Professor & Lawyer

Puttu Guru Prasad

Seniror Faculty for
Management Studies - VVIT
 Co-operation

Derived from the Latin word co-

operari

co means with and operari means

to work

Co-operation means working together

 Co-operative Society
A voluntary association of persons;
working together with common economic
objective;
providing support to the members;
self-help and mutual help;
non-profit motive;
pooling individual resources for group
welfare;
for common benefit.
OBJECTIVES
Render service, not for profit;

Mutual help, not competition;

Self help, not dependence;

Open membership

Membership open to all with common

interest;
Minimum of ten members;
No restriction on the maximum number;
Members may specify the maximum
number for their Society
 Voluntary Association

Members coming together voluntarily;

by choice, not by force;

Continues for as long as he likes;

May leave at his will.

 State control
Registration compulsory;
Statutes, Rules and Bye Laws to protect the
interest of members;
Has to maintain books and records;
Subject to statutory audit of books by
qualified Chartered Accountants;
Functions under the regulatory supervision of
Registrar of Co-operative Societies
 Sources of Finance

Capital contributed by all the members;

May raise loans and secure grants from
government;
after its registration.
 Democratic Management
Governed by a Managing Committee or
Board of Directors elected by the members
of the society;
Managed on democratic lines;
One member one vote, irrespective of no. of
shares held;
Service motive
Co-operatives not to maximize profit but to
provide service to its members;

A Consumer Co-operative Store sells quality

goods to members at a reasonable price
retaining a small margin of profit;

In a Housing Co-Operative, members reside

by sharing expenses on maintenance and
repairs.
 Separate Legal Entity
Separate legal entity;
Limited liability of its members;
Continuity of existence;
Death, insolvency or lunacy of a member not
to affect the existence of a society
Can enter into agreements;
Can purchase or sell properties in its
own name;
Can sue and be sued.
 Distribution of Surplus
Distributes Profits earned among Members
on the basis of members participation in
the business of the society;
Profits generated are not at the cost of its
members;
Example:
in a Consumer Society, profit generated by sale
of goods to general public is paid as purchase
bonus to members on the basis of goods
purchased by them from the society.
 Self-help through mutual
cooperation
Co-operative Societies thrive on the principle of
mutual help;

They are the organizations of financially weaker

sections of society;

converts Weakness to strength by self-help

through mutual co-operation;

Fights exploitation and secure a place in society

through Each for all and all for each.
 Formation of a Society

Governed by the Co-operative Societies Act,

1912;
Minimum of 10 persons having the capacity
to enter into a contract with common
economic objectives;
A joint application along with the bye-laws of
the society containing the details about the
society and its members to the Registrar of
Co-operative Societies of the concerned
state;
After scrutiny, the registrar issues a
Certificate of Registration
Requirements for Registration

Application with the signature of all

members
Bye-laws of the society containing:
Name, address and aims and objectives of the
society
Names, addresses and occupations of
members
Mode of admitting new members
Share capital and its division
 Easy Formation
Open Membership
Democratic Control
Limited Liability
Elimination of Middlemens
. Profit
State Assistance
Stable Life
 Easy Formation
Formation easy compared to a joint
stock company;

Any ten adults with common intent;

voluntarily forming an association;

Registered with the Registrar of Co-

operative Societies.
 Open Membership
Persons with common interest

voluntarily coming together

may become a member of the society at

his will

And leave the Society at will.

 Democratic Control
controlled in a democratic manner;
Electsrepresentatives to govern the
affairs of the Society;
One member, one vote;
GoverningCouncil/ Committee
accountable to members and the
Regulators.
 Limited Liability
liability
of members limited to the
extent of the capital contributed by
them to the Society;

No personal liability to members for

the liability of the Society
Elimination of Middlemens
Profit
Combined strength of members;
to derive economies of scale;
for direct access to
manufactures and producers;
goods and services;
to markets and distribution
channels;
Eliminates middlemens profit
 State Assistance
Central and State assistance;
in the form of capital contribution;
loans at low rates of interest;
exemption in tax;
subsidies in repayment of loans, etc.

*Graph showing Government

assistance to TDCC Tribal
Development cooperation
corporation
 Stable Life

fairly stable life;

continuous existence;

existence not affected by death, insolvency,

lunacy or resignation of members.
Limited Capital

Source of capital limited, by limiting membership

to a particular section of the society;

No incentive to members to contribute more to

the capital due to low rate of return;

Governments assistance often inadequate for

most Co-operatives
 Problems in Management

lack of managerial talent due to

elected representatives lacking in managerial
experience and expertise;

limited resources hampering outsourcing of

professional managerial talent;
 Lack of Motivation

Lack of motivation owing to

Societies being service oriented not
profit oriented;

Extra
efforts by any particular
member not getting extra reward;

Being aloof and not involved does not

result in denial of rewards.
Lack of Co-operation
Societies often suffer from
Personality differences;
Ego clashes;
Selfish attitudes;

Lack motivation;
Ignorance of or irreverence to principles of
co-operation
Dependence on Government
Societies ften tend to be dependent on
government patronage and support in
terms of grants, loans subsidies,
etc., owing to
inadequacy of capital;
Limited access to raw materials;
Lack of market and distribution of channels for
products;
Vagaries of nature leading to financial burden on
members, etc.
 Consumers Co-operative Society
For protecting interest of general consumers;
by making consumer goods available at a
reasonable price;
Source goods directly from the producers or
manufacturers;
eliminates middlemen in the distribution
process.
Some examples:
- Kendriya Bhandar,
- Apna Bazar
- Sahkari Bhandar
- Employees consumer co-
operative societies; Etc.
Producers Co-operative Society
to protect interest of small producers;
By making available raw materials, tools
and equipments, machinery, etc.;
Arranging Marketing & Distribution
channels, etc.
Examples:
Amul
APPCO,
Bayanika,
Haryana Handloom,
Co-optex
Co-operative Marketing Society

Society of small producers and manufacturers;

collects the products from members

makes available better marketing & distribution

channels economically;

sells in the market.

Examples:
Anand Milk Union Ltd., (Amul);

Co-optex

UP Handloom
Co-operative Credit Society
formed to provide financial
support to members

accepts deposits from members;

grants loans to members at

reasonable rates of interest

Examples:
Village Service Co-operative Credit Societies,
Employees co-operative credit societies, etc.
 Co-operative Banks
formed to provide banking facilities to members;
accepts deposits;
grants loans at reasonable rates of interest
Examples:
Co-operative Farming Society
formed by small farmers;
to pool small holdings and work
to benefits of large-scale
farming;
Examples:
Lift-irrigation Cooperative Societies;
pani-panchayats
Housing Co-operative Society
provide residential accommodation to
members
Constructs houses or apartments for
members;
Provides amenities;
Takes care of maintenance and repairs.
IFFCO
Giant of a Co-operative
Co-operatives Share in Fertilizer
Production