Complete Guide to Cooperative Society: Features, Merits, and Demerits
What is a Cooperative Society?
A Cooperative Society is a voluntary association of individuals who come together with the primary objective of protecting and promoting their mutual economic and social interests. It is organized on the democratic principles of "One for all and all for one" and "Self-help through mutual help."
Unlike other forms of business organizations that are driven primarily by profit maximization, the core motive of a cooperative society is to provide service to its members and safeguard them from economic exploitation by middlemen.
Key Features of a Cooperative Society
- Voluntary Membership: Membership is open to all individuals with a common interest. Any person can join or leave the society at their own will without any discrimination based on caste, religion, or gender.
- Legal Status: Registration of a cooperative society is compulsory under the Cooperative Societies Act. Upon registration, it acquires a separate legal entity distinct from its individual members.
- Democratic Control: It is managed on the principle of "One member, one vote." Irrespective of the number of shares held by a member, everyone has equal voting rights, ensuring democratic management.
- Service Motive: The primary goal is not to maximize profit but to provide goods, services, or financial assistance to its members at reasonable and fair rates.
- Distribution of Surplus: Any profit (surplus) generated is distributed among the members not based on their capital contribution, but according to the volume of business or transactions they have conducted with the society.
Merits (Advantages) of a Cooperative Society
- Easy Formation: Forming a cooperative society is relatively simple and inexpensive compared to a joint-stock company. It usually requires a minimum of 10 adult members to register.
- Limited Liability: The liability of the members is strictly limited to the extent of capital contributed by them. Personal assets are safe from the society's business debts.
- Stable Existence: Being a separate legal entity, the death, insolvency, or insanity of a member does not affect the continuous existence and operations of the society.
- Government Support: Because cooperatives promote socio-economic welfare, governments provide various concessions, subsidies, tax exemptions, and low-interest loans to them.
- Elimination of Middlemen: By directly connecting producers with consumers (like in Consumer Cooperative Societies), they eliminate middlemen, reducing costs and providing better value to members.
Demerits (Disadvantages) of a Cooperative Society
- Limited Capital: Since members usually belong to low or middle-income groups and the principle of "one member, one vote" discourages wealthy investors, the capital raised is often insufficient for large-scale operations.
- Inefficient Management: Cooperative societies often lack the financial strength to hire expert professionals. Management is handled by elected members who may lack the necessary business acumen.
- Lack of Secrecy: Open discussions in general meetings and strict regulatory obligations to disclose accounts make it very difficult to maintain business secrecy.
- Government Control and Interference: Along with government aid comes strict regulation. Regular audits, submission of accounts, and compliance with the state Cooperative Department can lead to excessive interference and operational delays.
- Internal Conflicts: Differences in opinion, personal rivalries, or political affiliations among members can lead to disputes, ultimately affecting the smooth functioning and harmony of the society.
Summary: While a cooperative society may struggle with capital constraints and specialized management expertise, it remains an excellent and highly effective model for achieving common economic goals, fostering equality, and protecting vulnerable groups from market exploitation.
