question_answer

Explain the meaning, features, merits and demerits of cooperative society.

Answer:

Ans.     A cooperative society is a voluntary association of persons of moderate means, who unite together to protect and promote their common economic interests.

Features:

1. Voluntary association: Everyone having a common interest is free to join a cooperative society and can also leave the society after giving proper notice.

2. Legal status: Its registration is compulsory and it gives it a separate identity.

3. Limited liability: The liability of the member is limited to the extent of their capital contribution in the society.

4. Democratic control: Management and control lies with the managing committee, elected by the members by giving vote. Every member has one vote irrespective of the number of shares held by him.

5. Service motive: The main aim is to serve its members and not to maximize the profit. State control: They have to abide by the rules and regulations framed by government for them.

6. Distribution of surplus: The profit is distributed on the basis of volume of business transacted by a member and not on the basis of capital contribution of members.

Merits:

1. Ease of formation: It can be started with minimum of 10 members. Registration is also easy as it requires very few legal formalities.

2. Limited liability: The liability of members is limited to the extent of their capital contribution.

3. Stable existence: Due to registration it is a separate legal entity and is not affected by death, lunacy or insolvency of any of its members.

4. Economy in operations: There is economy in operation due to elimination of middle man and voluntary services provided by its members.

5. Government support: Government provides support by giving loans at lower interest rates, subsidies and by charging less taxes.

6. Social utility: It promotes personal liberty, social justice and mutual cooperation. They help to prevent concentration of economic power in a few hands.

Limitations:

1. Shortage of capital: It suffers from shortage of capital as it is usually formed by people with limited means.

2. Inefficient management: Cooperative society is managed by elected members who may not be competent and experienced. Moreover it can't afford to employ expert and experienced people at high salaries.

3. Lack of motivation: Members are not inclined to put their best efforts as there is no direct link between efforts and reward.

4. Lack of secrecy: Its affairs are openly discussed in its meeting which makes it difficult to maintain secrecy.

5. Excessive government control: It suffers from excessive rules and regulations of the government. It has to get its accounts audited by the auditor and has to submit a copy of its accounts to registrar.

6. Conflict among members: The members are from different sections of society with different viewpoints. Sometimes when some members become rigid, the result is conflict.