Different Features of Cooperative Society in India

Features of Cooperative Society
Ganesh Nair
| Updated: Aug 10, 2022 | Category: Cooperative Society Registration

A cooperative society is a mutual accord between people where they come together to pool their resources to achieve a common economic objective. Members of a cooperative society usually consist of workers and small producers. Many people set up cooperative societies to safeguard their interests as one. There are features of cooperative societies. This article aims to enlist such features.

Features of Cooperative Societies:

Features of cooperative society signify how they differ from other forms of association.

  1. Membership in Cooperative society is Voluntary:

The main feature of cooperative societies is that the membership is voluntary. The idea of cooperative societies is to get like-minded people together to achieve a common goal that is for the benefit of all the members. That’s why membership in a cooperative society is voluntary. A person can be a part of it as long as he desires and leave it when he feels like it. However, when a member leaves a cooperative, his shares are not transferrable to others. If a person dies, the shares are automatically transferred to their heirs.

  • It has Open membership:

Another key feature of cooperative societies is that the membership is open to everyone irrespective of caste, colour, creed, race or sex. The cooperative can be made for a particular group of people. Still, there can be no discrimination inside that group, i.e. a cooperative can be made for employees of a government institution; here non –government employees can be denied membership. Still, membership cannot be denied on any distinction among employees of the govt. Institution. 

This does not mean that the membership cannot be denied on any grounds. The membership can be denied if it is detrimental to the group’s ideas and objectives. The managing committee has the right to terminate membership on similar grounds.

Further membership in a cooperative society is perennial, meaning it is not closed after a fixed period.

  • Liability of members:

This feature of a cooperative society is similar to that of companies, the liability of members in a cooperative society can be of two types; Limited or unlimited. Limited liability societies are much more common in India. Limited liability cooperative societies must mention the word “limited” in their name.

  • Investment of Capital:

The cooperative society members contribute to the capital through the purchase of shares. This is not the only source of capital. The government and various banks also extend their financial assistance to cooperative societies. Generally, cooperative societies are created to cater to the economically weaker sections of the society, so their capital is scant. On top of this, the regulations restrict the maximum shares a person can buy in a cooperative society.

  • Meager interest on capital:

The cooperative society is heavily dependent on capital to function effectively. A cooperative society[1] always fosters the interest of its members, and its operations are capital intensive. Moreover, the cooperative is created for its members’ betterment and service. Therefore, the dividend received on the capital is minimal. Laws require a cap to be put on the dividend rate given in case a profit has been generated. In India, this dividend rate is seldom more than 10%.

  • Surplus distribution:

The creation of a cooperative society is for the welfare of the people. So, when the cooperative society earns a profit, it is not disbursed to the members as per their capital contribution. Instead, regulations state that 25 percent of the profit must be infused back into society. Similarly, as stated in the point mentioned above, only a specific percentage of the profit is returned to the members, typically capped at 10 percent.

  • Democratic in nature:

All cooperative society’s operations are carried out with the members’ assent. While electing the committee members who shall look after the working of cooperative society- each member has ‘one’ vote irrespective of their shareholding capacity. The meetings of the cooperative societies are conducted locally and are attended positively by most members. 

There is a cap on the maximum shareholding in a cooperative society. This ensures that one person cannot have undue influence on the working of society. Therefore no member can threaten or force an action contrary to the consensus because of his shareholding capacity.

Similarly, like in various government institutions, the meetings take two-thirds/three-fourths majority to finalise a decision. Also, frequent meetings are conducted, and members are educated on various aspects of the committees.  

Such actions show how much democratic values are imbibed in a cooperative society.

  • Legal Status and registration:

A cooperative society must be registered under the Cooperative Societies Act, 1912 or through the cooperative society acts of different states. The following conditions must be met to get your cooperative societies registered:

  1. Minimum of 10 members.
  2. A duly filled application with all the relevant information.
  3. The application should accompany documents that entail the company’s name, address, shareholding, rules and bye-laws.

If the registrar is satisfied with the application, he shall issue a certificate to the cooperative society. This shall enable the cooperative society to have a legal existence.

A cooperative society has the right to take in new members and issue shares. Cooperative societies need to abide by various regulations. They are periodically required to submit audited documents and records to the registrar, and in some instances change in managerial position requires prior approval from the registrar.

  • Service motive:

A cooperative society is created to serve the people. The objective can vary from housing Cooperative Society, Marketing cooperative society, Agriculture cooperative Society, Credit cooperative society, Producer and Consumer cooperative society. A cooperative never functions to maximise profit; instead, it is created to work for the well-being of its members and society.

  1. Elimination of intermediaries:

The cooperative society directly serves the customers. There is no involvement of middlemen. This feature of a cooperative society makes it distinct from other entities involved in selling goods/services. As soon as the role of intermediaries is negated, cooperative societies can deal with customers directly. This enables the customers to get the goods at a fair price. and the seller gets more profit out of their sale and honest feedback. This results in the creation of healthy competition.

Conclusion:

Cooperative societies are not created to earn huge profits. They are created to serve and safeguard the interest of their members. There are various features of a cooperative society that enable us to understand how it differs from other companies and entities. These features often describe the sense of community, collective efforts and democratic nature that the cooperatives imbibe.

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Ganesh Nair

Ganesh Nair completed his graduation in law from IP university. He is an ardent researcher who has written various research papers and articles on contemporary legal issues. His keen interest in the field of research made him pursue a career in legal research. His core area of interest include Cyber, IPR and Finance laws.

 

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