Co-operative Society — Meaning, Principles and Features

1. Co-operative Society — Meaning, Principles and Features

A Co-operative Society is a voluntary association of persons, generally belonging to a

similar economic background, who join together not primarily to earn profit for its own sake

but to protect and promote the common economic interests of its members — through mutual help

and self-help. The word "co-operative" itself signals the method: members work together instead

of competing against each other. A Co-operative Society is formed and registered under the

Co-operative Societies Act — historically the central Co-operative Societies Act, 1912, with

most Indian states (including Maharashtra, under the Maharashtra Co-operative Societies Act, 1960) having since enacted their own state-specific Co-operative Societies legislation that

governs registration and functioning within that state; the exact registering authority and

procedural detail can therefore vary state to state, which is why this chapter states the

principle generally rather than citing one single uniform national section number.

The co-operative principles — these distinguish a Co-operative Society from every other form

of business organisation, corporate or non-corporate:

1. Voluntary and open membership — any person, irrespective of caste, creed, religion, or political affiliation, who can make use of the society's services and is willing to accept the responsibilities of membership, may join; equally, a member is free to leave at will.
2. Democratic control — "one member, one vote" — regardless of the number of shares a member holds or the amount of capital they have contributed, each member gets exactly one vote at a general meeting. This is the single most important feature separating a Co-operative Society from a Joint Stock Company, where voting power is proportional to shareholding.
3. Limited return on capital — the return (dividend) paid to members on the capital they have contributed is limited to a modest, fixed rate; a Co-operative Society does not exist to maximise the return on invested capital the way a company does.
4. Distribution of surplus — any surplus remaining after paying a limited dividend on capital is distributed among members broadly in proportion to their patronage (how much business they did with the society), not in proportion to their shareholding — reinforcing that the society exists to serve its members' needs, not to reward capital.
5. Co-operative education and training — societies are expected to set aside a portion of their surplus for educating members, officers, and the public about co-operative principles and practice.
6. Co-operation among co-operatives — societies are encouraged to actively co-operate with other co-operative societies at local, state, national, and international levels.

Features of a Co-operative Society (following from the principles above):

• Voluntary membership and open, voluntary exit.
• Separate legal entity — registration under the relevant Co-operative Societies Act confers a distinct legal personality on the society, separate from its members.
• Limited liability — a member's liability is ordinarily limited to the amount of capital …