SUBJECT: COMMERCE

CLASS: B. COM.
YEAR: I
NAME OF PAPER: Business Organization
TOPIC: Cooperative Society
SUB TOPIC: Features, Merits, Demerits, Types
KEY WORDS: Cooperative, Society

Dr. Krishna Kumar Agarwal

Professor
Former Head
Department of Commerce
Former Dean & Director
Faculty of Commerce & Management Studies
M.G.Kashi Vidyapith, Varanasi
kkagarwal3@gmail.com
 Cooperative Society
 A Cooperative organisation is a voluntary association of individuals
who associate together to promote their common interests. The
objects of a cooperative organisation are socio-economic in character.
 They are driven by the need to protect their economic interests in the
face of possible exploitation at the hands of middlemen obsessed with
the desire to earn greater profits.
 The co-operative society is compulsorily required to be registered under
the Co-operative Societies Act, 1912. The process of setting up a co-
operative society is simple enough and at the most what is required is
the consent of at last ten adult persons to form a society. The capital of
a society is raised from its members through issue of shares. The
society acquires a distinct legal identity after its registration.
 Definitions of Cooperative Society
➢ “Co-operative organisation is a society which has its objective for the
promotion of economic interest of its members in accordance with
cooperative principles.”
-The Indian Cooperative Societies Act, 1912
➢ “Co-operative is a form of organisation wherein persons voluntarily
associate together as human beings on the basis of equity for the
promotion of economic interest of themselves.”
-E.H. Calvert
➢ “Co-operation is self-help made effective by organisation.”
-Sir Horace Plankett
 Features of Cooperative Society
The characteristics of a co-operative society are listed below:

1. Voluntary Organisation

2. Service Motive

3. Mutual Help

4. Equality of vote

5. Legal Status

6. Democratic Management

7. Elimination of mediators

8. Disposal of Profit
 Features of Cooperative Society

9. Fixed return on capital

10. Cash trading

11. No religious and political discrimination

12. Regulation and control

13. Liability

14. Transfer of shares

15. States help

 Merits of Cooperative Society
The co-operative society offers many benefits to its members. Some of the
advantages of the co-operative form of organisation are as follows:
1. Equality in voting status
2. Limited liability
3. Stable existence
4. Social utility
5. Ease of formation
6. Support from government
7. Voluntary membership
8. Democratic management
9. Permanent life
 Demerits of Cooperative Society
The co-operative society suffers from the following limitations:
1. Limited Capital
2. Inefficiency in management
3. Lack of Secrecy
4. Excessive government control
5. Differences of opinion
6. Mutual conflicts and clashes
7. Absence of secrecy
8. Groupism in management
9. Conservation and illiteracy of the members
10. Improper maintenance and checking of accounts
 Types of Cooperative Society
Co-operative Societies may be classified into different categories according to the
nature of the services rendered by them. The main types of co-operative societies
are as follows:

i) Consumers’ Cooperative Society

ii) Producers’ Cooperative Society

iii) Marketing Cooperative Society

iv) Farmers’ Cooperative Society

v) Credit Cooperative Society

vi) Housing Cooperative Society

 Types of Cooperative Society
i) Consumers’ Cooperative Society: Such societies are organised by the
consumers to avoid exploitation by the middlemen and to ensure steady supply of
consumer goods and services of higher quality at fair prices.
ii) Producers’ Cooperative Society: These societies are formed by the small
producers of a particular locality to fight against the big capitalists and to help the
members who need capital, materials and equipment to use their skills for the
production of goods and services.
iii) Marketing Cooperative Society: Cooperative Marketing is of great
importance to the small producers and agriculturists who face many difficulties in
selling their output at remunerative profits. Marketing cooperatives seek to ensure a
steady and favourable market for the output of their members. The output of its
members is pooled together and sold according to the market conditions. The profits on
sales are distributed according to the contribution of the members to the pool.
 Types of Cooperative Society
iv) Farmers’ Cooperative Society: Small farmers may join together and pool
their resources for cultivating their land collectively by forming a cooperative society.
Its aim is scientific organisation of agriculture on large-scale so as to increase
productivity and improve the economic position of the cultivators.

v) Credit Cooperative Society: Cooperative Credit societies are formed to

provide financial assistance in the form of direct loans to their members. These
societies are organised both in the rural and urban areas. Funds are pooled together by
the members’ contributions and are utilised in giving loans to the needy members on
easy terms.

vi) Housing Cooperative Society: These societies are formed by those people
who strive to own a flat or a plot for constructing their own house. As such, these
societies are formed mostly in the urban areas where the problem of housing is acute.
 Formation of Cooperative Society
In India a co-operative society can be formed under the provision of

Indian Cooperative Societies Act, 1912. Some States like Bengal, Bihar,

Odisha, Maharashtra and Tamil Nadu have their own legislation.

Provisions are almost the same. In order to get a co-operative society

registered, at least 10 adult persons must submit a joint application to

the Registrar of Co-operative Societies. There must be something

common among these people e.g, they should be residents of the same

locality or be employees in the same enterprise.

 Formation of Cooperative Society
Formation Procedure
The application must contain the following particulars:

1. Name and address of the society

2. Aims and objectives of the society
3. Names and addresses of its members
4. Division of share capital
5. Method of admission of new members
6. Proposed by-laws of the society
7. Classification of members, their liability, rights and duties
8. Rules and regulations of the society
Exercises
Short Answer Questions
1. What do you mean by Cooperative Society?
2. Explain the features of Cooperative society.
Long Answer Questions
1. State various forms of Cooperative society.
2. Explain the merits and demerits of Cooperative Society.
 References
1) Chhabhra TN, Chhabra Sandhya; Business studies, Arya
Publications

2) Gandhi Poonam; Business studies, VK Global Publications

pvt. Ltd.

3) Motihar M. ; Business Organisation & Management,

Sharda Pustak Bhavan Allahabad

4) Agarwal R.C.; Business Organisation, Sahitya Bhavan

Publishers and Distributors Pvt. Ltd.
 Declaration
The content is exclusively mean for academic purposes and for
enhancing teaching and learning. Any other use for
economic/commercial purpose is strictly prohibited. The users
of content shall not distribute, disseminate or share it with
anyone else and its use is restricted to advancement of
individual knowledge. The information provided in this is
authentic and best as per knowledge.

--Prof. Krishna Kumar Agarwal

Prof. Krishna Kumar Agrawal