Co Oprative Society

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COOPERATIVE SOCIETY

COOPERATIVE SOCIETY

A cooperative society is formed by the people of limited means for self help through mutualhelp. It is set up to protect economically the poor sections of the society. It is set up forcooperation, not for competition. The motto of a society is self help, without dependence onother business units.

DEFINITION

1. According to Herrik

Cooperation is an action of persons voluntarily united for utilizing reciprocally their own forces, resources or both under mutual management for their common profit or loss .

2. According to Mr. Plunket

The cooperation is self help made effective by organization.

Diagram

Cooperative Society

Welfare

Business

Number of persons

Pool Resources


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What is a Co-operative?A co opera t ive i s def ined as an au tonomou s assoc ia t ion of persons un i ted vo lun ta r ily to m eet the i rcomm on econom ic , soc ia l, and cu l tu ra l needs and asp i rat ions th rough a jo in t ly -owned and

demo crat ical ly-contro l led enterprise.

A cooperative may also be defined as a business owned and controlled equally by the people who use itsservices or who work at it.

The following are the some of the definitions of cooperative organisations.

(1) International Labour Organisation- "Cooperative is an association of person usually of

limited means, who have voluntarily joined together to achieve a common economic, endthrough the formation of a democratically controlled business organisation, make equitablecontribution to the capital required and accepting a fair share of risks and benefits of theundertaking."

(2) Hubert Calvest- "Cooperative is a form of organisation wherein persons voluntary associatestogether as human beings on the basis of equality for the promotion of the econo interests ofthemselves."

(3) The Indian Cooperative Societies Act, 1912 - Section 4 of this Act definies cooperatives "as a

society which has its objectives the promotion of economic interest, its members in accordancewith cooperative principles."

Cooperative Society is that society which has been registered under the Cooperative SocietiesAct, 1912, or under any other law for the time being in force in any state registration ofcooperative society."

(4) Mr. Talmaki - "Cooperative society is an association of the weak who gather together for acommon economic need and try to lift themselves from weakness into strength throughbusiness enterprise."

Characteristics of Cooperative Soceity:

Based on the above definitions, we can derive the following characteristics of cooperativeorganisations.

1. Voluntary association:


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Everybody having a common interest is free to join cooperative society. There is no restrictionon the basis of caste, creed, religion, colour, etc. Anybody can also leave it at any time aftergiving due notice to the society. That is specialty of any cooperative society. There should be

minimum of 10 members to for cooperative society but there is no maximum limit for themembership.

2. Separate legal entity:

A cooperative society after registration is recognised as separate legal entity by law. It acquiresan identity quite distinct and independent of its member can purchase, dispose its own assets,can sue and also can be sued. The income of cooperative society is legally taxable as per theIncome Tax Act, 1961.

3. Democratic management:

Equalities is the essence of cooperative enterprises, governed by democratic principles. Everymember has got equal right over the function management of that society. As such eachmember has only single voting right irrespective of the number of shares held or capitalcontributed by them. In case of cooperative society, no member detects the terms andconditions of the functioning because "one man one vote" is the thumb rule.

4. Service motive:

The main objective being formation of any cooperative society is for mutual benefit through

self-help and collective effort. Profit is not at all in the agenda of the cooperative society. But ifmembers so like, they can take up any activities of their choice to generate surplus in order tomeet the day-to-day expenses.

5. Utilisation of surplus:

The surplus arising from the operation of business is partly kept in a separate reserve and partlydistributed as dividend among the members. According to Indian Cooperative Societies Act -1912, each society must transfer at least one-fourth of its profits to general reserve. It maydistribute maximum upto 90 per cent of its surplus as dividend to its members and can spent

another 10 per cent for the welfare of the members.

6. Cash trading:

One exception in the cooperative society is that like other business if never go for credit sales. Itsells the goods on the basis of cash only. Hence, the cooperative society hardly come across


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with the financial hardship because of non-collection of sales dues. Members can only purchaseon the basis of credit, which is an exception to the present rule.

7. Fixed rate of return:

All members are supposed to contribute capital for the formation of a cooperative society or atthe time of joining as a member of the cooperative ^society. In return to the capital invested,the members are assured of a fixed rate of return maximum to the extent of 9 per cent perannum on the sum deployed by them. This amount is being paid from the surplus generated bythe society on that year. This is an incentive extended by the society to its members.

8. Government control:

All the cooperative societies of the country are regulated by the Government through its

different rules and regulations framed from time to time. Cooperative societies of the countryare required to register themselves as per the Indian Cooperative Societies Act, 1912.Sometimes different State Governments also frame laws regarding the registration andfunctioning of cooperative societies for their states.

9. Capital:

The capital of the society is raised from its members by way of share capital. However, themajor part of finance is raised by the society through taking loan from the Government or byaccepting grants and assistance from the Central or State Government or from the apex

cooperative institutions like state and central cooperative banks operating in that state.


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ADVANTAGES OF COOPERATIVE SOCIETY

Following are the important advantages or merits of cooperative society:

1. Advantage for Farmers

Farmers can get fertilizers and seeds at low prices from such cooperative societies. Farmerscan also self their production at high rate or prices through cooperative societies.

2. Easy Formation

The formation of cooperative society is very easy. the formalities for registration are simpleand formation expenses are also normal. The registration of a society is not compulsory butit is desirable to have its registration.

3. Equal Rights

All members of cooperative society enjoy equal right of vote and ownership. Eachshareholder has only one vote in the management of cooperative societies.

4. Equal Distribution of Wealth

The profit of middlemen is also distributed among the workers. These societies remove theunequal distribution of wealth.

5. Economic Democracy

Cooperative society is a domestic form of organization. Every member is allowed toparticipate in the management of the business. Each member has the right to cast vote. Thedecision of majority is honored.

6. Elimination of Middlemen

Cooperative society eliminates the profit of middlemen. These societies purchases goodsdirectly from the producers for members and provide them on wholesale rate to society

members.

7. Financial Assistance

These societies also provide financial assistance to its members. In case of house buildingcooperatives housing society provides loan for the purchase of inputs.


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8. Friendly Relations

A cooperative society is a mean of developing friendly relations among the members. Asociety provides a platform for the introduction of members with each other.

9. Improve the Standard of Living

Such societies provide the goods and services to the members of the society at low prices.Due to this, the purchasing power of the people increases and their standard of livingimproves.

10. Increase in Employment

The cooperative societies also increase the employment opportunities for people.Thousands of people are engaged in different types of cooperative societies.

11. Limited Liability

The liability of each member in cooperative society is limited to the share capital, which heinvested. His remain safe.

12. Mutual Cooperation

It is worthwhile to mention here that cooperative society is very useful for creating thespirit of friendship and brotherhood among the members. Cooperative society is the basicneed of human being in modern era.

13. No Monopoly

A start of the society is the end of monopoly. The monopoly eliminates the competition andcontrols the market and prices. The society tries to restore competition and to eliminatecontrol over market and prices.

14. Open Membership

The membership of a cooperative society is open for all people living in the same area. It isa voluntary association of persons of any caste, color and creed.


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DISADVANTAGES OF COOPERATIVE SOCIETY

Following are the disadvantages of cooperative societies:

1. Lack of Capital

Generally the members of cooperative societies are related to poor group and they cannotprovide the capital on large scale. External financial resources are also limited. So,cooperative society faces the shortage of capital, which is a handicap to their development.

2. Untrained Supervision

The government has sufficient control over the movement of these societies. Thesesocieties cannot prosper because the staff appointed for supervision is mostly untrained.

3. Defective Organization

The organizations of cooperative societies are defective and these cannot operateefficiently to fulfill their objectives.

4. Illiterate and Ignorant

In our country, the villagers are generally illiterate and ignorant. So, they are not familiarwith the basic concept of the cooperative societies.

5. Lack of Experience

The members of societies have less experience of business. Due to lack of capital, theycannot hire the services of experts.

6. Lack of Discipline

Every member of the cooperative society considers himself as the owner of the business.Due to lack of discipline, business suffers a loss.

7. Lack of Sincere Management

It is our common observation that the management of society remains in the hands ofselfish and dishonest persons or members who obtain undue advantage form their powers.So, business suffers a loss.


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8. Lack of Profit Incentive

It is not a profit earning institution. Due to absence of profit incentive, the progress ofcooperative society is very poor.

9. Lack of Secrecy

There is no secrecy in the business of cooperative societies.

10. Lack of Knowledge

The members of cooperative society do not know the principles and rules of society. So,they create great problem for society.

11. Lack of Unity

In the absence of proper education and training, it is useless to think about unity. The lackof unity leads towards the destruction of the business.

12. No use of New Technology

The cooperative societies cannot use the latest technology in production. As a result of this,demand and profit remains low.

13. No Public Confidence

A cooperative society is not bound to publish annual financial statements for theinformation of general public. Due to this public shows less confidence in them.

14. Delay in Decision

The main cause of failure of cooperative societies is delayed in decisions.

15. Government Control

The cooperative department of the provincial government supervises the work of allcooperative societies. The business of a society is not free like other forms of business, so itcannot earn maximum profit.

Documents

Co Oprative Society