How to form a Co-operative Society

Any group of persons can form a cooperative society of their own if they so like to act jointly for the common benefit of each other. But that is not the legal way of formation the cooperative society. All societies must be formed under the Cooperative Societies Act, 1912 or under the relevant state cooperative laws.



The 97th Constitutional Amendment Act of 2011 gave a constitutional status and protection to co-operative societies. It added a new Part IX-B in the Constitution which is entitled “The Co-operative Societies” (Articles 243-ZH to 243-ZT).

February 15, 2012, was the date of commencement of the Constitution (Ninety-seventh Amendment) Act, 2011. The State Governments have been mandated to amend their respective State Cooperative Society Act in tune with the Constitution (97th Amendment) Act, 2011 before February 14, 2013.

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Right to form a cooperative society is now a fundamental right of the citizens

There have been certain crucial amendments to the Constitution whereby the right to form a cooperative society has been deemed to be a fundamental right equitable with the right to freedom of speech and expression, while also putting a mandate on the respective State Legislatures to promote cooperative socitites and ensure a functional framework of laws in every state for the same.


1. Article 19 – Protection of certain rights regarding freedom of speech etc. contains provision of citizens’ six specific freedoms :
In clause (c) of the clause (1) of this Article:
The word “cooperative societies” has been added to this. So the amended clause (c) is as –
“(c) to form associations or unions or co-operative societies”.
Right to form a cooperative society is now a fundamental right of the citizens.

2. Directive Principles of State Policy:
A new Article has been inserted with the Part IV as below “43 B. The State shall endeavour to promote voluntary formation, autonomous functioning, democratic control and professional management of co-operative societies”.

This new Article inserted in pursuance of the 97th CAA makes it necessary for the central and state governments to endevour to make State Acts and rules for the better autonomous functioning of cooperative societies. Since the Cooperative Societies Acts are Acts of State Legislatures, in pursuance of this Article they will be amended.

Formation of Co- Operative Society

Any group of persons can form a cooperative society of their own if they so like to act jointly for the common benefit of each other. But that is not the legal way of formation the cooperative society. All societies must be formed under the Cooperative Societies Act, 1912 or under the relevant state cooperative laws.

For formation of a cooperative society at least 10 persons are required. They must have the common objective to serve each other by forming a society. They have to contribute capital in form of share capital and decide to take up any one or more activities. They form a managing committee from and among the members who looks after the management of the society and implements the decisions of the members. As our Constitution is wedded to a socialistic pattern of society, it is a part of the Government policy to promote and encourage establishment of cooperative societies.

Therefore, cooperative societies enjoy several benefits provided by the Government from time to time . But in order to avail those benefits the society must have to register under the Cooperative Societies Act. The procedure for registration are as follow: Apply for registration of the association as cooperative society in a prescribed proforma available with the Registrar of Cooperative Societies with requisite information like -

(1) List of members, their individual addresses,

(2) Name and objectives of the society for which it has been formed,

(3) Collection of funds - share capital or loan fund with their utilization process,

(4) Office bearers as managing committee and their powers,

(5) Admission and retirement of members, and

(6) Bye-law of the society.

On fulfillment of all the above requirements the Registrar may issue a certificate of Registration in favour of that society, which elevates the status as Registered cooperative society or corporate body.

Audit of accounts of co-operative societies

In accordance to  Article 243ZM, the legislature of a state could, with the aid of regulation, make provisions with recognize to the preservation of debts by way of the co-operative societies and the auditing of such money owed at the least as soon as in a year, the legislature shall also lay down the minimum qualification of the auditors and the auditing businesses.
Such auditors or auditing businesses can be appointed from a panel approved by using a State government or authority authorised by using the State government on this behalf. The bills of the co-operative society shall be audited within six months from the shut of the monetary year and the audit document of the debts will be laid before the state legislature in keeping with the provisions of the legislation.

In accordance with Article 243ZN, the general body meeting will likely be convened inside the interval of six months from the close of the financial year proper of a member to get understanding in line with Article 243ZO, the legislature could by means of legislation furnish for access to every member the information, guide of accounts, and many others of a co-operative society, it shall additionally make provisions for the contributors to attend meetings and for co-operative schooling and coaching for its individuals.

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Returns

In accordance to Article 243ZP, each cooperative society shall file returns, inside six months of the close of each monetary 12 months, to the authority targeted through the state government together with the following matters akin to annual reviews of its activities, its audited declaration of debts plan for surplus disposal as authorized by means of the overall body of the co-operative society, record of amendments to the bye-laws of the co-operative society, statement related to conserving of its common annual physique assembly and some other know-how required by means of the registrar.

Offences and Penalties

According to Article 243ZQ of the Constitution of India, the legislature of a state shall make provisions for the offences and imposition of penalties for Cooperative Socities.

This Article has added five new acts of commission or omission, for which new provisions are to be made by the State Legislature in the sections of offences / penalties.  offences are namely:–

(a) a co-operative society or an officer or member thereof wilfully makes a false return or furnishes false information, or any person wilfully not furnishes any information required from him by a person authorised in this behalf under the provisions of the State Act;

(b) any person wilfully or without any reasonable excuse disobeys any summons, requisition or lawful written order issued under the provisions of the State Act;

(c) any employer who, without sufficient cause, fails to pay to a cooperative society amount deducted by him from its employee within a period of fourteen days from the date on which such deduction is made;

(d) any officer or custodian who wilfully fails to handover custody of books, accounts, documents, records, cash, security and other property belonging to a co-operative society of which he is an officer or custodian, to an authorised person; and

(e) whoever, before, during or after the election of members of the board or office bearers, adopts any corrupt practice

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Advantages

  1. Cooperative stores supply quality goods unlike other shops wherein adulterated foods maybe given to its consumers and thus saved them from adulteration and other malpractices. 
  2. As consumers or members of the society are the owners and managers of such stores, genuine requirements of the majority of consumers can be met. In other words, goods required by a majority of the customers or members of the society are always dealt by such stores.
  3. Cooperative societies are an important form of democratic business enterprise because ownership is not vested in one person completely so as a result, no single group can secure control over the organisation.

Disadvantages

  1. It only caters to the needs of small and medium-income groups so when there are large group with higher economic interest then it is preferable to choose another business model.
  2. There is much dependence on the honesty, integrity and loyalty of members and workers and once there are trust issues between the members it is hard to transact business thereafter.
  3. It is limited to certain objectives hence profits are minimal.
  4. Management of society usually rests in the hands of people with less managerial experience due to which society will suffer and many do not invest in hiring professionals to handle the society due to lack of funds or interest so henceforth growth of the society maybe put to stake by its own members.

The modification has introduced the co-operative societies into the realm of the constitution this means that that any alterations to be made in the phase shall require amendment by way of particular majority thereby securing the position of co-operative societies. The exhaustive provisions duvet various elements of the incorporation, returns, offences, etc. Of the co-operative societies making the job simpler for its officers to hold out their work.