A co-operative society is a special type of business organization, the different form of organization you have learned earlier. There are some important characteristic features of co-operative society which are given below:
Features of co-operative society
- Open membership: The membership of a co-operative society is open to all those who have a common interest. The Co-operative Societies Act does not specify the maximum number of members for any Co-operative Society. However, after the formation of the society, the members may specify the maximum number.
- Voluntary organization: A co-operative society is totally based on voluntary membership. Persons having a common interest can join as members. A member can join the society as and when he likes. Continue for as long as he likes, and leaves the society at will.
- State control: To protect the interest of members, co-operative societies are placed under state control through registration. While getting registered, a society has to submit details about the members and the business it is to undertake.
- Sources of finance: In a co-operative society capital is contributed by all the members. However, it can easily raise loans and secure grants from the government after its registration.
- Democratic Management: Co-operative societies are managed on democratic lines. A group is known as “Board of Directors” manages the society. The members of the board of directors are the elected representatives of the society. The members of the board of directors are elected representatives of the society. For example, in a village credit society, a small farmer having one share has equal voting right as that of a landlord having 20 shares.
- Service motive: Co-operatives are not formed to maximize profit like other forms of business organizations. The main purpose of a co-operative society is to provide service to its members. For example, in a consumer co-operative society, goods are sold to its members at a reasonable price by retaining a small margin of profit. It also proves better quality goods to its members and the general public.
- Distribution of Surplus: Every co-operative society, in addition to providing services to its members, also generates some profit while conducting business. Profit generated is distributed to its members not only the basis of the shares held by the members but on the basis of the member’s participation in the business of the society. For example, in a consumer co-operative society only a small part of the profit is distributed to members as a dividend on their shares; a major part of the profit is paid as purchase bonus to members on the basis of goods purchased by each member form the society.
- Self-help through mutual cooperation: Co-operative societies thrive on the principle of mutual help. Co-operative societies convert the weakness of members into a strength by adopting the principle of self-help through mutual co-operation. It is only by working jointly on the principle of “each for all and all for each” the members can fight exploitation and secure a place in society.
- Nature of formation: Some middle class and lower class people may form a society in order to activate some goals according to the rules of co-operative society. It does not require long and complicated legal formalities at the time of formation. Any ten persons may form a co-operative society for the promotion of their economic interests.
- A number of members: The minimum number of members required is ten but there is no limit to the maximum number of members. Any person can become a member of the society following these rules and regulations.
- Equality of voting rights: Equality is the essence of co-operative undertakings. Each member has one vote, irrespective of the number of shares held by him. Thus, the management of a co-operative society is democratic.
- Limited return on capital: The members are given an incentive in the form of a percentage of interest on capital.
- Legal entity: A co-operative society is required to be registered under the co-operative societies act. It has its separate legal entity and perpetual succession. With the change in the status of its members, the structure of a co-operative society is not changed.
- Transfer of shares: The shares of a co-operative society are not freely transferable. A member can surrender his shares to the society with the permission of the society’s office bearers.
- Economic motive: A co-operative organization is always formed with some economic motives for the arrangement of cheap credit facilities, providing consumer goods at reasonable rated, making available land for constructing houses, etc.
- Cash trading: Co-operative societies conduct business on a cash basis and allow no credit. Cash trading does not involve bad debts and credit collection expenses. Thus, it helps the society to have a good wording capital and maintaining short-term solvency.
- Elimination of middlemen: The main objectives of co-operative societies are to eliminate middlemen and to establish direct contact between members and customers. This ensures the availability of goods at fair prices and to minimize unhealthy competition.
- Political and religious neutrality: Co-operative societies are neutral far as political and religious affiliations are concerned.
- Government regulation and control: Society is regulated by the Bangladesh co-operative societies Act, 1984. A society can be registered only if it satisfies the condition laid down by the status for this purpose. The co-operative societies are to follow certain rules and regulations formed by the Government of Bangladesh. A co-operative society is formed and directed by an association of users, applies within itself the rules of democracy and directly intended to serve both its own members, the community as a whole.
Other Content of Co-operative Society:
- Definition of Co-operative Society
- Objectives of Co-operative Society
- Different Types of Co-operative Society
- Principles of Co-operative Society