Co-operative Societies

Concept



Co-operation is a movement of people. It is essentially an activity of the people for mutual help and collective progress.
Co-operation is an activity, where groups of people having common interests come together and work for mutual benefit. The groups can organize themselves to cater to diverse interests, from housing societies, to industrial production to co-operative credit to massive co-operative banks.
It is fundamental right of a citizen to form an association. At the same time voluntary membership is essence of Co-operation, Co-operative Society is not for earning profits. Beneficiaries are the members, who work together and share together.

Thus co-operation is a form of organization wherein persons voluntarily associate together on the basis of equality for the promotion of their social and economic growth.

Co-operation: Nature and Substance

The word co-operation is quite familiar to a common man. For him co-operation is simple working together in any sphere of human activity. In this sense, the roots of co-operation can be traced as far back as the beginning of human civilization. The modern biologist have claimed that co-operation are the group instinct in man which enabled him to live together, work together, and help one another in times of difficulty, has been biologically one of the most important and vital instincts.
It is true that some experts have highlighted man's progress in terms of aggression. However, we have also evidence available from the writings of great authorities like Propotkin who have stressed sociability to be as important a law of nature as mutual struggle. In his Mutual Aid, he asserts that, the human society has been sustained on the basis of mutual aid. H. G. Wells observed co-operative action in nature while Nietzsche felt that there was antagonism at the heart of the world. Broadly, on the basis of nature of things and course of development, one can certainly conclude that despite competitive struggle for existence among men, co-operation has contributed significantly as a force in the voluntary development of man.
E. R. Bowell has rightly stated,
"Co-operation is a universal instrument of creation”.

Features:


(i) Voluntary association. “A co-operative society is a voluntary association of persons and not of capital.” Any persons 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 the case of people whose professional interests differ from those of the society, e.g., a private trader competing with a consumer co-operative.

(ii)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 an Central co-operative Banks.

(iii) 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 an lay down the policy which its must follow to promote their common interest. 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 a n 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 members working in different capacities, and outsiders may be employed only when the society grows too large.

(iv) 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 its members, for it is formed basically for providing certain essential facilities to members . This does not mean that a co-operative society will never work for profit. It is quite usual for societies to earn profits by extending their services to non-members.
(v) 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 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 there 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' co-operative 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 of 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 percent, may be utilised for the general welfare of the locality in which the society is functioning.

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

(vii) State control and corporate status. Although voluntary in their basic character, the co-operative societies are subject to considerable Stat control and supervision. In India, the co-operative State co-operative societies Act, as the case may be. The co-operatives desiring to be registered must fulfill 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 be-laws and the scheme of organisation should be submitted to the Registrar. On registration, the co-operative 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 co-operative department and has to furnish returns of membership and manual report an 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 an lays down terms of employment.

Advantages:

An advantage of a co-operative business is they are usually more stable, caring and responsible employers. They can give greater job satisfaction and variety, and encourage a strong work commitment. They are more responsible to the customer and the community within the business.

1. Any one is allowed to buy shares into the company.
2.Creates a strong working commitment
3.If the company is incorporated then the members in the company are entitled to Limtited Liability!

Disadvantages:

The following are the reasons of failure or defects and disadvantages of cooperative organization.
1.Lack of capital.
(a).Its members are generally related to the poor group of the society and they are not in a position to invest a large amount.
(b).External financial resources of the society are limited.
(c).It cannot borrow money from non-members.
(d).It cannot issue any kind of debentures.
(e).It share cannot be transferred to nonmembers.

It thus suffers shortage of capital for the operation of business.

2.Limited scale. Due to the various hindrances behind the growth of capital, it is not possible for the cooperative society to start its business at a large scale; it therefore, keeps its business limited in the narrow field of cooperation.
3.Inefficient management. Expert and efficient management is important factor for running the business successfully. But a society cannot afford to hire the services of superior abilities due to its limited resources. Therefore its business cannot be carried on smoothly.
4.Lack of prompt decision. As all the matters are decided by the management committee and complied by another authority, it cannot act with promptness, if a chance comes to make a timely purchase or sale, they have to wait to get others consent.