Question

Explain how a cooperative is formed.

Answer 1

A cooperative society is formed through a relatively simple, democratic process based on the principles of voluntary association and mutual help. Here is how a cooperative is typically formed:

1. Voluntary Association: A minimum of ten adults who share a common economic interest come together voluntarily. They associate to improve their economic status through joint action.
2. Common Objective: They agree on the core objective of serving the members’ interests rather than earning profits. The cooperative is based on principles like self-help, equality, democracy, and service to members.
3. Capital Contribution: Members contribute capital by purchasing shares of the cooperative. The cost of shares is kept low to allow even poor persons to become members.
4. Registration: The cooperative society must be registered with the Registrar of Cooperative Societies. Registration grants the cooperative a separate legal entity, enabling it to own property, enter into contracts, sue, and be sued in its own name.
5. Democratic Governance: Upon formation, the society is governed democratically, with the principle of ‘one member one vote,’ ensuring equal participation regardless of capital contribution.
6. Legal Formalities: The legal formalities to form a cooperative society are minimal and inexpensive compared to other business forms.