subscribing shareholders wanted to breach the agreement and vote in a manner inconsistent with the instructions set forth in the contract, he or she would not be able to do so. 115 UNCITRAL Legislative Guide on Limited Liability Enterprises (2021), paras.72-75.

UNIDROIT 2026 – Study LXXXC – Draft Chapter III 115.

equal decision making rights or whether these rights will be allocated on some other basis (e.g., as

a function of the number of shares held in a corporation; conversion or restructuring of the company;

and dissolution of the company. Management involves the day-to-day business operations (e.g.,

opening and closing bank accounts; accessing credit; buying and selling equipment, seeds and

products; hiring employees; etc).

84. Delegation to management. While decisions regarding governance remain with members,

many legal forms allow those initially entrusted with decision-making power (e.g., a board of

directors) to delegate decisions regarding day-to-day management to selected members or to non-

members, such as employees of the company who are hired to run the business. This may be either

because the governing statute provides for such delegation or because the members themselves

have decided to delegate decision-making power.

XI. MANAGEMENT

85. Management and supervisory functions. Operating a company involves two general

functions: the making of day-to-day decisions (management function) and monitoring management

(supervisory function).116 How these functions are performed and by whom depends on the legal

form of the company, its size and management structure. Other formal and informal internal

mechanisms117 as well as external ones118 may be used or required by law to facilitate and help

improve the performance of management functions. The size, level of complexity and resources of a

company are among the elements that influence the performance and structure of management and

the significance of the supervisory function.

86. Management structure. From a legal standpoint, members of a company are free to decide

on the management structure that best corresponds to their business goals and to their governance,

industry, value chain and other needs, subject to mandatory provisions of the law. These include

provisions relating to the qualifications required to manage a company. In many jurisdictions

corporate statutes have been designed both to provide for flexibility with respect to the design of

management structures, and to enable management to exercise considerable day-to-day authority

over how a collaborative activity will be coordinated. A well-designed corporate statute helps reduce

the need to use (and then amend) contracts to structure collaborative activity. Instead of relying on

contractual mechanisms that can be extensive and costly to design and that might be put in place

for multiparty contract structures or for partnerships (e.g., a partnership agreement that sets out

how management decisions will be made), in a shareholder corporation, one can internalise and

coordinate activity within the corporation using internal rules that can be more easily changed as the

business evolves. A well-designed corporate law statute is designed to facilitate this coordination

function by allowing for the creation of an organisational structure within which one can have

employees work with one another in many different ways (that often change over time) that are a

function of how managers think their work should be coordinated.

87. Management in the corporate model. A corporation may therefore allow one to build

hierarchical organisations more effectively and also allow for decision-making authority to be more

centralised, than is the case with some other organisational structures, including partnerships. This

may assist with the organisation’s ability to make decisions in a more nimble and efficient fashion

and to have those decisions made by an experienced manager or management team, rather than by

providers of capital such as shareholders who may not have the expertise needed to manage the

day-to-day activities of the organisation. Depending on the other players involved in a value chain

116 G20/OECD Principles on Corporate Governance, p.34. 117 For example, financial and operational reporting, internal auditing, gathering feedback from members and employees. 118 For example, external audits and other tax or industry-related reporting requirements, having recourse to external advisers and training, seeking feedback from customers, suppliers and, as the case may be, investors.

116. UNIDROIT 2026 – Study LXXXC – Draft Chapter III

and the stakeholders that a business has to deal with, this dimension of the corporate vehicle may

prove advantageous for purposes of effective and timely decision-making. The corporate model also

typically limits the range of matters over which providers of capital such as shareholders get to have

a say, leaving day-to-day decision-making to management, while confining the need for shareholder

approval to certain specified fundamental changes to the business or corporation.

88. Choice of management structure in agrifood value chains. Different company forms entail

different levels of flexibility regarding the structure and performance of management. This

demonstrates the importance for smallholders and agri-MSMEs to adequately assess their needs and

goals when deciding upon the appropriate legal form and management structure for their business.

Although operating in the agri-food sector does not entail specific legal requirements regarding

management structure, the structure that is chosen by companies in this sector, particularly the

decision regarding vertical integration (hierarchy) versus relying on market transactions, is

fundamentally determined by the imperative to minimise production and transaction costs across the

value chain. Factors inherent to the commodity drive the need for tight control: production requiring

high asset specificity (specialised equipment) elevates transaction costs and favours internal

management, while perishable products or those destined for the processing industry demand strong

vertical coordination. Companies are heavily incentivised to pursue structures that ensure product

quality and reliability of supply, especially when servicing competitive, quality-sensitive end markets.

Operationally, companies with large, capital-intensive processing plants require a steady flow of raw

materials and use tight management structures, leveraging their superior access to capital,

production knowledge, and market information to exert major control over production decisions at

the farm level. However, a company may be prevented from achieving full vertical integration due

to external constraints such as government policies and legal frameworks that explicitly restrict

agribusiness firms from owning and cultivating land, or practical obstacles like finding sufficient labor

for hire, particularly since hired labor in integrated operations tends to be less motivated than

independent farmers, thus increasing supervision costs. Ultimately, the management structure

selected is the least-cost option for organising production given the product characteristics,

operational needs, and the specific limitations of the enabling environment.119

89. Legal capacity, minimum numbers of directors. In addition to requirements for management

structure that are linked to legal form, most national laws contain mandatory provisions requiring

the persons responsible for the supervisory function in a company to have legal capacity and not be

legally disqualified by virtue of being bankrupt or due to other circumstances provided by law. Publicly

traded (or listed) shareholder corporations are generally required to have a minimum number of

persons performing supervisory functions (i.e., directors).

90. Sustainability requirements. Under the trend towards incorporating ESG (Environmental,

Social, Governance), some jurisdictions have started to include specific requirements that publicly

traded corporations include on their boards a minimum number of persons from underrepresented

groups (based on gender, race, ethnicity, and sexual orientation). Although such requirements are

generally aimed at large corporations, some may be relevant mutatis mutandis for companies of any

size and whether private or public as they reflect national and/or internationally recognised standards

and good practices. For example, managers may become responsible for ensuring the acquisition of

a minimum percentage of raw material from small-scale farmers, with the exact minimum varying

by geographic region. Furthermore, managers may be requested to commit to providing technical

assistance to small-scale farmers across all agricultural production phases, along with training on

production techniques that safeguard family food safety and financial stability. These developments,

however, have largely emerged from other areas of law (e.g., tort law), rather than from corporate

119 FAO. 2013. Contract farming for inclusive market access; FAO. 2019. Developing sustainable value chains for small-scale livestock producers. Edited by G. Leroy & M. Fernando. FAO Animal Production and Health Guidelines No. 21. Rome; FAO. 2014. Developing sustainable food value chains – Guiding principles.

UNIDROIT 2026 – Study LXXXC – Draft Chapter III 117.

statutes. Increasingly, scholars and policymakers advocate for embedding such obligations directly

into corporate law frameworks to ensure greater coherence and accountability.

91. Technical expertise. In some industries, national laws include requirements for specific

qualifications and experience requirements of senior/executive managers. While these specifications

are generally not required for managers of agriculture companies, other requirements as to

sustainability and governance may imply the need for particular skills and experience for managers

of companies operating in agrifood systems.

92. Non-binding standards and good practices. In addition to requirements mandated by national

law, various non-binding instruments at both national and international levels also provide guidance,

recommendations and best practices in relation to sustainability and ESG for management structures.

Again, most of such instruments are directed towards large and/or publicly traded companies and

are not specific to companies operating in agrifood systems. Nonetheless, some of their principles

may be useful to define management structure.120 Good practices for the management structure

would be appointing managers with experience in environmental science, sustainable agriculture, or

corporate social responsibility.

93. Management by natural or legal persons. Another consideration when deciding on

management structure is whether both natural and legal persons, or only natural persons, may

manage the company. In the case of legal persons, the law varies across jurisdictions depending on

company type. The general trend indicates that whereas legal persons are often permitted to manage

partnerships, this is not the case for shareholder corporations. Reasons for precluding legal persons

from corporate management would include the fact that natural persons are more easily held

accountable for breach of fiduciary duties imposed on managers, rules against money-laundering,

prevention of fraud and illicit use of a company form. Where legal persons are permitted to be

managers of a company, conditions and restrictions may be imposed, such as the following: such

legal persons may be required to be members of the company; to name a natural person to deal

with matters concerning day-to-day operations on their behalf; to have at all times at least one

natural person in management; and to disclose and file information regarding legal persons managing

the company.121

94. Management by members and non-members. Subject to the restrictions on management

structure noted above, management of a company may be performed by all members exclusively,

by some members only, by non-members exclusively, or by both members and non-members. In

companies with few members, at least at their initial stages where each member may wish to have

substantial participation in the management and operation of the business, appointing a manager

who is a non-member may not fit the governance needs of the members. This would be the case

when the company is a micro or small enterprise, where management by all of its members

exclusively may be the preferred scenario.122 Appointment of non-members to management is more

common in publicly traded companies and in mature private companies that require professional

managers with experience in running larger organizations. As a business evolves, however, it may

120 For example, the G20/OECD Principles on Corporate Governance, which were revised in 2023, self- describe as the “leading international standard for corporate governance” and as aiming “to provide a robust but flexible reference for policy makers and market participants to develop their own frameworks for corporate governance.” Part V of the Principles is devoted to the responsibilities of the board. Among other leading corporate social responsibility initiatives is the UN Global Compact (https://unglobalcompact.org/what-is- gc/mission/principles), which is a voluntary framework for businesses and organisations to promote sustainability and social responsibility based on ten principles (in the areas of human rights, labour, environment, anti- corruption).121 UNCITRAL Legislative Guide on Limited Liability Enterprises (2021), para.90. 122 Id., paras **. This is the scenario adopted as the default rule applicable to management of limited liability enterprises given the fact that such a legal form is aimed primarily at facilitating the (legal) formation and operation of MSMEs.

118. UNIDROIT 2026 – Study LXXXC – Draft Chapter III

be desirable to delegate day-to-day decisions to a few members or even to one or more non-member

professional managers; thus, whether the legal form chosen will facilitate such adaptation rather

than necessitating conversion (e.g. from partnership to corporation) is an important consideration.

In medium and large enterprises, modern corporate governance frameworks often include specialised

board committees (e.g., auditing, risk and remuneration committees) to enhance transparency in

management practices.

95. Managerial capacity. Some members of a company may not be eligible under the law to

perform management or supervisory functions (e.g., they may not have the legal capacity or may

be disqualified as noted above) or they may prefer to delegate some or all of their management

powers (day-to-day and/or supervisory) to other members, non-members or both. Whatever the

reason, it is important for members to understand the legal and practical consequences. They should

also understand that while management of day-to-day operations may be delegated, as explained

above, governance remains within the realm of the members, and in the case of various kinds of

corporations with their boards of directors as well.

Fiduciary duties

96. Meaning. Those in particular roles entrusted with certain responsibilities in the course of

operating a company are usually subject to statutory duties that are known in many jurisdictions as

“fiduciary duties”. These include the duty of loyalty, which requires individuals to focus on doing what

is best for the company; to put the company’s interests ahead of their own; and to avoid putting

themselves in situations where there might be a conflict between their own interests and those of

the company. These often also include the duty of care, which requires individuals to act diligently

when making decisions and to consider the impact of decisions not only on the company; in some

jurisdictions it can also extend to those who may be affected by the company’s actions.

97. Duties in partnerships. As a partnership involves a special legal relationship between people

working together to pursue a business venture, it calls for a high degree of trust. As a result, many

partnership statutes stipulate that partners owe each other certain duties that are often characterised

as fiduciary in nature since they require partners to deal with each other in good faith and to put the

interests of the other partner(s) ahead of their own. For example, a partner may be prohibited from

setting up a separate business that would compete with the partnership and precluded from taking

advantage of business opportunities for its own exclusive benefit that should instead be pursued on

behalf of the partnership. Although the way in which these duties are expressed can vary from one

jurisdiction or legal system to another, the central concern remains the same: to ensure that partners

act in each other’s best interests rather than seeking to advance their own interests at the expense

of their fellow partner(s).

98. Duties in limited partnerships. A general partner will typically have statutory duties to any

other general partner(s) and to the limited partner(s) that are identical, or very similar in nature, to

those of a partner in a general partnership. A limited partner is not normally entitled to be involved

in making important management decisions and so will not ordinarily be subject to the full range of

duties to which a general partner is subject.

99. Duties in corporations. Most corporate law statutes provide that directors and officers (the

latter typically defined as being senior members of management that the Board has appointed) have

fiduciary duties that include the duty of loyalty and duty of care discussed above. These duties are

owed to the corporation and are applicable in privately-held and public corporations. The duty of

loyalty may also extend to shareholders in a few specific jurisdictions that have decided it is desirable

to do so in order to attract and protect providers of equity capital. In most jurisdictions, however,

there is no duty to act in the best interests of shareholders; the duty of loyalty is owed solely to the

corporation. These jurisdictions may nevertheless state that directors have a duty to consider the

UNIDROIT 2026 – Study LXXXC – Draft Chapter III 119.

interests of shareholders (although they need not be given priority), while others may state that this

duty to consider (i.e., the duty of care) is only owed to the corporation.

100. Extension to whom duties owed. Many jurisdictions are regularly confronted with pressure to

extend statutory fiduciary duties to others beyond the corporation. As noted, some jurisdictions have

done so, either through statutory amendments or as a result of judicial decisions. The countervailing

concern is that as the number of those to whom fiduciary duties are owed increases, it becomes

more difficult to retain clarity on whose interests should prevail in situations of conflicting interests.

Accordingly, legislators must carefully consider the best way to balance these different interests.

Central to almost all regimes is the principle that directors and officers cannot put their own interests

ahead of those of the corporation and that they must exercise care when making decisions with

respect to the corporation and its actions.

101. Minority shareholders. There are jurisdictions where majority shareholders owe fiduciary

duties to minority shareholders in certain circumstances, although the practice is not uniform across

all jurisdictions. Various forms of minority shareholder protection are discussed at greater length in

Section VII of this Chapter.

102. Business judgment rule. In certain jurisdictions, particularly in common law countries, the

so-called “business judgment rule” may serve to protect directors and officers from claims that they

have breached their fiduciary duties or duties of care. The rule is intended to have courts defer to

the business judgment of directors and officers in circumstances where they have not acted

fraudulently, engaged in misrepresentation or incurred a conflict of interest in any given decision

subject to judicial scrutiny. Under this principle, the onus is on the plaintiff to establish that the

business judgment rule should not apply. The rule is intended to recognize that courts should limit

the extent to which they second-guess directors and officers responsible for making difficult business

decisions, and it is intended to prevent frivolous litigation, incentivise risk-taking and promote

efficiency in decision-making. Some civil law jurisdictions have adopted this common law rule by

means of statutory provisions and with certain variations.

XII. FINANCIAL RIGHTS

103. Meaning. Financial rights typically include rights with respect to the distribution of profits and

of any remaining assets or capital when a company is wound up and all debts have been paid off.

The starting point for a member’s financial rights will often depend on the legal vehicle that is chosen.

104. Financial rights in partnerships. With a partnership, the default model in applicable legislation

is often based on equality: for example, the statute may provide that each partner is entitled to an

equal portion of any profits that are distributed. But partners may be permitted to deviate from this

default model by entering into a partnership agreement that provides for an allocation of financial

rights based on some other criterion: for example, the value of what was initially contributed to the

partnership when it was formed, or the value of ongoing contributions.

105. Financial rights in corporations. In contrast, with a corporation, the default model in

applicable legislation is most often that financial rights are a function of the number of shares held,

which is intended to reflect the value of the contribution made in exchange for those shares. Once

again, it may be possible under applicable legislation to deviate from that model by entering into an

agreement among shareholders that provides for a different allocation of financial rights or that

specifies that certain shareholders have distinctive financial rights. But in a corporate context

differences in financial rights are most often provided for by creating different classes of shares

whose financial rights are then reflected in the constitutive documents (e.g., articles of incorporation

or by-laws). For example, some corporations provide for what are called “preferred” shares, which

are often crafted to provide that investors in those shares will receive a specified return on their

120. UNIDROIT 2026 – Study LXXXC – Draft Chapter III

investment from any profits realised before any payment is made to holders on “common” shares.

Holders of preferred shares, however, may have no rights to receive a portion of the residual assets

or capital upon winding up, or they may be treated in the same way as holders of common shares.

In some cases, preferred shares may also not grant their holders any voting rights, depending on

the applicable corporate law or the company’s constitutional documents.

106. Flexibility of corporate model. As a company grows, it may need access to increasingly

diverse sources of financing. A partnership model that has to be adjusted through regular

amendments to the partnership agreement can prove more cumbersome to manage than a corporate

model, where the statute will often allow for the creation of classes of shares with differentiated

financial rights without the need to do this through a negotiated agreement that all members must

accept. Statutes governing corporations have evolved over time to facilitate attracting different kinds

of investors, and they have often been designed with an eye to offering considerable flexibility with

respect to the design of different classes of shares that can either be provided for in constitutive

documents when the corporation is first set up, or subsequently through amendments to its

constitutive documents. Amendments of this kind will typically require shareholder approval, but the

threshold for approval will not normally be unanimity (as might be the case when seeking to amend

a partnership agreement).

107. Differentiation from voting rights. In some countries, it is possible to distinguish between

how one allocates voting rights and financial rights. For example, different classes of common shares

may have identical financial rights, but different voting rights. These arrangements, often referred

to as “dual-class share structures”, allow a business founder to retain voting control through a class

of shares that carries multiple votes per share, while other investors may hold a separate class of

shares that has fewer or no voting rights but the same financial rights as those of the founder.

XIII. TRANSFER OF RIGHTS

108. Value and ease of transfer. As a business evolves, it may become increasingly important to

some members that they be able to transfer their interest. This can be especially important to

investors who value the ability to monetise their investment by selling it to another party. Distinct

legal personality and limited liability are therefore not the only reasons why corporations are a

popular way to pursue business ventures. The legal form is also attractive because in many countries

it has been designed to facilitate an investor’s ability to transfer its interest in the business. The

importance of ease of transfer becomes clear when comparing different legal forms.

109. Partnerships. The default rule under many partnership statutes is that a partner cannot

transfer its interest in the partnership, which would effectively amount to leaving the partnership

and bringing in a new partner, without the consent of the other partner(s). Unless a partnership

agreement has been entered into that specifically contemplates the mechanics that will govern

transfer, and even then, some partnership statutes view this as essentially amounting to dissolving

one partnership and creating a new one. This can raise a number of issues, ranging from the need

to update registrations to more complex questions concerning whether and when a partner who has

left a partnership ceases to be responsible for the partnership’s liabilities.

110. Limited partnerships. Statutes make it easier for investors who participate as limited partners

to transfer their partnership interest, without this giving rise to questions about whether the limited

partnership continues to exist once a new limited partner replaces an old one. The model often starts

from the default principle that the transfer of a limited partnership interest requires the approval of

all other partners, but then goes on to provide for transferability through a limited partnership

agreement. Although this requires a contract, it offers greater flexibility than the basic partnership

model by allowing, for example, an agreement that states that a limited partner may transfer its

interest with the sole consent of one of the general partners.

UNIDROIT 2026 – Study LXXXC – Draft Chapter III 121.

111. Corporation. The corporate form has most often been designed to be even more facilitative,

starting with a default position allowing a shareholder an unlimited right to transfer its shares and

then entitling a corporation to restrict this ability by placing restrictions in its articles or by-laws, or

by having shareholders enter into a contract that regulates transfer rights. Whether or not a

shareholder can freely transfer shares is often viewed as an important factor distinguishing a private

company, where this right is constrained, from a public company, where shareholders are free to

trade their shares as they see fit. Indeed, one of the distinctive features of public companies in many

countries is that they list their shares on stock exchanges, which have been created to assist in

ensuring that there is a market through which one can readily trade shares. This may be contrasted

with cooperatives, which typically require that shares be held by members of the cooperative and

that the board of directors approve new members. This is another reason (in addition to the difference

in how voting rights are typically attributed under each legal form) why cooperatives seeking

enhanced access to equity capital will sometimes convert to the corporate legal form.

112. Considerations at startup. While transferability concerns may not be top-of-mind for those

who are starting a business, it can become highly relevant once a business has grown and when one

party wants to transfer some or all of its interest in the business, or when the business is trying to

attract new investors who will be concerned about their ability to sell some or all of their interest.

Accordingly, as one reflects on the most appropriate legal form, care should be taken to consider

whether transferability is permitted and how easy or cumbersome the transfer process is likely to

be. Those who start a business will also wish to consider the degree of control they want to be able

to exercise over the parties to whom a member can transfer their interest in the business.

XIV. EXIT AND WITHDRAWAL OF A MEMBER

113. Issues to address. Another aspect that needs to be considered with regard to membership

concerns the withdrawal, expulsion, or death of a member, and in the case of legal persons,

dissolution of a member. Some of these scenarios, notably withdrawal, overlap with the transfer

discussion set out above since withdrawal may be triggered by a desire to sell one’s interest to a

third party, which may in turn give rise to the question whether this is permitted. However, it may

be that the issue is somewhat different and that a party that may eventually want to withdraw wishes

to ensure that there is a mechanism whereby they can require the other members to buy them out,

failing which they are then free to sell to another party. These are questions that will most often be

addressed in a contract between the members. It is therefore important for countries designing legal

forms to consider the default position (i.e., transferability only with consent of all other members, or

free transferability), as well as the ease with which one can move away from this default model (e.g.,

by way of contact).

114. Removal of members. There can be other kinds of “exit” scenarios that are different in nature.

For example, members may wish to remove a member for any number of reasons (e.g., because a

party has acted inappropriately or because trust has otherwise broken down), in which case the

question will be how easily this can be done. In a partnership, this will often be very difficult unless

a mechanism wasincluded in the partnership agreement, leaving the partners with no option other

than to dissolve the partnership. In a corporation, it can also be very difficult to force a shareholder

to dispose of their shares unless a mechanism has been included in an agreement with the

shareholder. Removal mechanisms may also raise concerns when used in an oppressive or abusive

manner, particularly if they result in the exclusion of minority members.

115. Death of member. Other issues arise on the death of a member. Does that member’s interest

simply disappear with its economic value essentially being for the benefit of the other members? Or

does it devolve to the deceased person’s estate, such that the beneficiaries of that estate are entitled

to all the rights associated with that interest? These questions can be especially important for smaller

businesses and should be considered at the outset and when the members are engaged in estate

122. UNIDROIT 2026 – Study LXXXC – Draft Chapter III

planning. Once again, the default position under a general partnership statute is usually that the

partnership simply comes to an end when one of its partners dies, unless a contract has been entered

into that addresses this situation. In contrast, under corporate law statutes the default position is

usually free transferability; thus, it may be easier under such statutes to envisage transferring an

interest to family members as part of one’s estate plan.

116. Considerations at startup. It is therefore important for parties starting a business to consider

what restrictions, if any, they want to place on transferability. Similarly, thought needs to be given

to scenarios in which trust might break down, such that there is a need to remove a member or to

hold them to account for harmful actions. Most developed corporate law statutes today reflect

decades of experience in designing a model that is better equipped to handle many of these scenarios

than the partnership or limited partnership models.

XV. DURATION AND DISSOLUTION OF A COMPANY

117. Duration. Most often in practice, companies are formed for an indefinite period of time, when

the legislation permits this option, and cease to exist either because one or more members leave the

company, because the members jointly agree to dissolve the company, or due to circumstances

which give rise to legal consequences, such as bankruptcy. Where the law under which a company

is formed is silent on indefinite duration, contractual arrangements may be required to allow

continuation after the exit or death of a member.

118. Short-term goal. A company may be formed for a specific goal, such as promotion and sale

of products at a specific event. Members may wish to pool their limited personal capital and share

resources to engage in a single business endeavour with the intention to dissolve after payment of

outstanding debts and distribution of profits. This might be considered a typical business case for

forming a partnership.

119. Long-term goal. A company may also be used to collaborate over a longer term. Members

may decide to pool their capital and personal resources to present and sell their products at several

events and to large value chains. They may choose to collaborate for better bargaining power and to

negotiate a more favourable position which would otherwise not be possible if each member

negotiated individually. In this case, the objectives of the collaboration may be achieved through

either the partnership or corporate form; participants might conclude that the formalities involved in

setting up a corporation are worth the cost because the legal vehicle is better suited to their long-

term goals.

120. Dissolution. Should members decide to dissolve the company, it remains obliged to pay its

outstanding debts with any remaining assets distributed among its members. Whether that

distribution is made on an equal basis or pro rata in proportion to member contributions is dependent

upon the default rules for that particular legal model (e.g., partnership, corporation) and whether

the members have chosen to deviate from those rules, either in the organisational rules of the

company or as agreed ad hoc in the event of dissolution.

121. Differentiation by legal structure. As was noted above, by default under most laws, a

partnership comes to an end upon the exit or death of a partner, unless a partnership agreement

provides otherwise. As corporate law does not envisage dissolution upon the death of a shareholder,

indefinite duration of the corporation is the norm.

XVI. CORPORATE GROUPS

122. Formation. When several agricultural companies wish to collaborate while maintaining a

certain degree of independence and/or in order to benefit from each other’s size and role in the agri-

UNIDROIT 2026 – Study LXXXC – Draft Chapter III 123.

food value chain, the preferred company arrangement might be that of a corporate group. Corporate

groups are designed to allow for some degree of integration of business relationships without reliance

on contracts to structure that integration. Other purposes of corporate groups are to diversify

businesses or regional presence, to allocate different risks or profitability in various separate entities,

or to reduce exposure to liability. A corporate group may be formed among companies on either

horizontal or vertical levels of the agrifood value chain, for example, by several producers (horizontal)

or by several producers, processors and retailers (vertical).

123. The collaboration of agricultural producers with companies and large corporate groups is

driven by the necessity of vertical coordination — primarily through mechanisms like contract farming

and participation in formalised structures such as agro-based clusters or agro-industrial parks—to

meet the stringent demands of modern and competitive global food systems. This integration enables

producers to overcome inherent disadvantages such as high transaction costs and limited access to

finance, inputs, and technical support, as lead firms (processors, exporters, and agribusinesses)

provide embedded services and access to lucrative, quality-sensitive markets (e.g., high-value

commodities like poultry or vegetables). Corporate involvement ensures the steady and reliable flow

of products required by large processing capacities and facilitates compliance with high quality

standards (like GlobalG.A.P.) and traceability through the use of digital supply chain management.

Although this collaboration is crucial for modernisation and innovation and can lead to increased

yields and profitability for producers, the concentrated market power often held by these downstream

corporate groups may dictate the terms of engagement.

124. Benefits and risks. A company may wish to consider joining or entering into a partnership

with a corporate group or, as it grows, it may consider restructuring its own business into a corporate

group. Business group arrangements are not formed exclusively with companies and may also include

cooperatives, government agencies, universities or other legal structures. They are not necessarily

structured as a company legal form and may be organised through the use of bilateral or multiparty

contracts. Corporate groups will generally involve more complex organisational rules and structures

as well as varying distribution of power. Accordingly, agri-MSMEs should take this into account and

should also assess the potential benefits and risks associated with such an endeavour when

considering whether to join a corporate group.

XVII. REMEDIES, DISPUTE PREVENTION AND RESOLUTION

125. Scope of mechanisms considered. This section discusses mechanisms for preventing and

resolving disputes that may arise during the formation and operation of a company. Some of these

mechanisms are established and governed by domestic law while others are governed by non-State

norms and practices. It considers mechanisms provided under company and general law and does

not address those set out by competition law, unfair practices law, tax law, consumer protection law,

labour law or privacy law. This section also considers remedies available under company law,

including actions that may be brought by shareholders or other stakeholders to address breaches of

duty or oppressive conduct.

126. Consideration in choice of mechanisms. The focus is on mechanisms − whether State or non-

State − that are most likely to help smallholders and agri-MSMEs prevent and settle conflicts arising

from their collaboration. To that end, variables that should be considered in the selection of a dispute

settlement mechanism include the following: (i) subject matter of the dispute; (ii) cost, speed and

efficiency; (iii) simplicity and accessibility; (iv) flexibility; (v) expertise and knowledge of the dispute

decision maker with respect to agricultural issues; (vi) customisation and adaptability to specific

context and realities; (vii) preservation of relationships; and (viii) minimisation of disruptions to the

operations of the company. The weight that members will give to these variables will depend on the

nature of the conflict, the identity of the members, and the legal tradition within which the company

operates, as well as other contextual factors. For example, some cultural and legal traditions assign

124. UNIDROIT 2026 – Study LXXXC – Draft Chapter III

more importance to the preservation of relationships and to mechanisms that seek to persuade (e.g.,

negotiation and mediation) rather than oblige as compared with a deeply rooted common law

tradition where reliance on formal mechanisms (e.g., arbitration and litigation) is more prevalent

and seen to better protect individual rights. In practice, time-sensitive or product-quality disputes

may favour negotiation or mediation, while complex legal or high-value disputes may call for

arbitration or judicial relief.

127. Multi-tiered dispute resolution. The mechanisms discussed in the paragraphs below are not

mutually exclusive. Some may be used jointly, in parallel or in sequence (e.g., negotiation, followed

by mediation and, if necessary, arbitration or court proceedings) so that easier, lower-cost steps are

attempted before more complex and expensive processes that lead to binding adjudication. To

enhance enforceability and effectiveness, multi-tiered clauses should clearly state conditions

precedent, realistic time limits, applicable institutional rules or appointment methods, and any carve-

outs allowing urgent interim measures when necessary.

A. Non-State mechanisms

128. Non-State mechanisms. Non-State mechanisms are dispute-prevention and dispute-

resolution arrangements grounded in party autonomy rather than adjudication by State courts. They

include amicable procedures led by a neutral party (e.g., negotiation, mediation and conciliation),

which are typically flexible, fast and relationship-preserving. They can also include arbitration

procedures that can involve varying degrees of complexity.

129. Institutional or ad hoc proceedings. These mechanisms may operate through institutional

providers (e.g., arbitration and mediation centres or trade-association schemes) that supply rules,

appointment services, case management and (where applicable) scrutiny of awards and settlement

terms.By contrast, ad hoc proceedings are conducted without an administering institution under

procedures selected by the parties (for example, the UNCITRAL Arbitral Rules), with appointments

and logistics handled by the parties themselves or by a designated appointing authority. They usually

offer greater flexibility and potential cost savings, but they require more precise clause drafting and

active case management. In both models, effectiveness depends on contract design that clearly

specifies: (i) scope of issues (including any pre-conditions); (ii) timelines; (iii) seat and place of

proceedings; (iv) procedural rules; (v) number and qualifications of neutral decision makers and the

appointment method; (vi) confidentiality; (vii) interim-measure options; and (viii) cost allocation.

Internal governance channels (ombudspersons, grievance mechanisms, ethics or complaints

committees) may also be used as a first tier before either institutional or ad hoc proceedings.

130. Internal governance rules, overarching guidance. Reliance on a company’s internal

governance rules is often seen as the primary method for preventing and resolving disagreements

or conflicts because these internal rules have been agreed upon by the members. Included within a

company’s organisational rules, bylaws (where relevant) and agreements (among partners or

shareholders), these rules encompass decision-making, management, members’ rights including

voting rights, contributions, distributions, record keeping, withdrawal, and, as the case may be,

conversion and restructuring. It is only logical that members would refer to these rules first for

guidance, which is the reason for the requirement in many States that such internal governance rules

be recorded, usually in written form.

131. Specific direction on dispute resolution. Secondly, internal governance rules may also contain

specific provisions for resolving conflicts that cannot be settled internally. These clauses may provide,

inter alia, for negotiation, mediation and conciliation, arbitration and/or for an internal ombudsman

or grievance mechanism.

UNIDROIT 2026 – Study LXXXC – Draft Chapter III 125.

132. Cultural context. In some legal cultures, internal governance rules, even when written, may

be regarded not so much as certain or mandatory but rather as relatively flexible guidelines reflecting

a mutual trust and general understanding of the terms of the collaboration. Depending on the cultural

context, discrete resolution of disputes with the objective of minimising public conflict is often

preferred. Where this is the case, informal negotiation and mediation to settle a dispute may be

prioritised over strict application of the internal governance provisions.

133. Internal ombudsman or grievance mechanisms. Company-level grievance channels (e.g., an

internal ombudsperson or complaints committee) are a first, low-cost step to resolve internal issues.

To be credible and effective, they should ensure: (i) independence from management; (ii) a clear

mandate and scope (who may file, what issues are covered, and applicable time limits); (iii) simple

intake, confidentiality safeguards, and protection against retaliation; (iv) short, predictable timelines

for acknowledgment, fact-gathering, and a reasoned outcome; (v) proportionate remedies

(corrective actions, undertakings, restitution, apologies) with basic record-keeping; and (vi)

feedback loops to management for preventive measures.

134. Negotiation.Negotiation is a voluntary and informal dispute resolution mechanism in which

the parties engage in direct discussions to resolve their differences amicably, without involving any

external neutral party. As the first step in addressing business conflicts, negotiation gives the parties

full control over the process and outcome, allowing them to set the agenda and terms of any

settlement without third-party intervention. Any resolution reached through negotiation is non-

binding until the parties formalize it (for example, in a written settlement agreement or company

resolution). Negotiations often preserve working relationships and saves time and costs compared

to other proceedings. Companies may include multi-tier clauses in their founding agreements

requiring good-faith negotiation as a first resort before escalating the dispute to mediation,

arbitration or litigation.

135. Mediation. Through mediation, an independent (i.e., neutral) third party facilitates

communication between the parties using conflict resolution tools and skills to foster a voluntary

solution to a given dispute. The process usually takes place outside a judicial or administrative forum.

If a mutually agreeable solution is reached, the resolved matters are included in a settlement

document which, upon its execution by the parties, is imbued with enforcement features similar to

those of a judicial decision. The mediator does not, however, have the ability to impose the decision

on the parties.

136. Conciliation. Conciliation is a voluntary independent process which may propose settlement

terms or offer a non-binding evaluation.123 Unlike adjudication, the conciliator cannot impose an

outcome; any resolution depends on party agreement. Conciliation is useful where a pragmatic,

guided compromise is desired (e.g., shareholder or partner deadlocks, valuation or payment-

schedule disputes). If agreement is reached, it should be recorded in writing (such as a settlement

agreement or company resolution) so it can be implemented or enforced under applicable law.

137. Arbitration. By contrast, in arbitration, the parties refer the dispute to one or more neutral

third parties who are empowered to make a binding decision. Such a decision is generally referred

to as an arbitration award, which is enforceable and, under the laws of most jurisdictions, final and

not subject to appeal. Arbitration tribunals are usually entitled to set their own rules, which sets

arbitration apart from the traditional rules of procedure of State courts, which tend to be more rigid

and complicated. As a result, arbitration awards can usually be issued more rapidly by comparison

with judicial decisions.If arbitration has been agreed upon by the parties, courts of general private

123 Some legal systems use “mediation” as an umbrella term that includes conciliation; other frameworks distinguish the two in practice, often by assigning the conciliator a more evaluative or proposal-making role, and in rare systems empowering the neutral to render a decision after a defined period. See the UNIDROIT/FAO/IFAD Legal Guide on Contract Farming (Rome, 2015), Chapter 7 (“Dispute resolution”), section B, on mediation and conciliation mechanisms.

126. UNIDROIT 2026 – Study LXXXC – Draft Chapter III

law jurisdiction are pre-empted from adjudicating any company law dispute between the parties

governed by the arbitration clause or agreement. Arbitration can involve significant costs (filing,

administration, and tribunal fees), which may limit access for weaker parties. In a company-law

context, this risk can be acute for minority shareholders. To mitigate it, drafters may consider fee-

shifting or cost-capping provisions, opting for expedited or a single arbitrator procedure, specifying

an accessible seat and language, permitting joinder or consolidation of related claims, and ensuring

clear standards on appointments, security for costs, and interim relief.

138. Other alternative dispute resolution mechanisms. In jurisdictions with weak judicial

infrastructures, in addition to being costly, private enforcement may be an unreliable mechanism to

resolve disputes in an impartial and expedited manner. In this context, other dispute resolution

mechanisms have arisen as an alternative to judicial litigation.

B. State mechanisms

139. State mechanisms — definition. State mechanisms are dispute-prevention, management,

and resolution processes established by or under the authority of the State. They encompass courts

and administrative bodies empowered to supervise companies (e.g., corporate registries and sectoral

regulators) and to issue binding, enforceable decisions and interim measures. Operating under public

law, they apply mandatory rules, ensure due process and transparency, and provide avenues for

review or appeal. State mechanisms may be triggered by public authorities (public enforcement) or

by private parties (private enforcement), and they interact with non-State mechanisms by

supporting, supervising, or, where required, setting aside private outcomes (e.g.,

recognition/enforcement of settlements or awards, injunctive relief, insolvency stays).

140. Judicial litigation – public enforcement. State enforcement is generally divided into two broad

categories: public and private enforcement. The former relates to the ability of governmental

agencies to impose sanctions on companies for breach of rules, regulations and legal provisions.

Although most of the agencies entitled to carry out public enforcement deal exclusively with publicly-

held (or “listed”) corporations, in some jurisdictions, administrative governmental entities can also

deal with violations taking place in closely-held (“private”) companies.

141. Judicial litigation – private enforcement. The latter category − private enforcement − takes

place when a shareholder or a third party (for instance, a creditor) brings a complaint before the

judiciary in order to enforce a legal or contractual provision or to claim damages, etc. Judicial

litigation is often the most expensive, lengthy and complex method for resolving disputes arising

from the formation or operation of an agri-company.

C. Remedies

142. Company law remedies. Different jurisdictions provide different remedies to shareholders

seeking to bring a claim by way of private enforcement. The next two paragraphs provide examples

of two remedies that are frequently seen in statutes governing business corporations. Consideration

should be given to whether the statutory remedies that are provided will be sufficient or whether it

is desirable to supplement them with contractual provisions intended to provide additional protection:

for example, contractual provisions that require unanimity or a high level of approval in order to

proceed with specified transactions (e.g., a transaction between the company and a majority

shareholder). Similarly, if the members wish to have access to remedies intended to discipline a

member who is not contributing to the collaborative venture in the way that was expected, it may

be desirable to address this in a contract (such as partnership agreement or a shareholder

agreement) since statutory provisions are often more limited in their focus, concerned especially with

ensuring that the company or a majority of its members do not take advantage of the minority.

UNIDROIT 2026 – Study LXXXC – Draft Chapter III 127.

143. Derivative action. The derivative action allows a shareholder to bring a lawsuit on behalf of

the corporation itself against a party that has harmed the corporation, such as a director or a third

party, in circumstances where the board of directors is unwilling to bring an action (as may be the

case if the claim is against a director). The derivative action therefore serves as a kind of safety

valve, enabling shareholders to bring an action for such matters as a director’s breach of fiduciary

duties (discussed in paragraph [108] above). To move forward with a derivative action, leave of the

court is required in many jurisdictions that provide for this remedy. The complainant will typically

have to demonstrate that it is in the corporation's best interests that the action proceeds, that they

are acting in good faith, and that the directors have been given proper notice but nevertheless refuse

to initiate an action. Although the court is often given broad discretion to grant a remedy not only to

the corporation but also to the complainant, the derivative action can prove a time-consuming and

uncertain way to pursue a remedy since leave of the court is required before one can proceed with

the action itself. This is one reason why some jurisdictions have also enacted the oppression remedy

(discussed in the next section) which does not require that a shareholder first obtain leave of the

court.

144. Oppression remedy. The oppression remedy is a remedy found in some countries’ corporate

law statutes that allows a shareholder, and sometimes other parties such as debtholders and

creditors, to seek court intervention when their interests are treated unfairly by the company, its

management, or a controlling shareholder. The oppression remedy has often been added to

corporate law statutes where existing law does not provide that the corporation or its majority

shareholders owe a fiduciary duty to minority shareholders. Under the oppression remedy,

complainants can seek a court order to remedy the oppressive or unfair conduct in question, with

courts often having broad discretion to issue appropriate orders. The scope of this remedy and the

orders that courts may issue can, however, vary significantly from one jurisdiction to another and so

it is important to consider the breadth of interests that are protected under a particular jurisdiction’s

version of the oppression remedy, as well as breadth of the remedial power that is given to courts

under the statutory provisions governing the oppression remedy.

145. Breadth of oppression remedy. In some countries, the oppression remedy has become a very

developed remedial provision that the courts have worked with for decades. In those countries, it

has therefore proven to be a highly flexible tool that allows minority shareholders, as well as other

kinds of specified complainants such as debt holders, to pursue a tailored remedy that is designed

to address the behaviour that is the subject of the complaint. Similarly, courts in these countries

are given broad discretion to grant remedies that can range from orders awarding damages against

the company or a majority shareholder, to orders that require the complainant’s shares or debt to

be bought out, directors or officers of the corporation to be removed, and/or that the corporation or

majority shareholder cease engaging in specific conduct that is harmful to the complainant. Courts

may also be empowered to appoint a receiver or to issue an order requiring the corporation to be

dissolved (and the collaborative venture therefore brough to an end). Jurisdictions with a developed

history of decisions under a broadly worded oppression remedy therefore offer important legal tools

that enable minority shareholders to initiate legal action intended to bring oppressive behaviour to

an end and to secure an appropriately tailored remedy that will address the harm suffered. In other

jurisdictions where minority shareholder rights may be less developed and where the remedy has

only been adopted more recently, for example in common law countries, it will, however, be

important to assess both the breadth of the wording of the remedial power granted to the courts and

the experience that the judicial system has in that country with the remedy. Judicial experience with

the remedy may be more limited and this may have a significant impact on the ability of minority

shareholders to obtain a satisfactory remedy in circumstances where the collaborative nature of the

venture has broken down because one or more members are of the view that the corporation or

another party such as a controlling shareholder is seeking to profit at their expense.

UNIDROIT 2026 – Study LXXXC – Draft Chapter IV 128.

UNIDROIT 2026 – Study LXXXC – Draft Chapter IV 129.

CHAPTER IV

DIGITAL PLATFORMS IN AGRICULTURE

TABLE OF CONTENTS

I. INTRODUCTION 130

II. FIVE DISTINGUISHING FEATURES OF DIGITAL PLATFORMS AS

A MODE OF COLLABORATION 132

III. THE PLATFORMISATION OF CONVENTIONAL COLLABORATIVE

LEGAL STRUCTURES 134

IV. DEFINITION AND TAXONOMY OF DIGITAL PLATFORMS IN

AGRICULTURE 135

A. DEFINITION 135

B. TAXONOMY OF APPLICATIONS 137

1. Exchanging commodities 138

2. Offering Services 138

3. Improving Management 139

V. THE MAIN ACTORS IN DIGITAL PLATFORMS IN AGRICULTURE 139

VI. BENEFITS AND CHALLENGES OF DIGITAL PLATFORMS

IN AGRICULTURE 141

A. BENEFITS OF DIGITAL PLATFORMS IN AGRICULTURE 141

B. CHALLENGES OF DIGITAL PLATFORMS IN AGRICULTURE 141

C. DATA-RELATED PROBLEMS IN AGRICULTURE 142

VII. GOVERNANCE OF DIGITAL PLATFORMS IN AGRICULTURE 143

A. PARTICIPATORY PLATFORMS 144

B. NON-PARTICIPATORY PLATFORMS 144

VIII. LEGAL STRUCTURES FOR GOVERNING DIGITAL PLATFORMS IN

AGRICULTURE 145

A. PURELY CONTRACTUAL PLATFORMS 145

B. ORGANISATION-BASED PLATFORMS 146

IX. REGULATORY AND MONITORING POWER WITHIN DIGITAL

PLATFORMS IN AGRICULTURE 147

X. ENTRY AND EXIT WITHIN DIGITAL PLATFORMS IN AGRICULTURE

148

XI. LIABILITY MANAGEMENT WITHIN DIGITAL PLATFORMS IN

AGRICULTURE 149

XII. REMEDIES, DISPUTE PREVENTION AND RESOLUTION IN DIGITAL

PLATFORMS IN AGRICULTURE 150

130. UNIDROIT 2026 – Study LXXXC – Draft Chapter III

I. INTRODUCTION

1. Digital platforms as form of collaboration. This Chapter discusses the “digital platform” as a

form of collaboration which is functionally distinct from companies, cooperatives, and multiparty

contracts (MPCs), but is not a legal structure on its own. Digital platforms are online infrastructures

within which individuals and organisations can interact. They make possible the exchange of goods

and services (transaction platforms) or the development of new digital products and services

(innovation platforms). While digital platforms can be developed and used by collaborative legal

structures, they perform functions that merit separate, additional analyses. Instead, digital platforms

are typically operated by legal structure, such as cooperatives and companies (i.e., “platform

operators”), and do not function autonomously of corporate or human control. As such, laws and

regulations concerning digital platforms are usually targeted at platform operators, who are

responsible for ensuring compliance (e.g., with rules requiring the verification of sellers’ identity and

products when using a platform). The platform operator ensures that members/users of its digital

platform comply with these rules through private ordering, broadly through various contractual

agreements and IP licenses. Despite the growth of automation, and the emergence of decentralised

autonomous organisations (DAOs) in certain sectors (e.g., financial markets), fully autonomous

digital platforms that can act without human intervention and enter into agreements with other legal

forms of collaboration are not yet a common phenomenon in the agricultural sector. In addition, the

relationship between platforms and conventional legal forms may change over time due to the rapid

technological change both are experiencing. Many of the contracts, cooperatives, and companies

managing agricultural activities are being digitised and digitalised across the globe, as discussed

throughout this Chapter.124 Digital platforms represent one important example of digitalisation.

2. The role of platforms in addressing needs and challenges. Digital platforms can respond to

the needs and challenges identified in the General Introduction, in particular by facilitating access to

markets, market resources and financial services; addressing power imbalances and increasing

participation in decision-making; promoting innovation. The possibility to facilitate the achievement

of some or all of these goals depends on many variables, some of them external to the platform’s

architecture, some of them intrinsic to it (e.g., its governance design). In general terms, digital

platforms are capable of improving the quantity and quality (in terms of reliability and speed) of the

information exchanged between the parties, which is a crucial factor in pursuing the goals addressed

in this guide. At the same time, the design of digital platforms can have a significant impact on power

asymmetries within an agricultural ecosystem, either reducing or exacerbating them. For example,

participatory platforms can increase democratic involvement in decision processes within the value

chain by making information transparently available and/or by allowing forms of peer monitoring.

On the other hand, non-participatory platforms can increase power imbalances, centralise monitoring

functions, limit access to information and/or create new dependencies on third parties.

3. Transaction costs. Digital platforms play an important function in reducing transaction costs.

Platforms can reduce search costs for agricultural inputs as well as the matching of buyers and sellers

of agricultural produce. Their design can facilitate interactions between different players in the

agrifood chain, including the three forms of collaboration considered under this guide. This relates

not only to the exchange of commodities, but also to the sharing of information and the provision of

services and other forms of support. For example, a company, acting as a buyer, might create a new

digital platform or join an existing one in which its suppliers can exchange information with the

buyer (e.g., about quality of the product to be supplied), obtain feedback whether the production

process they implemented complies with the buyer’s standard/expectations, or receive support on

how to use a given input. There might be other cases where the technical architecture of the digital

124 Digitisation and digitalisation are two different concepts. While digitisation focuses on converting and recording data, digitalisation develops processes and changes workflows to improve manual systems. Digitisation can contribute to the process of digitalisation.

UNIDROIT 2026 – Study LXXXC – Draft Chapter IV 131.

platform is co-designed by the different members/users or evolves over time thanks to the input of

the different actors in order to enhance collaboration among members/users. Moreover, digital

platforms can help reduce the monitoring costs of smallholders by enabling the real-time and

continuous collection and analysis of data on crops, market dynamics, etc. The benefits of digital

platforms are discussed at greater length in section IV.A.

4. Goal of the chapter. This Chapter aims to provide key insights and highlight certain variables

that can be relevant for smallholders and other stakeholders (such as agri-MSMEs) in the agrifood

chain in deciding whether or not to join an existing digital platform or to create a new one. In

identifying such insights and variables, a functional perspective will be adopted in order to underline

how digital platforms, by interacting with existing legal structures or acting on their own, can enhance

or hinder collaboration among smallholders.

5. Agricultural digital platforms. Digital platforms are becoming widespread and are present in

different sectors (e.g., labour, finance, insurance, etc.). This Chapter will focus on platforms that

operate primarily in the agricultural sector, even if there may be an overlap with platforms active in

other sectors (e.g., in the case of digital platforms providing access to credit also to farmers). In the

case of the agricultural sector, access to digital platforms by smallholders is often fraught with

challenges; therefore, the Chapter will address the identification of the features that should be

included in digital platforms to meet their needs.

6. Digitalisation. In the past decade, the use of digital platforms has grown in step with the

general digitalisation of the agricultural sector. In FAO’s 2024 Towards Digital Inclusion in Rural

Transformation, authors observed that between 2013 and 2023, low and middle-income countries

have implemented more than 700 new digital agricultural solutions. This has been particularly

common in sub-Saharan Africa (e.g., Kenya) and South Asia (e.g., India and Bangladesh). However,

while the farmers using such solutions in sub-Saharan Africa are primarily smallholders, in South

Asia, only about 33% of smallholders make use of these technologies. It is believed that the COVID-

19 pandemic also spurred the adoption of digital platforms and other solutions as there was an urgent

need to find alternative ways for public and private sector organisations to reach farmers (and vice

versa).

7. E-commerce. Digital platforms can play an important role in facilitating the sale of agricultural

products, in particular through e-commerce. Even if e-commerce can take many different forms, in

many cases it involves a set of bilateral relations (e.g., between the seller and the digital platform;

between the seller and the buyer) rather than a multiparty relationship. But there are also cases

where e-commerce is one of the many modules of a multiparty relationship which operates through

a digital platform. The opportunities and challenges presented by e-commerce differs partly based

on whether the e-commerce transactions are domestic or international. In the first case, access to

infrastructures, trust issues, and digital literacy can have an impact on the adoption of e-commerce

solutions, requiring investments and support by regional governments as well as regulations related

to data management and security. Most agricultural e-commerce activities cater to a domestic

market.In the second case, states and international organisations have long recognised the

opportunity and obstacles that small and medium enterprises can have in engaging with cross-border

e-commerce,125 including in the sale of agricultural produce, and have stressed the need for inter-

state cooperation in overcoming these difficulties. Cross-border agricultural e-commerce can raise

additional complex legal and jurisdictional issues for smallholders as it engages with multiple legal

frameworks, including e-commerce law, international trade law, customs and tariffs, and regulations

concerning the standardisation, labelling, inspection, and testing of agrifood products. When deciding

to use digital platforms for facilitating cross-border e-commerce, these issues must be addressed.

125 United States-Chile Free Trade Agreement, 2003 Article 15.5(a); Central America-Dominican Republic Free Trade Agreement, 2004, Article 14.5(a); UNCITRAL, Taxonomy of Legal Issues Related to the Digital Economy (United Nations, 2023), page 51.

132. UNIDROIT 2026 – Study LXXXC – Draft Chapter IV

8. Risks of digitalisation. The choice of joining a digital platform or employing other digital

solutions must take into account the fact that digitalisation in general, and digital platforms in

particular, represent an important opportunity for rural development, but at the same time imply

some risks. Farmers risk losing part of their operational autonomy when the platform (or the operator

providing the digital service) automates some decisions For example, a company might develop an

integrated computer vision, robotics, and crop management platform that automates the spraying

of herbicide on weeds, targeting only the spots where needed and in the amount which is required

to optimise weed control. This may yield efficiency gains but may also undermine the farmer’s

judgment and experience. In addition, depending on the operator who controls/manages the

platform, platforms can exacerbate and exploit power asymmetries between users such as

smallholders and the business entities that primarily operate these platforms. This can manifest in

the control that platform operators can exercise over users through technical measures such as

digital rights management where users have limited or no option to opt out. The platform operator

may use personal and non-personal data in opaque and potentially harmful ways, from the

perspective of users and other relevant stakeholders. Reliance on boiler-plate contracts have

contributed to this dynamic. For instance, in the absence of privacy rules in some countries and/or

the weak regulation of personal/non-personal data, contractual and licensing agreements, as well as

private regulatory initiatives, fill gaps in how agricultural data is governed. The choice of an existing

collaborative legal structure to use a commercial third-party digital platform, should then take into

account such risks in order to minimise them to the extent possible.

9. Informality. Digital platforms can functionally contribute to formalising smallholders, even

when they do not have a recognized legal structure, since they can contribute to collecting and

structuring data about their activities and map their existence. At the same time, digital platforms

can perpetuate informality by making traditional legal structures redundant since individuals can

collaborate with each other without using a legal structure.

II. FIVE DISTINGUISHING FEATURES OF DIGITAL PLATFORMS AS A MODE OF

COLLABORATION

10. Distinguishing features. Digital platforms are functionally different from the three forms of

collaborative legal structures considered in the CLSAE Guide because of five factors:

(a) Coordination of a large number of participants. While MPCs, cooperatives and

companies can have a large number of members, there are practical constraints on

how such large collaborative legal structures can grow while retaining their core

features and identity (e.g., practising internal democracy). Managing organisations of

such a size implicates not only matters of contract governance, corporate governance,

or cooperative governance, but inevitably entails the use of governance technologies

to run meetings, count votes, resolve disputes, etc. Through the use of digital

platforms, much larger member-governed and participatory organisations can emerge.

There are examples of distributed networks of local agri-food hubs which span on many

countries and have onboard thousands of producers, which are coordinated through

the use of a digital platform.126

(b) Making multiple layers of collaboration possible. A digital platform allows users to

create and/or magnify collaborative projects which are distinct from the collaborative

form represented by the platform itself. In other words, in a platform there can be two

layers of collaboration: the first layer involves the collaborative endeavour permitting

the existence and operation of the platform and involves the members of the platform.

The second layer involves the other instances of collaboration that users develop

thanks to the digital infrastructures and services made available by the platform. There

126 https://openfoodnetwork.org/

UNIDROIT 2026 – Study LXXXC – Draft Chapter IV 133.

are now e-commerce platforms that, for instance, connect a large number of producer

cooperatives to rural consumers. The first layer of collaboration happens between the

collaborative legal structures involved in building the e-commerce platform, with a

separate second layer of collaboration taking place between the business and individual

users of the platform. In effect, the platform operator organises a second tier of

collaboration. This buttresses the point that platforms are not just intermediaries, but

they also act as governance structures and can create ecosystems of organisations or

individual actors. This aspect differentiates digital platforms from MPCs, cooperatives

and companies, where special projects or more specific types of collaboration are

possible, but they are limited to members. The idea that digital platforms can allow

the coordination of much larger numbers of members than in the other forms of

collaboration and are capable of organising second-tier collaboration can have an

impact on the governance structure and, in particular, on the choice between a

centralised or decentralised governance structure. The organisation of second-tier

instances of collaboration can favour a more decentralised governance structure, since

this spin-off collaboration will have some degree of autonomy vis-à-vis the first-tier

collaboration. This point is elaborated further in sub-paragraph (e) below.

(c) Specific intermediation procedures. The intermediating function characterising

platforms differs from the intermediating function in other forms of collaboration. The

difference lies in the fact that intermediation is often the main task of platforms, an

economic activity per se, while in other forms of collaboration, intermediation is an

ancillary function. The economic viability of a digital platform is contingent on the

generation and maintenance of network effects, which requires this intermediation

function to attract and balance the user groups on different sides of the platform. A

common business strategy to achieve this balance is to provide “subsidies” and other

incentives to the user groups that are low in supply at a given time. These are not

necessarily direct financial subsidies or incentives. For instance, there are now digital

platforms for hiring agricultural equipment that matches equipment owners with

farmers looking to temporarily book the equipment. As many smallholders do not have

smartphones, some platform operators have deployed agents to help smallholders

place bookings. This makes the equipment booking process easier, while also

increasing demand for the equipment on the platform.

(d) Easy entry and exit of members and resources. Digital platforms have porous

boundaries relative to MPCs, cooperatives and companies with regard both to the

inclusion of users and the use of assets. Platform organisations enable co-production

and the drawing of resources from a wide range of stakeholders with minimal friction.

Take, for example, mobile communication platforms that aggregate production from

individual farmers, cooperatives and community organisations. They enable forward

contracting with buyers, providing a predictable and structured market for key crops.

Such digital platforms also facilitate the delivery of extension content and training

through text and voice messaging, and allows farmers to register production data,

request loans and receive payments via mobile money.127 In doing so, linkages are

made between actors within a given collaborative legal structure and actors external

to the structure. The other collaborative legal structures in this guide are relatively

less porous. Cooperatives have strict rules with respect to entry and exit of members,

and MPCs and companies have some membership and contracting rules as well. The

use of a digital platform by these collaborative legal structures can alter the ease of

entry and exit of users and resources.

(e) Governance mechanisms. The governance mechanisms for the digital platform are

often different from the governance mechanisms of the platform operator. For

127 IFAD 2026, e-Granary example, active in Rwanda, ESA

134. UNIDROIT 2026 – Study LXXXC – Draft Chapter IV

instance, in online marketplaces for farmers, the governance of the first, technical

layer may involve regular updates of the open-source software, which is related but

still distinct from the governance of organisations running food hubs.

11. Enabling new functions. Digital platforms can be conceived as enablers of new functionalities

and dynamics. An example is offered by the pursuit of sustainability goals: since sustainability can

be conceived as a systemic goal, requiring the extensive coordination of a large number of

stakeholders, digital platforms can introduce entirely new features and dynamics. For example, there

are now digital hubs that, among other things, enable the gathering and sharing of agricultural and

climatic information, to support smallholders, livestock keepers, and rural entrepreneurs.128 The

platform can thus be used to monitor the environmental harm that is potentially caused by actors,

such as farmers, and enable them to adjust their activities based on the exchange of data relating

to their environmental performance. Thus, digital platforms could be employed as a tool by the other

three collaborative legal structures to govern the value chain by allowing a more advanced and

sophisticated level of monitoring and coordination.

III. THE PLATFORMISATION OF CONVENTIONAL COLLABORATIVE LEGAL

STRUCTURES

12. Platformisation. Digital platforms do not only have distinct features from the other

collaborative legal structures, ‘platformisation’ is transforming the features of conventional legal

structures as well. Platformisation refers to the penetration of digital platforms within

“infrastructures, economic processes and governmental frameworks, as well as the reorganisation of

cultural practices and imaginations around these platforms”. Thus, platformisation does not only

refer to a technical infrastructure, but also business models and an organisational and cultural logic

that emerges from the use of digital platforms across the global economy.

13. Platformisation of the governance of companies and cooperatives. The phenomenon of

platformisation has significant implications on the membership and governance of both companies

and cooperatives as well as their financing. Digital platforms are now widely used to run meetings

(e.g., annual general meetings/assemblies). In addition to making remote communication possible,

digital platforms can allow the direct participation of a greater number of people synchronously and

asynchronously in a meeting (e.g., through meeting recordings and auto-transcriptions), without the

use of proxies or representatives. Consequential decisions can be made using these platforms,

including voting on proposals and resolutions. These platforms have thereby created the possibility

of diminishing organisational hierarchies, between the board/senior management and members in

particular, although the degree to which these platforms are used for communication and

engagement differs widely. This platformisation has been supported through legal amendments

explicitly permitting online meetings and decision-making. The use of digital platforms can also

involve new stakeholders (i.e., users), who depending on applicable terms and agreements, may

have decision-making power over the platform and even over the legal structure operating the digital

platform (e.g., if the user also becomes a member). While digital platforms can enable greater

involvement in the governance of agricultural cooperatives and agricultural companies, there are

also significant challenges. Power imbalances may arise between those with less technical

sophistication and those with a more advanced digital literacy, which might paradoxically limit

communication and participation rather than improving them. How the inclusion of users in platform

governance will affect organisational liability has also stirred controversy, as discussed in relation to

Decentralised Autonomous Organisations (DAOs) below.

14. Platformisation of the financing of companies and cooperatives. The use of digital platforms

also opens up new sources of financing for agricultural firms. Both debt-based and equity crowd-

funding, for instance, primarily use digital platforms to raise funds, convey information, and make

128 IFAD 2026, We Connect Farmers example – Gambia, WCA

UNIDROIT 2026 – Study LXXXC – Draft Chapter IV 135.

disclosures. Some of these crowdfunding platforms specifically focus on sustainability, seeking to

match sustainability-conscious investors with sustainable firms. More recently, the use of a digital

platform to issue crypto-tokens in exchange for certain financial and/or control rights over a project

(e.g., access, profit-sharing, etc.) has also been a lucrative alternative financing arrangement.

Increasingly, digital platforms are also being used by companies for direct listing and private

placements, with the latter involving accredited investors. Ultimately, this can change the traditional

capital structure of an agricultural firm, with these diverse creditors and investors having varied

interests and expectations of the firm, its leadership, and its strategic planning.

15. Platformisation of multiparty contracts. Multiparty contracts in the agrifood sector involve an

intricate web of relations among the different contractual parties ranging from sharing information

to setting prices, from providing instructions to monitoring compliance. In order to optimise the

management of such relations parties could establish, or make recourse to, a platform which could,

for example, offer monitoring services on real-time, on-line knowledge-building activities, and quality

assessment to determine the product’s final price. In addition, similar to what has been underlined

in paragraphs 13-143, platforms can also have an impact on the governance of the (multiparty)

contractual networks as well as on their financing.

16. Platformisation leading to datafication. As discussed further in the subsequent section, the

use of digital platforms inherently involves the collection, analysis, and use of data. This too can be

applied to transform the conventional legal structures as the data can be used to optimise

organisational and financial decision-making, through the generation of new metrics and analytical

insights. At the same time, datafication involves issues related to proper data management in order

to minimise risks that data can be used at the detriment of data holders’ rights and interests; such

risks might also impact negatively on the number of farmers willing to join platforms.

IV. DEFINITION AND TAXONOMY OF DIGITAL PLATFORMS IN AGRICULTURE

A. Definition

17. ICT4D. Digital platforms are part of the broader domain of Information and Communication

Technologies (ICT) for (agricultural) Development (ICT4D). The term “platform” has been used in

different ways in various scientific disciplines and fields, in particular in (industrial) economics,

industrial organisation and management, information systems, law, marketing, and software

engineering. Different criteria have been used to define digital platforms across these fields and

disciplines.

18. Digital platform definition. At the international level, digital platforms have been generically

described as “online platforms”, with the UNCITRAL Taxonomy of Legal Issues Related to the Digital

Economy building on the definition developed by the OECD129 and UNCITRAL’s own texts on e-

commerce. UNCITRAL has previously defined an online platform as “a service that: (i) is provided

via the Internet or some other communications network by electronic means (i.e. an online service)

and (ii) facilitates interactions between persons who interact using the service”. UNCITRAL notes that

a similar definition is used by UNCTAD,130 as well as the ITU and the World Bank.131 In this chapter,

digital platforms are defined as online infrastructures within which individuals and organisations can

interact, making possible the exchange of goods and services (transaction platforms) or the

129 The OECD defines a platform as “a digital service that facilitates interactions between two or more distinct but interdependent sets of users (whether firms or individuals) who interact through the service via the Internet.” OECD 2019: 21. 130 Digital platforms are “the mechanisms for bringing together a set of parties to interact online.” UNCTAD 2019: xv. 131 Digital platforms act “a marketplace, bringing together and reducing transaction costs between distinct groups of customers.” ITU and World Bank 2020: 31.

136. UNIDROIT 2026 – Study LXXXC – Draft Chapter IV

development of new digital products and services (innovation platforms) in ways capable of creating

nonlinear increases in utility and value. Nonlinear increases in utility and value mean that the addition

of each individual user exponentially increases the value of the platform. This integrates the earlier

international definitions, while highlighting certain functional uses of digital platforms.

19. Different functional types. The definition above captures three different functional types of

digital platforms. It is possible to broadly distinguish: (i) transaction platforms, in which members

use the platform for direct exchange of existing goods or services, from (ii) innovation platforms

which offer the technological infrastructures for developing products and services which are new and

complementary to the platform. A digital platform for booking tractors is an example of a transaction

platform. A digital platform facilitating farmer registration and enabling the reporting of disease or

pest infestation is an example of an innovation platform, as it can be used to make third-party

agricultural subsidy provision more efficient and plan interventions to address disease or pest

occurrences. While transaction platforms typically generate income through advertisements,

subscriptions and transaction fees, innovation platforms generate income through licensing or selling

products. There are now digital platforms that combine these transaction and innovation functions,

leading them to be described as (iii) hybrid digital platforms. This might be the case with digital

platforms which not only facilitate farmer data collection for third-party services (e.g., financial credit

provision for farmers) but also enable the matching of farmers with complementary service providers

for value chain linkages.132

20. Level of platform’s maturity. Another element to be considered in distinguishing among digital

platforms is whether the platform is in its early development or in its maturity phase. In the first

case, the platform will favour network effects in order to increase its scale, even to the detriment of

profits; in the maturity phase, the platform will focus on profitability.

21. Network effects. A crucial part of the definition of platforms is related to the network effects

they can generate. Network effects are primarily divided into two broad types: direct network effects

and indirect network effects. The former refers to how the value of a platform changes because of

an increase in the number of users on the same side of the platform. A digital platform providing

access to a “data commons” that contains agricultural data grows in value for everyone when more

relevant data contributors join these digital data commons. A growing wealth of data available on

such a digital platform enables users to benefit from richer insights from data processing. On the

other hand, indirect network effects occur when an increase in the number of one group of users

leads to another group of users on a different side joining the platform. For instance, an increase in

the number of food producers contributing to a platform offering their produce can draw more

consumers and communities due to the variety and quantity of fresh, organic produce available.

Conversely, an increase in the number of consumers and communities that join the platform can

make the platform attractive for food producers due to the number and variety of consumers

available for their agricultural produce. The value created for the group of users on the other side of

the platform enhances the overall value and economic sustainability of the platform, as these

platforms typically receive a fee for each transaction that is completed.

22. Technological evolution. Digital platforms in agriculture are not static and evolve as a result

of changes in the wider environment in which they operate. Consider how agricultural enterprises

process and use information. Before the emergence of digital platforms, agricultural market

information systems - often operated by public authorities - systematically gathered data and made

this verified data available to farmers and other stakeholders through traditional media. These

systems that gathered important market, weather and agricultural commodity data were gradually

integrated into digital platforms (e.g., Whatsapp),133 overshadowing the state-backed stand-alone

market information systems that some perceived as being ineffective and financially inefficient. In

132 IFAD 2026 – BanhJI Rural Enterprise (Cooperative Digital Solution) in Cambodia, APR is also an example. 133 IFAD 2026 – AMIS (Whatsapp Platform), Nigeria, WCA.

UNIDROIT 2026 – Study LXXXC – Draft Chapter IV 137.

contrast, the potential of digital platforms to generate network effects, including through the use of

information systems, became a more economically viable option.

23. Platform’s new features. In response to rapid technological change, digital platforms are

integrating features from adjacent yet unrelated industries. The integration of various agricultural

solutions, from supply chain linkages to financial services, into a single digital platform has been

described as the creation of digital “super platforms”. This trend is, in part, due to the importance of

data in digital platforms and the economy at large. The collection, processing, and use of data are

not only necessary for the generation of beneficial network effects; data can be used by other

software applications integrated into the digital platform to provide new services. For example, a

State can, as part of an effort to digitalise all public services, allow farmers to create digital

identification systems for their land and cattle in order to get access to information relevant for their

production activities.134 Platforms can, for instance, help farmers decide when to plant a given crop,

using years of rainfall and crop production data. Moreover, data provided by farmers can help credit

providers, from microfinance institutions to traditional banks, make more informed decisions to

extend farmers credit, or even use the data itself as a form of collateral to receive start-up working

capital.

24. Data categories. There are three broad categories of agricultural data that agricultural

enterprises may collect, process, and use via their digital platforms: (i) farm data, (ii) complementary

environmental data, and (iii) proprietary data relating to the performance of agricultural input.

Agricultural enterprises may wish to do so for sustainability reasons, including economic (e.g., cost

cutting, increasing productivity), social (e.g., improving working conditions) and environmental (e.g.,

reducing harmful waste) sustainability. The application of various AI systems, for tasks including

planning, reasoning, monitoring, and interacting with the physical environment, further enables the

realisation of these benefits but requires the intensification and diversification of data collection.

25. Data collection. From smartphone applications to sensors installed on farmland to drones,

there are many sources for collecting the data necessary for “agricultural AI”. Sensors, for instance,

can be used to collect real-time data on humidity and temperature to improve crop yields, while

optimising water use.

B. Taxonomy of Applications

26. Platforms’ applications. The increasing presence of digital platforms in agriculture requires

developing a taxonomy to make it easier to navigate among their different types. This taxonomy

should be built around the different applications that transaction, innovation, and hybrid digital

platforms perform in the agricultural sector. Taking digital platforms’ applications into account, it is

possible to identify the following types:

(a) online marketplaces;

(b) access to equipment;

(c) provision of information and agricultural advisory services;

(d) supply chain management;

(e) improvement of decision making in market transactions;

(f) provision of financial services and payments management;

(g) provision of training and education; and

(h) data management.

134 World Bank 2019: 28.

138. UNIDROIT 2026 – Study LXXXC – Draft Chapter IV

27. Categories of platforms’ applications. These application types can be grouped into three main

categories, taking into account the main goals of the digital platform: (i) exchanging commodities

(e.g., inputs, raw materials, final products), (ii) offering services (e.g., agronomic services, financial

services, educational services/equipment services), and (iii) improving management processes (e.g.,

management of the supply chain, data management, more efficient decision making). Nonetheless,

it is becoming increasingly frequent to have digital platforms which perform multiple functions at

once, for example by integrating products and services.135

1. Exchanging commodities

28. Platforms as marketplaces. In some cases, digital platforms operate as marketplaces in

agriculture, either in the B-to-B or in the B-to-C contexts (or in both), acting as intermediaries or

suppliers for agricultural inputs and/or goods). Some of these online marketplace platforms are

custom-made, having been developed to cater to the particular needs of a local farming community

or agricultural sector. Yet, many farmers also use major commercial social media and instant

messaging platforms to sell their produce due to the low costs involved and the large group of

consumers that they could potentially attract.

2. Offering Services

29. Service intermediation. Digital platforms can also be a means for farmers themselves to gain

access to tractors and other expensive farm equipment. The platform, in this situation, intermediates

and matches farmers with tractor owners through a smartphone application or text messaging.136

30. Financial services. An important application of digital platforms is for the remittance and

disbursement of payments for produce, wages, and state subsidies (e.g., for remitting seed money

to rural youth involved in agriculture). Other financial services that are dispensed through digital

platforms include small-scale credit and saving schemes, insurance, and crowdfunding.137 Examples

range from platforms designed to offer a comprehensive digital financial operating ecosystem in

order to improve access to financial services138to platforms integrating different functions such as

financial services (i.e. loans), purchase of agro-inputs and linkage to traders/buyers.139

31. Education and training. Digital platforms can represent a means for providing education and

training for farmers. This can occur within an integrated supply chain, when the chain leader transfers

technology, know-how and other relevant information as a way to promote the efficiency of the chain

and better integrate the different actors. In other cases, the platform offers education and training

which are complementary with respect to the provision of other goods and services. For instance, a

digital platform for milk can enable the sharing of knowledge and resources about cow health,

workspace disinfection, and other good dairy farming practices. An agricultural ’chatbot’ can provide

advice to farmers about sustainable farming practices and reducing waste. There might be other

cases where the platform offers education and training for purely altruistic reasons or for supporting

their members. Alternatively, the digital platform may operate in a more peer-to-peer manner, where

farmers share knowledge and insights with each other. Relatedly, digital platforms can be used to

promote networking and peer-learning between young farmers and rural youth organisations. This

has also contributed to the burgeoning growth of agri-influencers on social media.

135 https://climate.com/en-us.html 136 https://www.trotrotractor.com/; https://trringo.wordpress.com/about/; World Bank 2019: 14. 137 IFAD 2026 – BanhJi Rural Enterprise (Cooperative Digital Solution) - Cambodia, APR. 138 https://banhji.com/ 139 https://agrinnovators.org/news/e-granary-digital-platform-for-east-african-smallholders/

UNIDROIT 2026 – Study LXXXC – Draft Chapter IV 139.

3. Improving Management

32. Data collection and management. Digital platforms can also represent a means for

generating, sharing, and managing data and information for agricultural purposes. For instance,

some platforms offer farmers a place to store and share agricultural data, while others enable the

tracking of important datapoints for a specific farming activity (e.g., flock size, vaccination schedules,

feed consumption for poultry raising).140

33. Advisory services. This management function can be connected to the provision of agri-

consultancy and advisory services,141 but it can also be independent from it. For example, the data

collected could be shared by the platform with input providers in order to provide them with field

data about the performance of their inputs and/or for improving their efficacy, by benchmarking their

operational data with those of other farmers.142 There are also cases in which the platform provides

both services and hardware, such as in the case of operators providing data analytics and tailored

prescriptions (e.g., on seed rate, crop protection, fertility), but also selling some hardware

components.143 This kind of solution is adopted by some agricultural machinery producers as well.144

34. Value chain management. In some instances, digital platforms are employed to better

manage the value chain in terms of logistics, compliance with regulatory standards, tips to value

chain members, production planning, marketing and the like. For example, software and platforms

can be developed for collecting field data from farmers and giving them management tips and

benchmarking data (vis-à-vis the performance of other members). The data can also be used to

organise logistics, production planning and marketing.145 For instance, a state-run digital platform

can be used to reduce wastage in the public procurement of produce from farming organisations for

school meals.146

35. Provision of information. Digital platforms can provide information to farmers to allow them

to make better decisions and to be competitive in market transactions, for example, by offering

mobile- and web-based data collection solutions with the goal of improving decision-making and

market interactions. “147 Another example isrepresented by those companies which provide real-time

price data, disseminating them among small farmers in order to allow them to effectively bargain for

the prices of commodities.148

V. THE MAIN ACTORS IN DIGITAL PLATFORMS IN AGRICULTURE

Platform Operators

36. Definition platform operators. Digital platforms are often conflated with the various legal

structures that build, maintain, and own these platforms. It is important to distinguish “platform

operators” from the members and user groups of a platform: the first refers to the organisations

creating and running the platform, and the second to the individuals and organisations taking

advantage of the services offered by and/or through the platform. The ELI Model Rules on Online

Platforms define a platform operator as “a trader who operates a platform”,149 with a trader being

140 IFAD 2026 – My Poultry Manager – Nigeria, WCA; https://datacollaboratives.org/cases/joindata.html; https://djustconnect.be/en/how-does-it-work.. 141 https://agrevolution.in/; https://www.fbn.com/ 142 https://datacollaboratives.org/cases/growers-information-service-cooperative-gisc.html. 143 https://climate.com/en-us.html. 144 https://www.deere.com/en/digital-tools/. 145 EIP-Agri 2016 : -11.

146 IFAD 2016 – Mobile app for public purchases of school mean program, Guatemala, LAC 147 https://www.esoko.com/about. 148 https://dataimpacts.org/project/market-data-raise-farmer-income/. 149 Article 2(b), ELI Model Rules on Online Platforms.

140. UNIDROIT 2026 – Study LXXXC – Draft Chapter IV

“any natural person or legal person, irrespective of whether privately or publicly owned, who is acting

for purposes relating to its trade, business, craft or profession…”.150 Digital platform operators can

be for-profit businesses, in which the business is typically financed by venture capital and generates

income from mediating transactions between the “sides” of the platform (e.g., through a transaction

fee). There are also not-for-profit digital platform operators, like collaborative networks aimed at

making available food via local online platforms. The distinction between a platform and a platform

operator requires investigating, as does the relationships tying them together. A prominent reason

why platforms are conflated with platform operators is because the operator itself sometimes uses

the platform to interact with users, rather than only intermediating user groups. UNCITRAL, for

example, notes that an e-commerce platform operator can directly become involved in the sale of

goods and services alongside, and in competition with, other user groups.151

Platform Members

37. Definition of platform members. In addition, it is possible to distinguish between types of

user groups. There are users and, separately, there are “members” as a particular sub-category of

users who join a platform by entering into a membership agreement with the platform operator.

Platform Users

38. Definition of platform users. In contrast, users are actors who engage with the intermediary

services offered by the platform without formally being a member. This distinction is strictly

interwoven within the management structure of the platform. There can be platforms where there

are only operators and users (i.e., the operator does not allow the entry of users as members), where

there are only members (i.e., the operator requires users to become members in order to use the

platform), and where there are both members and users (i.e., depending on the fact that the

prospective members meet the standard to become a member and/or the user wants to “upgrade”

her status and become a member to take part in the platform’s management). This distinction reflects

the idea that the platform needs management (i.e., layer one collaboration) different from the

management of the activities that take place on the platform (i.e., layer two collaboration).

Blurred Categories

39. Platform management. Another way to understand the distinction between users and

members is by referring to their participation in the management of the platform. Members are those

subjects who have a managing role/participation in the platform (e.g., right to vote to appoint

platform managers), while users are those who have access to and/or use the services hosted on

the platform without having managing roles/participation. The distinction between members and

users can represent an oversimplification to some extent of what occurs in some instances - there

might be peer platforms where there are no delegated managers but all users have voting rights -

but this distinction is nevertheless a useful starting point for analytical purposes in order to grasp

the differences in terms of roles, powers and responsibilities between the different actors interacting

within a digital platform ecosystem.

40. Users outside the platform. In addition, the distinction between those user groups that are

“inside” the boundaries of a platform operating firm and those that are “outside” those boundaries is

not always clear. Multi-disciplinary research shows how digital platforms and their ecosystems have

begun redefining the boundaries of firms, including the collaborative legal structures that are the

focus of this Legal Guide. Once platforms begin organising activity across supply chains and

ecosystems, they access services and resources beyond those provided by a firm. For instance,

innovation and hybrid digital platforms, and the firms that operate them, often come to rely on the

expertise of software developers who are not directly employees or members of the firm. This is

150 Article 2(i), ELI Model Rules on Online Platforms. 151 UNCITRAL 2023, p. 53.

UNIDROIT 2026 – Study LXXXC – Draft Chapter IV 141.

significant as the governance of digital platforms is shaped by the technical choice of platform

designers, with ramifications for what a platform does and how it does it. Consequently, information

systems theorists have advised the careful consideration of how platform decision rights are

partitioned between developers and the firms operating the platforms, how these firms control the

output and process of software development, and how they decide on whether the ownership of the

digital platform should be proprietary or shared.

VI. BENEFITS AND CHALLENGES OF DIGITAL PLATFORMS IN AGRICULTURE

A. Benefits of Digital Platforms in Agriculture

41. Potential benefits. There are several potential benefits of using digital platforms in

agriculture. Digital platforms can enhance the productivity and efficiency of smallholders by reducing

transaction costs and search costs (e.g., reducing the costs of finding consumers or suppliers), for

example easing the procurement of soybeans for farmers. Relatedly, aggregating data through the

use of digital platforms can also help farmers to negotiate the price of inputs with suppliers at a

greater scale. Digital platforms that operate as online marketplaces can potentially help farmers

bypass rent-seeking middlemen and directly access national and international markets. This can

support the integration of global value chains. Consequently, digital platforms can broadly contribute

to increasing the income of farmers, including women and young farmers.

42. Resource efficiency. In broader terms, the use of artificial intelligence and other emerging

technologies is also considered to be advantageous as it can help smallholders reduce the waste of

energy and resources. This is beneficial for climate change adaptation and mitigation efforts. Digital

platforms can thereby contribute to food security and even rapid, “leapfrog” development and

modernisation.152

B. Challenges of Digital Platforms in Agriculture

43. Market failures. At the same time, the rapid growth of the platform economy and the data

economy has generated significant market failures that may eventually require remediation through

State intervention. These failures include: (i) lock-in of farmers’ data due a lack of technical and data

interoperability, (ii) the weak bargaining position that farmers have vis à vis the size of platform and

data operators; (iii) the presence of data sharing agreements that favour large players; (iv) the lack

of trust farmers may have about the use of their data; (v) the conflict between the legitimate interest

of actors like the state in accessing agricultural data with farmers’ interests in protecting their farm

data. In addition, infrastructural problems, such as lack of connectivity, limited access to technology

or power shortages, might affect access to digital platforms by some groups of farmers.

44. Digital divide. Many digital platforms used in the agricultural sector are only pilot projects

and have not been subject to impartial and rigorous research. There are practical concerns about

digital platforms not being able to sustainably generate revenue and ensure the privacy and security

of agri-data. The existence of a (gender) digital divide - even within countries - and disparities

between urban and rural areas as well as literacy and language skills can also all impact the update

of digital platforms.

45. Corporisation and power asymmetries. From a political economy and critical agrarian studies

perspective, the use of digital platforms can contribute to the corporatisation of the agricultural

sector, to the detriment of smallholders. These platforms may come to depend on, and earn income

from, corporate agri-business, thereby creating new power asymmetries (as further discussed

below). The generation of large quantities of data can itself be used as a tool for control and new

152 African Development Bank 2016.

142. UNIDROIT 2026 – Study LXXXC – Draft Chapter IV

colonial practices, by both extracting data from vulnerable agrarian communities without their

informed consent and using this data to determine their choice of diet, farming practices, and other

aspects of their life. This threatens the autonomy of farmers. By shaping preferences and behaviour

- e.g., which farming practices, seeds, etc. are “optimal” as opposed to others - digital platforms

potentially contribute to the creation of monocultures and can threaten biodiversity. The aggregation

of data, and the transparency and legibility that data analytics ensures, can have broader implications

beyond the agricultural sector. The digital identification and registration of land contribute to its

financialisaton by making land more eligible for global purchase and exchange. The concentration of

data, according to some, can also contribute to the concentration of markets. Transparency about

farmers’ data may have benefits in terms of alerting other actors in the value chain about, e.g.,

spoiled produce, but as actors are not as transparent about their own data, the relative bargaining

power of farmers can diminish.

C. Data-Related Problems in Agriculture

46. Recognising the “data ownership” rights of farmers. The combination of high switching costs,

significant barriers to entry to digital agriculture, and data fragmentation privileges the largest

agricultural enterprises that could afford to be first-movers and establish themselves in the market.

This works to the detriment of newer actors, such as small agricultural cooperatives. However, for

integrated agricultural giants, exploiting these market failures and benefiting from data-driven

“smart farming” can be a means to recoup some of their losses incurred through a shrinking of their

traditional business (e.g., sale of seeds, fertilisers), which in part is due to the efficiencies and cost-

savings achieved by large and small agricultural enterprises alike through the use of new

technologies. A prominent proposal for addressing these concerns is recognising the “data ownership”

rights of farmers. Data ownership continues to be an important, contentious discussion point globally,

as it could potentially enhance farmers’ trust in new technologies and data sharing and reduce data

lock-in. However, such ownership rights may valorise an individualised notion of ownership and, on

their own, do not strengthen farmers’ bargaining power relative to larger agricultural enterprises,

leading to newer calls for strengthening data access.

47. From Data Ownership to Data Access. The latter seems to be the approach adopted more

recently by many institutions, which have rejected the idea of data ownership due to the risk that

such an exclusive right might cause excessive fragmentation and create obstacles to the

establishment of a data-driven economy. Data access seems to represent a concept more in line with

the need to allow for the circulation of data and to promote data-driven products and services. It

appears that, so far, this type of approach has been followed in the agricultural sector as well. For

example, the codes of conduct, developed in both the EU and USA, dealing with agricultural data

sharing, while recognising that data belong to farmers, focus on data access and the use of

contractual arrangements for sharing data.

48. Data access. In the context of digital platforms, similar dynamics are expected, with