Legal framework

The legal framework analysis aims to provide general knowledge of the national cooperative legislation and of its main characteristics and contents, with particular regard to those aspects of regulation regarding the identity of cooperatives and its distinction from other types of business organisations, notably the for-profit shareholder corporation.

It aims to evaluate whether the national legislation in place supports or hampers the development of cooperatives, and is, therefore “cooperative friendly” or not, and the degree to which it may be considered so, also in comparison to the legislation in force in other countries of the ICA region, or at the supranational level.

In addition, the research aims to provide recommendations for eventual renewal of the legal frameworks in place in order to understand what changes in the current legislation would be necessary to improve its degree of “cooperative friendliness”, which is to say, to make the legislation more favourable to cooperatives, also in consideration of their specific identity. This webpage presents a snapshot of the legal framework analysis results for Bhutan.

The Co-operatives (Amendment) Act of Bhutan, 2009 was enacted to facilitate the development of cooperatives as a sustainable pillar of growth within the private sector. It directs the Royal Government of Bhutan to promote cooperatives for the well-being of members and communities. The Act provides for five types of cooperatives i.e. farmers’ group, primary cooperatives, federation of cooperatives, union of cooperatives and special types of cooperatives. It does not provide for specific tax exemption to any farmer group or cooperatives since taxation is governed by tax laws in Bhutan. However, all existing cooperatives are exempted from paying tax, as the Fiscal Incentives Tax of Bhutan, 2017 granted a 10-year tax holiday to businesses engaged in agriculture and renewable natural resources sector.

Main laws relevant to cooperatives in Bhutan:

Co-operatives (Amendment) Act of Bhutan, 2009

Cooperative friendliness 

The cooperative legal environment of Bhutan is quite “cooperative friendly” as it provides a conducive environment to people to form cooperatives and work towards realisation of their common aspiration to become economically self-reliant. 

Key recommendations for improvement 

  • Extend application of the Act to those cooperatives whose activities are beyond the renewable natural resources sector.
  • Set legal sanctions for non-adherence to provisions of the Act and its Rules.
  • Outline clear procedures for the settlement of grievances or disputes through mediation, and without having to seek judicial adjudication.
  • Outline clear roles and responsibilities of the Registrar and the Department of Agricultural Marketing and Cooperatives (DAMC).


The Co-operatives (Amendment) Act of Bhutan, 2009 was enacted to facilitate the formation of farmer groups and cooperatives in the country. It is the only legal framework that recognises farmer groups and cooperatives as legal entity. The implementation of this Act is supplemented by Co-operatives Rules and Regulations, 2010 which provide detailed procedural requirements for the formation, governance and management including financial management of farmer groups and cooperatives. The cooperative law in Bhutan is enacted based on the internationally accepted seven principles of cooperatives, which were adopted by ICA for the betterment of cooperatives globally. The current legislation is cooperative friendly and allows for the promotion and development of farmer groups and cooperatives in the country. However, the current legislation does have some issues raised by farmer groups and cooperative members and are being considered for revision by DAMC and Legal Services of the Ministry of Agriculture and Forests in the new Cooperative and Farmer Groups Bill, 2019.


The legal frameworks analysis is a tool developed under the ICA-EU Partnership #coops4dev. It is an overview of the national legal frameworks at the time of writing. The views expressed within are not necessarily those of the ICA, nor does a reference to any specific content constitute an explicit endorsement or recommendation by the ICA. 

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