Features of Cooperative Society

Everything you need to know about the Features of Cooperative Society. Cooperative society form of organisation has emerged as a consequence of industrial revolution which led to proliferation of industrial activities.

This also led to the emergence of two distinct classes in the society, industrialist and labour. Industrialists used to exploit labour and other weaker sections of the society.

To protect the interests of the weaker sections of the society, the concept of cooperation emerged which has the motto, ‘each for all and all for each’ and ‘self- help through mutual aid’.

This cooperation resulted in the emergence of cooperative form of organisations, commonly known as cooperative societies, for various activities, including business activities.

Some of the features of a cooperative society are:-

1. Voluntary Association 2. Equal Voting Rights 3. Separate Legal Entity 4. Service Motive 5. Distribution of Surplus 6. State Control 7. Elimination of Middlemen 8. Cash Trading 9. Audit

10. Principle of Self and Mutual Help 11. Democratic Management 12. Perpetual Existence 13. Open Membership 14. One Man One Vote 15. Perpetual Existence 16. Spirit of Co-Operation 17. Capital Raising 18. Registration 19. Management of Affairs of Co-Operative

20. Dividend Distribution from the Surplus 21. Service Motto 22. Disposal of Surplus 23. Fixed Return on Capital 24. Common Interest 25. Equality of Vote 26. Distributive Justice 27. Limited Capital 29. Morality and Ethics.

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Features and Characteristics of Cooperative Society: Voluntary Association, Open Membership, Service Motto and a Few Others

Features of a Cooperative Society – 12 Important Features of a Cooperative Society

1. Voluntary Association- The membership of cooperative societies is voluntary. Anybody having a common interest is free to join a cooperative society. The member can also leave the society any time after giving a proper notice.

2. Equal Voting Rights- A cooperative society is based on the principle of “one man one vote”. A member has only one vote irrespective of the number of share(s) held by him. Thus, a co-operative society runs on democratic principles.

3. Separate Legal Entity- A cooperative society is required to be registered under the Co-operative Societies Act. Registration provides it a separate legal entity. Its existence is quite different from its members.

The death, insolvency or lunacy of a member does not affect its existence. It can sue and be sued in its own name. It can make agreements as well as purchase and sell property in its own name.

4. Service Motive- A cooperative society is based on the service motive of its members. Its main objective is to provide service to the members and not to maximize profits. Earning profits is the most important objective of other forms of business organization. It is not so in the case of co-operatives.

5. Distribution of Surplus- Members are paid dividend and bonus out of the profits of the co-operative society. The bonus is given according to the volume of business transacted by each member with the co-operative society.

For example, in a consumer co-operative society, bonus is paid in proportion to the purchases made by members during a year. In a producers’ cooperative society, the value of goods delivered for sale forms the basis of distributing bonus.

6. State Control- Cooperative societies are subjected to regulation and control by the government. In India a cooperative society can be registered under the Cooperative Societies Act, 1912 or the State Co-operative Societies Act.

7. Elimination of Middlemen- The main object of the cooperative societies is to eliminate middlemen and to establish direct contact between members and customers. This ensures availability of goods at fair prices and minimizes unhealthy competition.

8. Cash Trading- Generally, a co-operative society buys and sells goods on cash basis. Cash trading does not involve bad debts and credit collection expenses. Thus, it helps the society to have a good working capital and to maintain short-term solvency.

9. Audit- Accounts of cooperative society are audited by the auditors appointed by the Government under the supervision and control of Registrar of Co-operative Societies.

10. Principle of Self and Mutual Help- Cooperative society promotes the common interests of its members through self-help and mutual help.

11. Democratic Management- Annual General Meeting (AGM) of co-operative society is held every year in which the managing committee is elected, which manages the affairs of the co-operative society.

12. Perpetual Existence- Existence cooperative remains unaffected by the death, or insolvency of any of its members. Thus, it has perpetual existence.

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Features of a Cooperative Society – 10 Primary Features of a Cooperative Society: Voluntary Association, Open Membership, Service Motive, State Control and a Few Others

The primary features of a cooperative society are explained below:

1. Voluntary Association:

A cooperative society is a voluntary association of persons eager to raise their economic status in the locality through collective actions. The membership of cooperative society is free to those having a common interest. They can leave the society at their will after giving a due notice. A member can withdraw his or her capital but cannot transfer the shares to another person.

2. Open Membership:

Members join the cooperative society by choice. A minimum of 10 members are required for the formation of a cooperative society. The Cooperative Societies Act, 1912 does not put a limit on the membership of cooperative societies. However, after the formation of a cooperative society, the members may unanimously decide to specify the maximum number of members.

3. Service Motive:

Unlike other forms of business organisations, a cooperative society does not function to earn profits. The main objective of a cooperative society is to serve the public. It sells quality goods at cheaper rates to the members by retaining a small margin for profit. The profits are then transferred to the general reserve and used for the welfare of members.

4. State Control:

Cooperative societies are voluntary business associations. However, like any other forms of business entities, they are required to observe the laws and regulations framed by the government. The government exercises its control on these societies from time to time by checking their accounts. To fulfill this duty, the cooperative societies are required to send their account books to the registrar for inspection.

5. Democratic Management:

To perform the managerial work, the members elect the honorary office bearers in a democratic way. The management committee of the society is elected on the basis of ‘one person one vote’ in the general meeting. Thus, irrespective of the status or number of share holdings, all the members have the right to cast one vote.

6. Separate Legal Entity:

After getting registered under the Cooperative Societies Act, a cooperative society becomes a separate legal entity with an identity of its own. Its members have limited liability. The death, lunacy or insolvency of its members does not affect its existence. It can buy properties and can make contracts in its own name.

7. Distribution of Surplus:

Apart from rendering services to their members, cooperative societies also earn some profits, which are a by-product of their business activities. Profits, however, are not earned at the cost of the members’ welfare. Profits are distributed among the members not on the basis of the capital holdings, but in proportion to the participation of each member in the functioning of the society. The entire profits are, however, not distributed to the members.

The surplus is used in four ways:

(i) As per the law, one fourth of the profits are transferred to the general reserve.

(ii) A portion of the profits, not exceeding 10 percent, is used to pay dividend on share capital.

(iii) A part of the surplus, not exceeding more than 10 percent, can be used for the benefit of the areas where the business is working.

(iv) The remaining surplus can be divided among the members as bonus.

8. Cash Trading:

Cooperative societies conduct business activities on cash basis. Cash trading spares the cooperative societies to avoid bad debts and credit collection expenses. It also ensures continuous flow of capital and protects from short-term insolvency. However, these societies are not barred legally to sell goods on credit. Exceptions are made in case of some members.

9. One Man One Vote:

Cooperative societies make no distinction among the members on the basis of their financial strength or the number of shares held by them. Therefore, each member is allowed one vote regardless of the number of shares held by him or her and has equal say in the management.

10. Perpetual Existence:

A cooperative society enjoys lifelong existence. Once it gets registered, it cannot be dissolved except by law alone.

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Features of a Cooperative Society – Spirit of Co-Operation, Voluntary Association, Capital Raising, Registration, Management of Affairs of Co-Operative and a Few Others

1. Spirit of Co-Operation:

“Service before self”, ‘Service’ is of primary importance and “Self Interest” is of secondary importance. “Each for all and all for each” is the mantra of co­operative. Every member works in the interest of the co-operative.

2. Voluntary Association:

For pursuing common objective persons voluntarily come together and form an association. Its membership is open for all irrespective of caste, language, religion, sex or income. There is no bar against an individual desirous of becoming a member. Moreover no individual can be compelled to become a member.

3. Capital Raising:

The capital required by co-operative is raised by share capital which is contributed by its members. It has limited share capital. Therefore, co-operatives can raise their capital by way of loans, grants, and assistance from the Government.

4. Registration:

Registered co-operative gets an independent status and can own its assets, enter into contracts can sue and be sued. Registration procedure is simple and not time consuming.

5. Management of Affairs of Co-Operative:

Management of the affairs of co-operative is entrusted to directors elected by its shareholders in annual general meetings and they are responsible and accountable to the members. Each shareholder has one vote only, irrespective of the number of shares held by him or her.

6. Dividend Distribution from the Surplus:

In co-operative, return on capital investment to its members is given in the form of dividend from its surplus after meeting its trading liabilities.

7. Separate Legal Entity:

Co-operative has separate legal entity distinct from its members as such it has a perpetual life and is not affected by the entry and exit of members. It can own property and dispose it off in its own name, can enter into business contracts in its own name, it can sue and can be sued in its own name.

8. State Regulation:

The co-operatives in a state are regulated and governed by the special Acts, enacted by respective state e.g. Maharashtra State Co-operative Society Act 1960.

9. Democratic Functioning:

The managing committee is elected by members on the basis of one member one vote, irrespective of the number of shares held by any member. The management of the co-operatives is done in a democratic way.

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Features of a Cooperative Society – 7 Distinctive Characteristics: Voluntary Association, Finance, Control and Management, Service Motto, Disposal of Surplus and a Few Others

As a form of organisation, the cooperative association is marked by the following distinctive characteristics:

Characteristic # 1. Voluntary Association:

“A co-operative society is a voluntary association of persons and not of capital.” Any person, irrespective of his caste and creed, can join a co-operative society of his free will and can leave it at any time after giving due notice to the society. While leaving, he can withdraw his capital from the society. He cannot, however, transfer his share to another person.

The voluntary character of the co-operative association has two major implications- (a) none will be denied the right and opportunity to become its member, and (b) the co-operative society will not compel anybody to become a member. Exception will, of course, have to be made in case of people whose professional interests differ from those of the society, e.g., a private trader competing with a consumer co-operative.

Characteristic # 2. Finance:

The capital of a co-operative society is raised from members by way of share capital. Since co-operatives are organised by relatively weaker sections of society, the share capital is generally limited. However, it is a part of Government policy to assist and encourage co-operatives and therefore, a co-operative society can usually augment its resources by loans from the State and Central Co-operative Banks.

Characteristic # 3. Control and Management:

Democracy is the key-note of the management of a co-operative society. Since most of these societies operate on a local scale, the meetings of the members are generally well attended. At these meetings, the members elect the managing committee and lay down the policy which it must follow to promote their common interests.

Each member, whatever be his stake in the society, has one vote and hence an equal right to participate in the management of the society. Members cannot vote by proxy. Besides, the organisation and control of a co-operative society tend to be perfectly democratic in so far as its bye-laws are approved by the members after it has been registered.

Not merely this, even the day-to-day work of a co-operative society may be carried on by the members working in different capacities, and outsiders may be employed only when the society grows too large.

Characteristic # 4. Service Motto:

A co-operative society is organised primarily with the object of rendering maximum service to its members in a certain field. It does not aim at profit at the cost of its members, for it is formed basically for providing certain essential facilities to members. This does not mean that a cooperative society will never work for profit. It is quite usual for societies to earn profits by extending their services to non-members.

Characteristic # 5. Disposal of Surplus:

It is usual for commercial concerns to distribute profit among the owners in the ratio of their capital contribution, or in an agreed ratio. A co-operative society differs from the trading companies in this respect.

Under the co-operative form of ownership and organisation, the surplus arising out of a year’s working is given to the members not directly as dividend on shares held by each of them, but in the form of a bonus which need not be proportionate to their respective capital contributions.

The bonus may be paid to the members in proportion to purchases made during the year in the case of a consumers’ co­operative store, or in proportion to the goods delivered for sale to the society in the case of a producers’ co-operative store.

In fact, the profit arising out of a difference between the cost price and market price may not be distributed among members but may be utilised in extending amenities and facilities to the members or for undertaking certain social activities for the benefit of the members.

It may be noted that law requires that every co-operative society must transfer at least one-fourth of its profits to a general reserve, likewise, it is provided that a portion of the profit, not exceeding 10 per cent, may be utilised for the general welfare of the locality in which the society is functioning.

Characteristic # 6. Fixed Return on Capital:

One of the basic principles of co-operative organisation, laid down by the pioneers of the co-operative movement like Rochdale and Owen, was that a fixed or limited return on capital subscribed to the society must be paid out of the surplus to the members. “Making the payment of fixed interest on paid-up capital definitely a first charge on the trading surplus, gave those who joined the society a solid reason for leaving their saving in deposit with it.”

Characteristic # 7. State Control and Corporate Status:

Although voluntary in their basic character, the co-operative societies are subject to considerable State control and supervision. In India, the co-operative societies are registered under the Co-operative Societies Act, 1912, or the relevant State Co-operative Societies Act, as the case may be.

The co-operatives desiring to be registered must fulfil the following broad and basic requirements-

(i) A co-operative society must have at least 10 members who have attained majority in age (i.e., are above 18 years of age),

(ii) The members should be bound together by a common bond, e.g., they may belong to the same village or locality, tribe, or occupation, etc.

(iii) The members should present a joint application to the Registrar of Co-operative Societies furnishing important particulars like membership, share capital, objects, etc.

(iv) A copy of the bye-laws and the scheme of organisation should be submitted to the Registrar.

On registration, the cooperative society will attain the corporate status (the status of a company) and will become entitled to certain privileges. It will also be subject to control and supervision by the State. In fact the co­operative department keeps a watch on the working of the societies and tries to regulate it whenever necessary.

Every co-operative has to get its accounts audited by an auditor from the co-operative department and has to furnish returns of membership and annual report and accounts to the Registrar of Co-operatives. In some States like Madhya Pradesh, the Registrar of Co-operative Societies even approves of appointments in managerial position and lays down terms of employment.

The features of the co-operative organisation outlined above were the basic principles on which the co-operative movement was based in the beginning. With the passage of time, some of them have been modified in view of the peculiar needs and difficulties of certain types of societies.

While a co-operative society is essentially a business unit established primarily for organising and providing some service to the members and the community on a continuing basis, co-operation is not a mere form of business or economic organisation. It is a movement aiming at the end of exploitation by private business and the development of self-help among various sections of the society on voluntary basis.

It is a socio-economic movement inspired by the ideal of organising and uplifting the weaker sections of the society through collective action. In the words of the noted Indian co-operator late V. L. Mehta, “It is the claim of the co­operative movement that it can be the principal means of bringing about in a peaceful manner a social change of fundamental nature, ushering in a social order non-exploitative, equalitarian, tolerant, that harmonizes the dignity of the individual with the well-being of the community.”

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Features of a Cooperative Society – 14 Main Features of a Cooperative Society

Feature # 1. Voluntarily Organisation:

Co-operative Organisation is a voluntarily association of individuals seeking to improve their economic conditions through joint efforts. There is no legal binding or coercion from any corner for a person to become a member. A member is also free to quit the organisation at any time.

Feature # 2. Common Interest:

Unlike a Joint Hindu Family where membership is by – birth or by marriage into the family, a common interest brings members of a cooperative society together. The prime objective of the cooperative would be to this common interest.

Feature # 3. Open Membership:

Membership of the organisation is open to everybody. There is no restriction or time limit for enrolling as a member. Members can join anytime by paying a small membership fee or by subscribing to share capital of the co-operative. However, a minimum of 10 members are required to start a cooperative.

Feature # 4. Democracy:

The Co-operative Organisation is run on democratic lines. Members elect a board of Directors, who manage the affairs of the society on behalf of the members and are answerable to the members of the society. Thus, cooperative societies are truly democratic organisations.

Feature # 5. Equality of Vote:

In all matters requiring an opinion of members, a vote is taken. Each member, irrespective of his position in the society or the number of shares held by him, is entitled to only one vote. There is no provision for voting by proxy. This ensures that the opinions all members of the society are given equal weightage.

Feature # 6. Limited Return on Capital:

The unique feature of a cooperative society is that its objective is to ensure the wellbeing of its members, and not profit. Thus, capital contribution does not enjoy the same importance as in case of other forms of business. However, capital rewarded with a small rate of interest. Profit distribution is not based on capital contribution.

Feature #7. Distributive Justice:

Profits earned by the society are distributed amongst its members according to the extent of business transacted by the member with the society. A specified portion of profits is transferred to Statutory Reserve Fund and then a fair rate of interest is paid on capital subscribed by the members. Remaining Profits are distributed based on dealings of members with the society.

Feature # 8. Limited Capital:

Co-operative Societies are largely formed by people with limited economic means. Moreover, there is no incentive to contribute more capital as it earns limited returns and is not considered for distribution of profits. Thus, the amount of capital with the society is very small. Bulk of the funds is raised in the form of loans and grants.

Feature # 9. Cash Transactions:

A distinctive feature of cooperative societies is that almost all transactions are in cash. There is no trading in credit, as liquidity and -safety of funds is very crucial. The risk of bad debts is eliminated to protect the small capital base.

Feature # 10. Legal Status:

A cooperative society must be registered under the Cooperative Societies Act, 1912, or respective state cooperative laws. On registration, it becomes and independent entity of its own, distain it from its members. It can enter into contracts on its own. It can also sue other people and organisation in a court of law.

Feature # 11. Privileges:

A registered cooperative society enjoys certain privileges and exemptions granted by the Central and State Governments. It is exempt from payment of Income Tax, Stamp Duty, Registration Fees etc. A cooperative society has prior claim over the property of its debtors compared to other creditors.

Feature # 12. State Control:

Cooperative societies are governed by provisions of relevant laws and are subject to state supervision and control. One of the reasons is the amount of grants received by the societies from the government.

Feature # 13. Morality and Ethics:

The objective of cooperative society is not profit, but mutual gain, based on mutual trust. The society mainly deals with its members. The transactions of the society are above board; “the moral element in its aims is as important as the material.”

Feature # 14. Transfer of Shares:

There is no provision for sale or transfer of shares held by a member of the society in the capital of the society. However, there is a possibility of withdrawal of capital. The member can quit the society and take back his capital contribution after giving due notice.

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Features of a Cooperative Society – With the Definitions According to: The Cooperative Societies Act, 1912 and H.C.Calvert

Cooperative society form of organisation has emerged as a consequence of industrial revolution which led to proliferation of industrial activities. This also led to the emergence of two distinct classes in the society, industrialist and labour. Industrialists used to exploit labour and other weaker sections of the society.

To protect the interests of the weaker sections of the society, the concept of cooperation emerged which has the motto, ‘each for all and all for each’ and ‘self- help through mutual aid’. This cooperation resulted in the emergence of cooperative form of organisations, commonly known as cooperative societies, for various activities, including business activities.

Cooperative society is defined as follows:

Cooperative society is a form of organisation wherein persons associate together voluntarily on equal basis to further their common interests.

For example, consumers may form a cooperative society to purchase goods directly from the producers so as to cut the profit of middlemen and supply goods at cheaper rates to the members of the cooperative society.

Cooperative organisation is a society which has its objectives for the promotion of economic interests of its members in accordance with cooperative principles. -The Cooperative Societies Act, 1912

Cooperative society is a form of organisation wherein persons voluntarily associate together as human beings on the basis of equality for the promotion of economic interests of themselves. -H.C. Calvert

The main features/characteristics of cooperative society are as follows:

1. Voluntary Membership:

The membership of a cooperative society is voluntary. A person belonging to the same group, which is forming the society, may or may not join the society. Further, a member of the society has the option to leave the society by serving an appropriate notice of this action. Membership of the society is open to all concerned irrespective of their caste, religion, gender or political affiliation.

2. Separate Legal Entity:

A cooperative society is a separate legal entity which is distinct from its members. Registration of the society under the relevant Act is necessary which gives it a status of distinct identity. Thus, it can hold property and carry on activities in its own name; it can sue others and can be sued by others in its own name. Joining of new members or leaving of existing members does not affect the continuity of the society.

3. Limited Liability:

Liability of the members of a cooperative society is limited to the extent of capital contributed by them. Thus, the maximum risk of members is limited to this extent.

4. Service Motive:

The basic motive of forming a cooperative society is providing service to its members through its activities rather than earning profit from these activities. If the society earns profit, it is distributed among the members as dividend in conformity with the bye-laws of the society.

5. Management and Control:

The ultimate control of a cooperative society lies with its members. Members make decisions on the principle of ‘one man, one vote’. For the purpose of managing day-to-day affairs, members select their representatives as members of board of directors and/or management committee.

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Features of a Cooperative Society – With 2 Distinct Characteristics of the Constitution Exemplified by a Cooperative Society

The word cooperative means working together and with others for a common purpose.

The cooperative society is a voluntary association of persons, who join together with the motive of welfare of the members.

i. In order to bring a cooperative society into existence registration is compulsory under the Cooperative Societies Act 1912.

ii. In order to get a cooperative society registered it should be constituted of a minimum of 10 adult members.

iii. The members of a cooperative society contribute capital to purchase of its shares.

iv. Cooperative society is considered to be a separate legal entity after registration.

Since, its inception, post-independence the cooperative societies in India have witnessed phenomenal growth, mainly in the farming sector. The networks of cooperatives within the country operate at the local, regional, state and national levels that assist in agricultural marketing. The dealings primarily take place in commodities like food grains, jute, cotton, sugar, milk, fruit and nuts.

The various features of a cooperative society are described below:

1. Voluntary Membership – The membership of a cooperative society is voluntary in nature. Any person irrespective of his/her religion, caste and gender is free to join or leave cooperative society anytime as per his/her desire.

2. Separate Legal status – Cooperative society enjoys in a district status independent of its members as its registration is compulsory. It can enter into contracts and hold property in its name, sue and be sued by others.

3. Limited liability – The liability of the members of a cooperative society is limited in nature. Under no circumstances, its members can be asked to contribute beyond the extent of the amount contributed by them as capital in order to settle the claims of the third party.

4. Control – The management and control of a cooperative society is democratic in nature. It is managed by an elected managing committee which is set up by its members through voting.

5. Service motive – A cooperative society is brought into existence with the purpose of promoting social welfare through mutual help. The surplus if any, is shared amongst the members as dividend in compliance with the bye-laws of the society.

A cooperative society form of business organisation exemplifies the two distinct characteristics of our constitution – 1. democracy and 2. secularism as described below –

1. Democracy:

A cooperative society is seen on a democratise pattern. This is due to the fact that the power to take decisions lies in the hands of an elected managing committee. The members of this committee are selected jointly by all members. It is based on the principle of one man one vote.

2. Secularism:

The working of a cooperative society is based on secularism. This is due to the fact that there is separation of religion from the management. The membership of the society is open to people of all caste, creed and religion, anyone may volunteer to become its members.

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Features of a Cooperative Society – Voluntary Association, Separate Legal Entity, Control, Service Motive and Distribution of Surplus

1. Voluntary Association:

A cooperative society is a voluntary association. It is open to all irrespective of their religion, caste, colour, creed and gender. Any person above the age of 18 years, who has a common interest, can join a cooperative society and can leave it any time by giving his resignation. There is no compulsion to remain a member.

2. Separate Legal Entity:

Registration of a cooperative society is compulsory. It has a separate legal entity distinct from its members. It can enter into contracts and own property in its own name. It can sue and be sued in its own name. The death, insolvency or insanity of a member does not affect its existence unlike partnership.

3. Limited Liability:

The liability of members of a cooperative society is limited to the extent of the capital contributed by them. Therefore, personal assets of members cannot be used to repay business debts.

4. Control:

There is equality of status between members of a cooperative society. Business is managed by an elected managing committee and acts on the principle of ‘one member one vote’ and it doesn’t matter how many shares are held by the member.

5. Service Motive:

A cooperative society is formed with a service motive and for mutual welfare and not for maximisation of profits. Earning profits is a secondary motive and not the primary motive.

6. Distribution of Surplus:

If there is any surplus as a result of if business operation, it is distributed among members as ‘dividend’. In addition, members may also get ‘bonus’.

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