Long answer type question. Define Co-operative society. Explain its merits and demerits.


The word “co-operative” means “an organisation wherein the stakeholders work with one another”. Thus, a co-operative society is a voluntary association of individuals who work together to protect or promote their common interests.

Merits of a co-operative society:

i. Ease of formation: The formation of a co-operative society is quite easy, as it requires the induction of only 10 adult members. Its registration procedure under the Co-operative Societies Act 1912 is quite simple.

ii. Continued existence: A co-operative society is a stable form of organisation, as it enjoys the status of a separate legal entity. As a result, the life of a co-operative society remains unaffected by the death, insolvency or insanity of its members.

iii. Democratic management: In co-operative societies, the management is democratic in nature. This implies that every member has a voting right and the decision with maximum votes is implemented. This welcomes the participation of every member in the voting process.

Limitations of a co-operative society:
i. Excessive government control: Co-operative societies have to follow rules and regulations framed by the co-operative departments of the concerned state governments. These rules include submission and auditing of accounts.

ii. Inefficiency in management: The management of a co-operative society generally comprises part-time or inexperienced people. They may not be skilled enough to handle managerial functions effectively. Consequently, co-operative societies often lack efficiency.

iii. Limited resources: All resources available with a co-operative society are limited to the extent of capital contribution by its members. The limited availability of resources restricts its scope of expansion.