1. Voluntary association:

A Co-operative Society is formed by persons who join it on their own. A person can join or leave the society whenever he wishes. But a member cannot transfer his membership to another.

2. Open membership: –

Membership is open to all irrespective of religion, caste, colour, creed or status of a person. There is no maximum limit for the number of members.


3. Democratic management:

All the members, usually, will be taking part in the management of their society. Equality is the fundamental principle of a Co-operative Society.

4. Equal voting rights:

In a Co-operative Society every member has only one vote even if a person holds more number of shares. Co­operation is considered as ‘Democracy of Men’ with “One man- One vote” as the underlying principle.


5. State control:

Co-operative Organisations are subject to control of the concerned state. In India, the co-operative societies are registered under the Co-operative Society Act, 1912.

6. Service motto: Its primary Motto is to offer services to its members to the maximum extent possible. It does not aim at profit maximisation.

7. Cash transactions:


Generally, Co-operatives transact business on cash basis only to protect the interest of the members against loss due to bad debts.

8. Disposal of surplus:

Surplus is distributed among members not on the basis of shares held by them but on the basis of their transactions with them.

According to the Co-operative Society Act, the following provisions are to be followed


(i) Only 9% of the profits distributed as dividends.

(ii) 25% of profits transferred to reserve fund.

(iii) 10% of profits are to be used for general social welfare activities.

(iv) The rest used to give bonus to members or rebate on the sales affected by them.