The following are the some of the definitions of cooperative organisations.

(1) International Labour Organisation- “Cooperative is an association of person usually of limited means, who have voluntarily joined together to achieve a common economic, end through the formation of a democratically controlled business organisation, make equitable contribution to the capital required and accepting a fair share of risks and benefits of the undertaking.”

(2) Hubert Calvest- “Cooperative is a form of organisation wherein persons voluntary associates together as human beings on the basis of equality for the promotion of the econo interests of themselves.”

(3) The Indian Cooperative Societies Act, 1912 – Section 4 of this Act definies cooperatives “as a society which has its objectives the promotion of economic interest, its members in accordance with cooperative principles.”


Cooperative Society is that society which has been registered under the Cooperative Societies Act, 1912, or under any other law for the time being in force in any state registration of cooperative society.”

(4) Mr. Talmaki – “Cooperative society is an association of the weak who gather together for a common economic need and try to lift themselves from weakness into strength through business enterprise.”

Characteristics of Cooperative Soceity:

Based on the above definitions, we can derive the following characteristics of cooperative organisations.


1. Voluntary association:

Everybody having a common interest is free to join cooperative society. There is no restriction on the basis of caste, creed, religion, colour, etc. Anybody can also leave it at any time after giving due notice to the society. That is specialty of any cooperative society. There should be minimum of 10 members to for cooperative society but there is no maximum limit for the membership.

2. Separate legal entity:

A cooperative society after registration is recognised as separate legal entity by law. It acquires an identity quite distinct and independent of its member can purchase, dispose its own assets, can sue and also can be sued. The income of cooperative society is legally taxable as per the Income Tax Act, 1961.


3. Democratic management:

Equalities is the essence of cooperative enterprises, governed by democratic principles. Every member has got equal right over the function management of that society. As such each member has only single voting right irrespective of the number of shares held or capital contributed by them. In case of cooperative society, no member detects the terms and conditions of the functioning because “one man one vote” is the thumb rule.

4. Service motive:

The main objective being formation of any cooperative society is for mutual benefit through self-help and collective effort. Profit is not at all in the agenda of the cooperative society. But if members so like, they can take up any activities of their choice to generate surplus in order to meet the day-to-day expenses.


5. Utilisation of surplus:

The surplus arising from the operation of business is partly kept in a separate reserve and partly distributed as dividend among the members. According to Indian Cooperative Societies Act – 1912, each society must transfer at least one-fourth of its profits to general reserve. It may distribute maximum upto 90 per cent of its surplus as dividend to its members and can spent another 10 per cent for the welfare of the members.

6. Cash trading:

One exception in the cooperative society is that like other business if never go for credit sales. It sells the goods on the basis of cash only. Hence, the cooperative society hardly come across with the financial hardship because of non-collection of sales dues. Members can only purchase on the basis of credit, which is an exception to the present rule.


7. Fixed rate of return:

All members are supposed to contribute capital for the formation of a cooperative society or at the time of joining as a member of the cooperative ^society. In return to the capital invested, the members are assured of a fixed rate of return maximum to the extent of 9 per cent per annum on the sum deployed by them. This amount is being paid from the surplus generated by the society on that year. This is an incentive extended by the society to its members.

8. Government control:

All the cooperative societies of the country are regulated by the Government through its different rules and regulations framed from time to time. Cooperative societies of the country are required to register themselves as per the Indian Cooperative Societies Act, 1912. Sometimes different State Governments also frame laws regarding the registration and functioning of cooperative societies for their states.


9. Capital:

The capital of the society is raised from its members by way of share capital. However, the major part of finance is raised by the society through taking loan from the Government or by accepting grants and assistance from the Central or State Government or from the apex cooperative institutions like state and central cooperative banks operating in that state.