Advantages And Disadvantages of Cooperative Society: The term ‘cooperative’ implies the readiness to work with another person or in a team for a common purpose. A cooperative society is an autonomous organization formed by people who share the common goal of promoting the economic, social, and other interests of its members, and of which its membership is open and voluntary.
The primary objective of a cooperative society is not to make profit but to attain the common goal of its members. The purpose also drives towards providing remedy for sections of the public that are economically weak. It is usually formed by people of similar low economic class having a common goal. Cooperative societies operate policies which are targeted at executing the mutual interest of its members and improving their status economically. Their policy ensures equality of its members and equity in their dealings.
The first cooperative society was formed in England in 1844 AD by Robert Owen under the name, Rochdale Pioneers of England.
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Table of Content
Characteristics of A Cooperative Society
1. Voluntary Membership: membership of cooperative society is absolutely voluntary. Members also reserved the right to exit the association at any point in time. Its membership is open to every person as long as they are motivated by common goals. Membership to a corporative society is neither gender nor race sensitive.
2. Membership Limit: there is no prescribed limit of membership in a cooperative society. Thus, the number of its members can count as maximum as unlimited. However, fir a corporative society to be validly established, there must be up to 10 members as minimum requirement.
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3. Contribution by Members: a cooperative society requires funds to run its affairs and achieve its goal. Members are required to make some contributions for the formation and operation of the cooperative society.
4. Democratic Management: A cooperative society observes the principles of democracy. The management committed is democratically elected.
The rule of law regulating the internal affairs of the association is well adhered to by its members and the managing board. Every member is accorded equal regard and rights, regardless of his number of shares. Each member is entitled to one vote. Surplus incomes are however distributed according to the capital contribution of the members.
5. Continuity: As long as there are still members, the cooperative society continues to operate. The death of a member does not wind up a cooperative society.
6. Autonomous: Cooperative societies are independent and sovereign. They are self-governing and self-aware.
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7. Legal Entity: An incorporated cooperative society is recognized by law as an independent legal entity separate from its members. It therefore has the capacity to sue and be sued as a legal entity, the capacity to own properties as well as perform other transactions.
8. Credit Sale: A cooperative society does not engage in credit sales. This however does not apply to its members. Members of a corporative society can purchase from the society on credit.
9. Government Regulation: Cooperative society is regulated by certain rules and regulations of the state. Its regulation starts right from the registration requirements.
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10. Profit-Making: The primary objective of a cooperative society is not to make profit. They are rather primarily concerned with promoting the common goal of the members. This however does not preclude them from making profits.
11. Contribution by Members: A cooperative society requires fund to run its affairs and achieve its goal. Members are required to make some contributions for the formation and operation of the corporative society.
The objectives of cooperative society are targeted at enhancing co-operation between the members of the organization. Cooperative society encourages devotion to services and fostering of the common goal of its members. Inasmuch as their main objective is not to make profit, they are still profit-motivated.
It is through profit making that the society is run efficiently and its purpose attained. Cooperative society fosters unity, promotes the welfare of its members, ensures equal rights, teaches moral principles, works on placing a balance on the inequality of wealth, helps to equip and improve the skills of its members, and generally contributes to the economic development of the state.
Advantages of Cooperative Society
1. Easy To Form: The requirement for the formation of a cooperative society is the minimum of 10 members. Other requirements for its registration are neither demanding nor the process cumbersome. The amount required for its registration is usually not exorbitant.
2. Voluntary and Open Membership: Membership of cooperative society is not limited to any class, gender or race. There is no academic qualification required. People are free to join and are equally free to exit the society. Membership is absolutely voluntary. This qualifies as an advantage.
3. Tax Exemption: Cooperative societies are exempted from paying taxes in most of the states, since their primary interest is not necessarily profit-making.
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4. No Bad Debts: Because the policy of cooperative society does not operate on sale on credit, the risks of incurring bad debts are limited. This promotes continuity in the society and reduces the chance of the society’s failure.
5. Mutual Help: Cooperative society is concerned with the interest of its members; economic, social and otherwise. The objective of cooperative society is driven towards extending help to its members. Its members can benefit loan grants financial, material and other aids from the society. The system encourages mutual co-operation of which its benefit extends to even nonmembers of the society.
6. Continuity: There is continuity in the existence of a cooperative society. Membership is open to unlimited members and members are also free to leave the society at any time they so desire. The death or misfortune of any member does not affect the existence of a cooperative society.
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7. Limited Liability: Members of a cooperative society are not personally liable for the debts and liabilities incurred by the organization. The members’ liability is only limited to the value of their shares. A cooperative society wears its own legal entity which is distinct from its members. It can be sued and proceeded against in lieu of its members.
8. Democratic Management: Cooperative society gets all members involved in the management and control of the organization. Every member is treated equally and fairly.
Their policies are democratic in nature. Each member bears one vote regardless of the amount of shares owned.
Disadvantages of Cooperative Society
1. Limited Capital: Members of cooperative society are purposeful people of low income class. Consequently, they are open to being faced with the problem of capital.
Moreso, cooperative society attracts less investment since its primary objective is not to make profits.
2. Internal Conflict: The virtue of cooperative society is grounded on member’s co-operation. Whenever conflict ensues in a cooperative organization, the purpose is most liable to be defeated, since there is little or no motivation sustaining its operation.
3. Government Interference: Regardless of its autonomous status, the government still exerts some degree of interference on cooperative societies. There are some state laws guiding the operation of cooperative society.
Also by the virtue of being incorporated, it is bound by some enactments. Some of these surely operate to the detriment of the society.
4. Absence Of Secrecy: In a cooperative society, every member is involved in the management and control system of the society. Thus, there is little or no secrecy in the system. The record book of the organization is open and reachable to any member who wishes to inspect same.
5. Corruption and Management Inefficiency: Corruption entirely defeats the purpose of a cooperative society. This goes to the root of its existence. Management inefficiency is another possible disadvantage which a cooperative society is prone to. This is because they are usually faced with capitals to run the organization.
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Cooperative society is a very purposeful initiative. Taking its full effect, the initiative actually makes the society a progressive one, but unfortunately, it is faced with certain drawback which weighs down its idealistic purpose.
Edeh Samuel Chukwuemeka ACMC, is a Law Student and a Certified Mediator/Conciliator in Nigeria. He is also a Developer with knowledge in HTML, CSS, JS, PHP and React Native. Samuel is bent on changing the legal profession by building Web and Mobile Apps that will make legal research a lot easier.