Definition: As the name suggests, cooperative society refers to that type of business organization wherein people work together for a common goal, i.e. welfare of its members.
It has to be registered under the Cooperative Societies Act, 1912, in order to obtain the status of a separate legal identity. The members of the cooperative society raise the capital themselves by issuing shares.
It is an autonomous association of individuals, operated with the motive of safeguarding their economic, cultural and social interests if there are possible chances of exploitation while dealing with the intermediaries who want to earn maximum profits.
Characteristics of Cooperative Society
- Voluntary Association: In a cooperative society, the membership is voluntary, i.e. as per the choice of people. In essence, people are free to join and become members of society, as well as they can quit anytime, as per their own will. However, a proper process is to be followed for leaving society, and so prior notice is required to be served.
- Open Membership: The cooperative society is open for all the people having a common interest for which the society is formed. Any person of any caste, gender, religion, or race can join society. The minimum number of members required to constitute a cooperative society is 10.
- Registration: A cooperative society needs to be formally registered to obtain legal status. The registration gives it a separate identity which is distinct from its members. Along with that, the society can enter into contracts and acquire property in its name, and it can legally sue and be sued by others.
- Limited Liability: In a cooperative society, the liability of the members is limited to the extent of the capital contributed by them.
- Democratic Character: A Managing Committee is appointed so as to take important decisions. Members have the right to vote and choose among themselves the members who will form the managing committee, making it a democratic one.
- Service Motive: Mutual Help and Welfare of the poorer section is the sole purpose of society. Any surplus earned from its operations is allocated to the members as a dividend while complying with the regulations of the cooperative society.
- State Control: With the aim of safeguarding the interest of its members, it comes under the control and supervision of the state government. Further, at the time of registration, it has to furnish the details of its members and the business in which it operates. Further, society has to maintain its account books, which an independent auditor will audit.
The cooperative society works on the notion of self-help and mutual help, and so it aims at providing support to its members.
Types of Cooperative Societies
The cooperative society established with the purpose of safeguarding the interest of consumers and promoting their welfare is a consumer cooperative society. Consumers who prefer to purchase a good quality product at reasonable prices often join these societies.
Further, to attain economy in operations, these societies eliminate middlemen, and for that, it purchases goods directly from the wholesalers and sells them to customers.
Example: Kendriya Bhandar, Sahkari Bhandar, etc
Producer Cooperative Society
When a cooperative society is formed with the aim of protecting the interest of small producers and increasing their bargaining power. Its members are those producers who wish to procure inputs, such as raw materials, tools, equipment and suppliers, for the production of goods to satisfy consumer demands.
Examples: Andhra Pradesh State Handloom Weavers Cooperative Society (APCO), Haryana Handloom, etc.
Marketing Cooperative Society
These societies are set up to help small producers to sell their products by providing them with reasonable prices for their offerings. It is possible by eliminating middlemen and obtaining a competitive market position.
Example: Gujarat Co-operative Milk Marketing Federation, which sells the product under the name ‘AMUL’, Mother Diary, etc.
Worker Cooperative Society
Also called as workers’ cooperative, is a form of cooperative society whose ownership and management lies in the hands of its workers. Meaning that the members of the society are both employees as well as its members.
Example: Indian Coffee House (ICH)
Farmer Cooperative Society
These societies provide quality inputs such as seeds, fertilizers, insecticides, machinery, manure, irrigation equipment, support services, etc to the farmers for their development as well as welfare. Its purpose is to gain the advantage of large-scale farming and increase yield.
Example: Lift-irrigation cooperative societies and Indian Farmers Fertiliser Cooperative Limited
Credit Cooperative Society
These societies aim at providing loan facilities at a nominal interest rate to the members. And so the members are those who look for financial aid. It aims at protecting the members from being exploited by money sharks, who charge high interest. The loan is provided out of the money raised as capital and the deposits of members.
Examples: Village Service Co-operative Society, Urban Cooperative Banks, etc.
Housing Cooperative Society
As the name suggests, a housing cooperative society is one that helps people with low income to build their houses. The residential accommodation problem is resolved by society by building flats or providing plots to the members on which they can themselves construct the house.
Example: Employees’ Housing Societies and Metropolitan Housing Co-operative Society
So, people do not join a cooperative society to earn money, rather, they join it as a group to pool their resources, and use the same in an optimum manner and procure some shared benefit.