CO-OPERATIVE

ORGANISATION
A cooperative form of business is a different form
of business enterprises. In this form the main
motive is not earning profit but the main motive of
co-operative organisation is mutual help. It works
with the principle of each for all and all for each.
 Features of co-operative
organisation
 Voluntary association = The cooperative society is a voluntary association
of person. Any person con join the cooperative society if he/she has
common interest.
 Equal voting rights = The cooperative societies works with democratic
principle of “one man-one vote”. All the members get only one voting
rights irrespective of capital contribution by them. The rich members by
taking more shares cannot dictate their terms. A person who has 1000
shares and a person who has 10 shares will get one voting right only.
 Service motive = The main motive of cooperative society is to provide
services to its members and not to earn profit. Earning profit Is the
secondary motive and not the main motive of cooperative organisation.
 Separate legal entity = It is compulsory for a cooperative society to get
itself registered under the cooperative societies Act. After registration the
cooperative organisation gets a separate legal entity.
 Distribution of surplus = The profit of cooperative society is not distributed
according in the ratio of capital contribution by each member but it is
distributed according to dealings of members with the society.
 Merits of cooperative organisation
1. Easy to form = The formation of cooperative organisation is
very simple process. Only ten adult members having common
interest are required to form it.
2. Limited liability = The liability of member of cooperative
organisation is limited to the extent of their capital
contribution in the cooperative organisation.
3. Continuity = The cooperative society has a separate legal
existence. The death, insolvency or incapacity of any member
does not effect the existence of society.
4. Democratic setup = The cooperative societies work with the
democratic system. They are based on the principal of one
man one vote.
 Merits of cooperative organisation
 Open membership = Any person having common interest can
become the member of cooperative organisation.
 Economic functioning = The operation of a cooperative
organisation is quite economical. As most of the activities are
performed by the members themselves and while purchasing
goods or raw material middle man are eliminated so they can
get the raw material and goods at low cost.
 Stage patronage = The cooperative organisation get various
benefits from the government. The government provides
various concession and rebate in taxes.
 Social utility = The cooperative organisation promote social
justice and mutual cooperation. They promote self help, moral
value among the members.
Demerits of cooperative organisation
 Limited capital = The cooperative organisation is
formed by the people who have limited resources and
there is no compulsion to contribute some minimum
amount of capital to become member.
 Inefficient management = The cooperative
organisation is managed by its member only.
Generally all the activities are performed by the
members only.
 No motivation = In cooperative organisation there is
no direct link between the efforts and reword.
 Conflict among the members = Quite often
Demerits of cooperative organisation
 1. Lack of capital. 
(a).Its members are generally related to the poor group of the society and they are
not in a position to invest a large amount.
(b).External financial resources of the society are limited.
(c).It cannot borrow money from non-members.
(d).It cannot issue any kind of debentures.
(e).It share cannot be transferred to nonmembers.
It thus suffers shortage of capital for the operation of business.
2. Limited scale. Due to the various hindrances behind the growth of capital, it is
not possible for the cooperative society to start its business at a large scale; it
therefore, keeps its business limited in the narrow field of cooperation.
3. Inefficient management. Expert and efficient management is important factor for
running the business successfully. But a society cannot afford to hire the services of
superior abilities due to its limited resources. Therefore its business cannot be
carried on smoothly.
4. Lack of prompt decision. As all the matters are decided by the
managementcommittee and complied by another authority, it cannot act with
promptness, if a chance comes to make a timely purchase or sale, they have to wait
to get others consent.