The co-operative societies is a group of persons or institutions that come into existence to offer various services to its members. One who cannot benefit in his individual capacity can gain as a member of co-operative societies, since it purchases in bulk quantities resulting in economics a part of which is shifted to its members. Thus the members can buy at price is less than the market.
Following are the characteristics of cooperative societies:
The society is formed on mutual cooperation.
Every member is required to pay an annual fee.
Society may be registered making the liability of the members limited.
Members must pay service charges.
It runs on no profit, no loss basis.
The profit, if made, is distributed to the members or invested back for expansion.
Societies are formed in the fields of banking, housing, farming, fishing, credit and others.
Like Joint Stock Company, it enjoys continuity and its life is not affected by the change in membership or death of a member.
Registered societies must use the word ‘limited’ following their names.
There are some advantages and some disadvantages of cooperative societies. The advantages are as follows:
Continuity: the cooperative society enjoys a long and stable life. Like a company, it does not come to an end in case its founders or members die. Unlike sole proprietorship and partnership, it exist in its own name and acts as an artificial being.
Low prices: since it is operated on and no profit no loss basis the price of the product offered for sale and is kept at a lower level than that of the market. It benefits the members and the buyers.
Loans: these are offered to agriculturist to facilitate them to buy seeds, fertilizers, tractors and hire warehouses. Non-agriculturalists is also enjoy the facility of cash loans to finance their personal needs.
House Loans: many cooperative societies are formed in the field of housing and advance loans to their members to build, renovate, and buy houses at a lower rate of interest than the bank or other financial institutions.
The disadvantages of cooperative societies are as follows:
Fee payment: the members of the society must be a certain amount as a fee on annual basis. If the society is unable to make any profit the amount of fees and refundable which is otherwise refunded if the society makes profit.
Unlimited liabilities: societies can run without registration under society’s act 1912. In such a case, the liability of the members becomes unlimited. The unlimited liability forces its members to pay off the debts from their personal property when the society becomes bankrupt.
Payment of service charges: member of the society must pay service charges to finance those day to day expenses of the society. These charges are refunded when it earns profit. In case, a society is unable to earn a profit, the charges are not refunded.
Differences of opinion: differences of opinion in running the society may lead to its dissolution just like the partnership. Such a state of affairs does not happen in the companies.
