Co-operative Sector

Co-operative Form of
Organization
Introduction to Co-operative sector
The co-operative movement has been necessitated to
protect the interests of weaker sections of society.
The primary objective of this movement is how to protect
economically the weaker sections of society from the
oppression of economically strong segment of society.
In all forms of organization , be it a sole trader, partnership
or joint stock company, the primary motive means
including exploitation of consumers.
The cooperative form of organization is a democratic set
up run by its members for serving their own interests. It is
self help through mutual help.
The philosophy behind co-operative movement is all for
each and each for all.
 Co-operative societies are voluntary associations started
with the aim of service to members.
Hubert Calvest says, Co-operation is a form of organization
wherein persons voluntarily associate together as human
beings on the basis of equality for the promotion of the
economic interests of themselves.
Dr. H.N.Kunzen defines co-operatives as , Co-operative is
self help as well as mutual help.
It is a joint enterprises of those who are not financially strong
and cannot stand on their legs and, therefore ,come together
not with a view to get profits but to overcome disability
arising out of the want of adequate financial resources.
This definition suits the Indian context. In India co-
operatives are started by the weaker sections of society for
protecting its members from the clutches of profit hungry
businessmen.
 The Indian Co-operative Societies Act,1912 defines co-
operatives in Section 4 as , a society which has its
objectives the promotion of economic interests of its
members in accordance with co-operative principle.
Characteristics of Co-operative Organization
Some of the principles of co-operatives are discussed as
follows:
1.Voluntary Membership
Co-operative organization is a voluntary association of
persons, in the sense that people can become its
members and they can leave it at their own will and
without any coercion.
No one is compelled to become or continue its
members can form themselves into a co-operative.
2. Open membership
The membership of the cooperative society is open to all
irrespective of caste ,creed , religion, race ,sex, colour etc.
Every body is given an equal opportunity to become a
member. However, membership may be restricted to a
homogeneous group in some cases. For instance, a cooperative
society of farmers may deny membership to those who are not
farmers.
3.Democratic Control
The management of a cooperative society is entrusted to a
managing committee elected by members on the basis of one
member one vote irrespective of the number of shares held
by any member.
The broad policy framework of the society is laid down by the
general body of members and the managing committee has to
function within this framework.
4. Service Motive
The basic aim of cooperative organization is to render
service to its members in particular and to the society
in general.
Service above self is the spirit of cooperation.
There is an emphasis on the material and moral uplift
of members. However, a cooperative enterprise may
make reasonable profits.
5. Compulsory Registration
No association of persons can use the word
cooperative in its name without being registered
under the Cooperative Societies Act , 1912 or under
the cooperative societies Act of a State Government.
6. Separate Legal Entity
After registration a cooperative enterprise becomes a body
corporate independent of its members.
It is entirely distinct from its members. It can own property and
make contracts in its name.
It can be sue and sued in its own name.
7.Finance
The capital of a cooperative enterprise is provided by its members
by purchasing shares. One member cannot subscribe to more than
10 % of the total share capital.
Shares are not transferable but they can be surrendered to the
organization.
Share capital constitutes a small part of total funds, the major part
of which is raised by way of loans from the government or from the
apex cooperative institutions. It may also receive grants and
assistance from the government.
8. Equitable Disposable of Surplus
The trading surplus earned by a cooperative society is utilised for
several purposes. A fixed rate of dividend not exceeding 10
percent can be paid on the capital. One fourth of the profits is to
be transferred to general reserves as per the law.
A portion of the surplus, not exceeding 10 percent may be utilised
for the general welfare of the locality in which the society is
functioning.
The rest of the profits may be distributed among members in the
form of bonus.
Bonus is given on an agreed basis but not on the members in
proportion to the purchases made by the members 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
cooperative.
9. Government Control
The activities of a cooperative society are regulated by the State even
though it is voluntary in character.
Government conducts periodic inspections of the audited accounts and
affairs of the society.
A cooperative society has to submit annual reports and accounts to the
Registrar of Societies.
Formation and Management of Cooperatives
As stated earlier the registration of a cooperative enterprises is
compulsory.
In order to get a cooperative society registered, an application in the
prescribed form must be submitted to the Registrar of Cooperative
Societies of the State in which the societys registered office is to be
situated.
Any ten persons above the age of 18 years and having common interest
may submit a joint application for being formed into a cooperative society.
The application for being formed into a cooperative society. The
application should contain the following information.
 The name and address of the society
The aims and objects for which the societys is being registered.
The names, address and liabilities of the members.
Division of share capital
Method of admission of new members
Two copies of the bye laws (rules and regulations ) of the society. A
cooperative may adopt model byelaws given in the cooperative societies
act instead of framing its own bye-laws.
Once the application for registration along with the copies of bye laws is
submitted, the Registrar of Cooperative Societies will carefully scrutinize
them in order to ensure that they are in accordance with the provisions and
spirit of the cooperative societies act.
When he is fully satisfied in this connection, he will enter the name of the
society in his register and will issue a certificate of registration.
After getting the certificate of incorporation , the society becomes a body
corporate having a separate legal entity of its own , with perpetual
succession and limited liability of its members.
Management of Cooperatives
The management of a cooperative society lies in the
hands of a managing committee. Members of this
committee are elected directly by the members at the
annual general meeting of the society. The managing
committee consists of a number of members who elect
from among themselves the following office bearers:
1.President
2.Vice-President
3.Secretary
4.Joint Secretary
5.Treasurer
 The general body of shareholders lays down the broad
objectives and policies of the cooperative society.
The managing committee determines detailed
programmes and procedures of the society. The
committee also gets progress reports from the office
bearers and it is accountable to the managing
committee.
The committee must manage the society in accordance
with the provisions of the Cooperative Societies Act,
1912.
The cooperative society must furnish annual reports
and accounts to the Registrar of Cooperatives. It must
also get its accounts audited every year.