EORUPA ACADEMY

Q. No. 18: Bring out the difference between Joint Stock Company and Cooperative Societies? ANSWER:

JOINT STOCK COMPANY & COOPERATIVE SOCIETIES

INTRODUCTION: DEFINITION OF JOINT STOCK COMPANY: A company is an artificial person created by law having separate entity with a perpetual succession and common seal. DEFINITION OF COOPERATIVE SOCIETIES: A Co-Operative society is a form of organization where in persons voluntarily associate together as human being on basis of equality for the promotion of economic interest of themselves. EXPLANATION: Both of these organizations are very important for the success of a country. The joint stock company is vital as it provides employment opportunities whereas a cooperative society is important for people who have limited resources. DIFFERENCE BETWEEN JOINT STOCK COMPANY & COOPERATIVE SOCIETY CO-OPERATIVE SOCIETY 1) LEGISLATION It is incorporated under the companies It is registered under the cooperative ordinance 1984. societys act of 1925. 2) MEMBERSHIP There should be at least 7 members above It requires at least 10 members above the the major age to form a public company age of 18 years to form a society. There is and there is no maximum limit. There no restriction for fixation of members. members are fixed by their share capital. 3) OPERATION AREA Due to large organization, the operation Being a small organization, it operates area of purchase and sale of commodities is within a limited area. It creates the very wide. economic needs of its members on a small scale. 4) PROFIT DISTRIBUTION The directors declare the dividend and after Profits are given least importance in a crediting a part of the profit in the reserve cooperative society. In case of a consumers fund, distribute the net profits in cooperative, the profits are distributed proportion to the shares held by according to the transaction made by a shareholders. member in a trading year. 5) SHARE TRANSFER The share can be easily sold or purchased A member can transfer his shares to his in the stock exchange nominee, heir as per by laws of the society in its office. JOINT STOCK COMPANY

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6) CAPITAL FORMATION The company can divide its ownership into It cant attract large capital as the business shares of small denominations and can is carries on small scale. attract large capital from thousands of individuals. 7) BORROWING POWER The company can raise funds subject to its It can borrow money from non- members rules of memorandum and articles of only to a limited extent as may be association. It can also borrow additional prescribed by the rules and by laws of the funds by issuing debentures. society. 8) PERSONAL INTEREST The elected directors often exploit and The areas being limited, there are less misuse of the funds of the company for chances of misuse of funds for personal their personal interest. interest. 9) PURCHASE OF SHARES In a company there is no limit on the A member in society cant hold more than 1/5th purchase of shares by a person. of the share capital or shares exceeding Rs. 10000. 10) OWNERSHIP AND CONTROL In a public company, ownership and In cooperative society the members take control are separate. The board of directors keen interest in the affairs of the company. controls the affairs of the company for the Ownership and control are very close in a shareholders who are the owners of the co-operative society. company. 11) FORMATION: The formation of a joint stock company is The formation of a cooperative society is complicated. easy. 12) EXEMPTION FACILITIES It does not enjoy the concession and It enjoys certain concession and privileges provided by the government. exemptions like income tax, super tax and registration fee. 13) LIABILITY: The liability of shareholders a company is In case of cooperative society the liability limited may be limited or unlimited. 14) ISSUE OF DEBENTURES A joint stock company may issue Cooperative societies cannot issue debentures to the public to borrow money. debentures the public. 15) DISTRIBUTION OF WEALTH It becomes the cause of unequal Co-operative societies are helpful in Distribution of wealth. removing the unequal distribution of wealth. 16) ROLE OF MIDDLEMEN In a joint stock company, middleman plays In Co-operative society, middleman has no a very effective role. role 17) AUDIT OF ACCOUNTS. The share can be easily sold or purchased A member can transfer his shares to his in the stock exchange. nominee, heir as per by laws of the society in its office. 18) CONFIDENCE As the company management is run As there are no special rules and according to the companies ordinance regulations made and only act 1925 is 1984, therefore public have confidence in there, which has no supreme authority, so it. public does not show confidence. 19) WITHDRAWAL RIGHTS The shareholders cant withdraw their It is very easy to withdraw capital by giving

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EORUPA ACADEMY
capital easily. a short notice. 20) INNOVATION: There are great many innovations due to The capital volume is low and so there are larger capital. no innovations. 21) WINDING UP: There is complicated and long procedure The life of a co-operative society is normally for the winding up of a company, but there short. The members sometimes dissolve it are rare chances of it. A company normally due to lack of interest. The process of possesses a perpetual. winding up is very simple. CONCLUSION: Both the company and co-operative society are very vital for a country, the company is run on a large scale with the sole aim of earning profit whereas a cooperative society is established for the sake of benefiting people of limited resources.

Prepared By: H.ABDUL REHMAN

0321-6485593