COOPERATIVE
SOCIETY
Features
The characteristics of a cooperative
society are listed below.
(i)
Voluntary membership: The membership of a cooperative society is voluntary. A
person is free to join a cooperative society, and can also leave anytime as per
his desire. There cannot be any compulsion for him to join or quit a society.
Although procedurally a member is required to serve a notice before leaving the
society, there is no compulsion to remain a member. Membership is open to all,
irrespective of their religion, caste, and gender.
(ii)
Legal status: Registration of a cooperative society is compulsory. This accords a
separate identity to the society which is distinct from its members. The
society can enter into contracts and hold property in its name, sue and be sued
by others. As a result of being a separate legal entity, it is not affected by
the entry or exit of its members.
(iii)
Limited liability: The liability of the members of a cooperative society is limited to the
extent of the amount contributed by them as capital. This defines the maximum
risk that a member can be asked to bear.
(iv)
Control:
In a cooperative society, the power to take decisions lies in the hands of an
elected managing committee. The right to vote gives the members a chance to
choose the members who will constitute the managing committee and this lends
the cooperative society a democratic character.
(v)
Service motive: The cooperative society through its purpose lays emphasis on the values
of mutual help and welfare. Hence, the motive of service dominates its working.
If any surplus is generated as a result of its operations, it is distributed
amongst the members as dividend in conformity with the bye-laws of the society.
Merits
The cooperative society offers many
benefits to its members. Some of the advantages of the cooperative form of
organisation are as follows.
(i)
Equality in voting status: The principle of ‘one man one vote’ governs the cooperative
society. Irrespective of the amount of capital contribution by a member, each
member is entitled to equal voting rights.
(ii)
Limited liability: The liability of members of a cooperative society is limited to the
extent of their capital contribution. The personal assets of the members are,
therefore, safe from being used to repay business debts.
(iii)
Stable existence: Death, bankruptcy or insanity of the members do not affect continuity
of a cooperative society. A society, therefore, operates unaffected by any
change in the membership.
(iv)
Economy in operations: The members generally offer honorary services to the
society. As the focus is on elimination of middlemen, this helps in reducing
costs. The customers or producers themselves are members of the society, and
hence the risk of bad debts is lower.
(v)
Support from government: The cooperative society exemplifies the idea of democracy
and hence finds support from the Government in the form of low taxes,
subsidies, and low interest rates on loans.
(vi)
Ease of formation: The cooperative society can be started with a minimum of ten members.
The registration procedure is simple involving a few legal formalities. Its
formation is governed by the provisions of Cooperative Societies Act 1912.
Limitations
The cooperative form of organisation
suffers from the following limitations:
(i)
Limited resources: Resources of a cooperative society consists of capital contributions of
the members with limited means. The low rate of dividend offered on investment
also acts as a deterrent in attracting membership or more capital from the
members.
(ii)
Inefficiency in management: Cooperative societies are unable to attract and employ
expert managers because of their inability to pay them high salaries. The
members who offer honorary services on a voluntary basis are generally not
professionally equipped to handle the management functions effectively.
(iii)
Lack of secrecy: As a result of open discussions in the meetings of members as well as
disclosure obligations as per the Societies Act (7), it is difficult to
maintain secrecy about the operations of a cooperative society.
(iv)
Government control: In return of the privileges offered by the government,
cooperative societies have to comply with several rules and regulations related
to auditing of accounts, submission of accounts, etc. Interference in the
functioning of the cooperative organisation through the control exercised by
the state cooperative departments also negatively affects its freedom of
operation.
(v)
Differences of opinion: Internal quarrels arising as a result of contrary
viewpoints may lead to difficulties in decision making. Personal interests may
start to dominate the welfare motive and the benefit of other members may take
a backseat if personal gain is given preference by certain members.
