The Co-operative organizations are formed on the basis of equality for the promotion and furtherance of common economic interest. The International Labour Organization had defined a Co-operative organization as “an association of persons who have voluntarily jointed together to achieve a common economic end through the formation of a democratically controlled organization, making equal contributions to the capital required and accepting a fair share of risks and benefits of the undertaking”.
Co-operative Societies must have at least ten members and must be registered under Co-operative Societies Act’. Examples of Co-operative Organizations are Credit Co-operative societies, Consumers’ Co-operative organizations, Producers’ Co-operative organizations.
It is a voluntary association of persons who work together to promote their economic interest. It works on the principle of self-help and mutual help. The primary objective is to provide support to the members. People come forward as a group, pool their individual resources, utilise them in the best possible manner and derive some common benefits out of it.
Advantages
- This is a democratic and secular form of business organization. Poor and Persons of limited means can improve their economic conditions
- Co-operative organizations remove the evils of monopoly and concentration of wealth and power
- The liability can be limited and separate legal status may be enjoyed.
- Privileges and exemptions in the form of tax concessions, lower stamp duty etc., are accorded to this form of business organizations.
Disadvantages
- Co-operative organizations cannot raise capital for large scale operations
- Since the very basis is democratic way of managing, business secrecy cannot be maintained.
Characteristics of cooperative society
Based on the above definition we can identify the following characteristics of cooperative society form of business organisation:
- Voluntary Association: Members join the cooperative society voluntarily i.e., by their own choice. Persons having common economic objective can join the society as and when they like, continue as long as they like and leave the society and when they want.
- Open Membership: The membership is open to all those having a common economic interest. Any person can become a member irrespective of his/her caste, creed, religion, colour, sex etc.
- Number of Members: A minimum of 10 members are required to form a cooperative society. In case of multi-state cooperative societies the minimum number of members should be 50 from each state in case the members are individuals. The Cooperative Society Act does not specify the maximum number of members for any cooperative society. However, after the formation of the society, the member may specify the maximum member of members.
- Registration of the Society: In India, cooperative societies are registered under the Cooperative Societies Act 1912 or under the State Cooperative Societies Act. The Multi-state Cooperative Societies are registered under the Multi-state Cooperative Societies Act 2002. Once registered, the society becomes a separate legal entity and attains certain characteristics. These are as follows.
- The society enjoys perpetual succession
- It has its own common seal
- It can enter into agreements with others
- It can sue others in a court of law
- It can own properties in its name
- State Control: Since registration of cooperative societies is compulsory, every cooperative society comes under the control and supervision of the government. The cooperative department keeps a watch on the functioning of the societies. Every society has to get its accounts audited from the cooperative department of the government.
- Capital: The capital of the cooperative society is contributed by its members. Since the members contribution is very limited, it often depends on the loan from government and apex cooperative institutions or by way of grants and assistance from state and Central Government.
- Democratic Set Up: The cooperative societies are managed in a democratic manner. Every member has a right to take part in the management of the society. However, the society elects a managing committee for its effective management. The members of the managing committee are elected on the basis of one-man one-vote irrespective of the number of shares held by any member. It is the general body of the society which lays down the broad framework within which the managing committee functions.
- Service Motive: The primary objective of all cooperative societies is to provide services to its members.
- Return on Capital Investment: The members get return on their capital investment in the form of dividend.
- Distribution of Surplus: After giving a limited dividend to the members of the society, the surplus profit is distributed in the form of bonus, keeping aside a certain percentage as reserve and for general welfare of the society.
