Cooperative organization

Cooperative organization

You have learnt about Sole Proprietorship, Partnership and Joint Hindu Family as different forms of business organisation. You must have noticed that while there are many differences among them in respect of their formation, operation, capital contribution and liabilities, there is one similarity that they all are engaged in business to earn profit. However, there are certain organisations which undertake business activities with the prime objective of providing service to the members. Although they also earn some amount of profit, but their main intention is to look after some common interest of its members. They pool available resources from the members, utilise the same in the best possible manner and share the benefits. These organisations are known as Cooperative Societies. Let us learn in detail about this form of business organisation.

The term cooperation is derived from the Latin word 'co-operari', where the word 'Co' means 'with' and 'operari' mean 'to work'. Thus, the term cooperation means working together. So those who want to work together with some common economic objectives can form a society, which is termed as cooperative society.

Characteristics Of Cooperative Society

Based on the above definition we can identify the following characteristics of cooperative society form of business organisation:

(a)  Voluntary Association: Members join the cooperative society voluntarily i.e., by their own choice. Persons having common economic objective can join the society as and when they like, continue as long as they like and leave the society and when they want.

(b) Open Membership: The membership is open to all those having a common economic interest. Any person can become a member irrespective of his/her caste, creed, religion, colour, sex etc.

(c)   Number of Members: A minimum of 10 members are required to form a cooperative society. In case of multi-state cooperative societies the minimum number of members should be 50 from each state in case the members are individuals. The Cooperative Society Act does not specify the maximum number of members for any cooperative society. However, after the formation of the society, the member may specify the maximum member of members.

(d) Registration of the Society: In India, cooperative societies are registered under the Cooperative Societies Act 1912 or under the State Cooperative Societies Act. The Multi-state Cooperative Societies are registered under the Multi-state Cooperative Societies Act 2002. Once registered, the society becomes a separate legal entity and attain certain characteristics. These are as follows.

(i)    The society enjoys perpetual succession

(ii) It has its own common seal

(iii)                   It can enter into agreements with others

(iv)                   It can sue others in a court of law

(v) It can own properties in its name

Types Of Cooperative Societies

You know cooperative organisations are set up in different fields to promote the economic well-being of different sections of the society. So, according to the needs of the people, we find different types of cooperative societies in India. Some of the important types are given below.

(a)  Consumers' Cooperative Societies: These societies are formed to protect the interest of consumers by making available consumer goods of high quality at reasonable price.

(b) Producer's Cooperative Societies: These societies are formed to protect the interest of small producers and artisans by making available items of their need for production, like raw materials, tools and equipments etc.

(c)  Marketing Cooperative Societies: To solve the problem of marketing the products, small producers join hand to form marketing cooperative societies.

(d) Housing Cooperative Societies: To provide residential houses to the members, housing cooperative societies are formed generally in urban areas.

(e)  Farming Cooperative Societies: These societies are formed by the small farmers to get the benefit of large-scale farming.

(f)   Credit Cooperative Societies: These societies are started by persons who are in need of credit. They accept deposits from the members and grant them loans at reasonable rate of interest

Merits Of Cooperative Society

The cooperative society is the only form of business organisation which gives utmost importance to its members rather than maximising its own profits. After studying its characteristics and different types, we may now study the merits of this form of business organisation

(a) Easy to Form: Any ten adult members can voluntarily form an association get it registered with the Registrar of Cooperative Societies. The registration is very simple and it does not require much legal formalities.

(b) Limited Liability: The liability of the members of the cooperative societies is limited upto their capital contribution. They are not personally liable for the debt of the society.

(c)  Open Membership: Any competent like-minded person can join the cooperative society any time he likes. There is no restriction on the grounds of caste, creed, gender, colour etc. The time of entry and exit is also generally kept open.

(d) Stable Life: The cooperative society enjoys the benefit of perpetual succession. The death, resignation, insolvency of any member does not affect the existence of the society because of its separate legal entity.

(e)  Tax Concession: To encourage people to form co-operative societies the government generally provides tax concessions and exemptions, which keep on changing from time to time.

(f)   Democratic Management: The cooperative societies are managed by the Managing Committee, which is elected by the members. The members decide their own rules and regulations within the limits set by the law.

Limitations Of Cooperative Society

Although the basic aim of forming a cooperative society is to develop a system of mutual help and cooperation among its members, yet the feeling of cooperation does not remain for long. Cooperative societies usually suffer from the following limitations.

(a)  Limited Capital: Most of the cooperative societies suffer from lack of capital. Since the members

of the society come from a limited area or class and usually have limited means, it is not possible to collect huge capital from them. Again, government's assistance is often inadequate for them.

(b) Lack of Managerial Expertise: The Managing Committee of a cooperative society is not always able to manage the society in an effective and efficient way due to lack of managerial expertise. Again due to lack of funds they are also not able to derive the benefits of professional management.

(c)  Less Motivation: Since the rate of return on capital investment is less, the members do not always feel involved in the affairs of the society.

(d) Lack of Interest: Once the first wave of enthusiasm to start and run the business is exhausted, intrigue and factionalism arise among members. This makes the cooperative lifeless and inactive.

(e)  Corruption: Inspite of government's regulation and periodical audit of the accounts of the cooperative society, the corrupt practices in the management cannot be completely ignored.

Formation Of Cooperative Society

A cooperative society can be formed as per the provisions of the Cooperative Societies Act, 1912, or under the Cooperative Societies Acts of the respective states. The various common requirements prescribed for registration of a cooperative society are as follows:

(a)  There must be at least ten persons having common economic interest and must be capable of entering into contract. For multi-state cooperative societies at least 50 individual members from each state should be present.

(b)  A suitable name should be proposed for the society. (c)  The draft

bye-laws of the society should be prepared.

(d) After completing the above formalities, the society should go for its registration.

(e) For registration, application in prescribed form should be made to the Registrar of Cooperative Societies of the state in which the society is to be formed.

(f)   The application for registration shall be accompanied by four copies of the proposed bye-laws of the society.

(g)   The application must be signed by every member of the society.

(h) After scrutinising of the application and the bye-laws, the registrar issues the registration certificate.

(i)    The society can start its operation after getting the certificate of registration.

Mixed economy

Mixed economy is an economic system in which both the private sector andstate direct the economy, reflecting characteristics of both market economiesand planned economies.

Most mixed economies can be described as market economies with strong regulatory oversight and governmental provision ofpublic goods. Some mixed economies also feature a variety of state-run enterprises.

In general the mixed economy is characterised by the private ownership of themeans of production, the dominance of markets for economic coordination, with profit-seeking enterprise and the accumulation of capital remaining the fundamental driving force behind economic activity. But unlike a free-market economy, the government would wield indirect macroeconomic influence over the economy through fiscal and monetary policies designed to counteract economic downturns and capitalism's tendency toward financial crises andunemployment, along with playing a role in interventions that promote social welfare.

Subsequently, some mixed economies have expanded in scope to include a role for indicative economic planning and/or large public enterprisesectors.

There is not one single definition for a mixed economy, with it defined variously as a mixture of free markets with state interventionism, or as a mixture of public and private enterprise, or as a mixture between markets and economic planning. The relative strength or weakness of each component in the national economy can vary greatly between countries. Economies ranging from the United States to Cuba have been termed mixed economies. The term is also used to describe the economies of countries which are referred to as welfare  states,  such    as  the Nordic countries.  Governments  in  mixed    economies often provide environmental          protection, maintenance of employment standards, a standardized welfaresystem, and maintenance of competition.

As an economic ideal, mixed economies are supported by people of various political persuasions, typically centre-left andcentre-right, such as social democrats or Christian democrats. Supporters view mixed economies as a compromise between state socialism and free-market capitalism that is superior in net effect to either of those.