Page 2 - Lesson Note 6

MERITS

1. Excise of formation: It can be started with minimum of 10 members. Registration is also
easy as it requires very few legal formations. The societies are registered under Co-
operative Societies Act, 1912.

2. Limited Liability: The liability of members is limited to the extent of their capital
contribution.The personal assets ofthe members cannot be taken for meeting liabilities of
the society.

3. Stable existence: Due to registration it is a separate legal entity and is not affected by
the death, luxury or insolvency of any of itsmember. So, the society remains stable,
irrespective of any change in membership

4. Economy in operations: Due to elimination of middlemen and voluntary services
provided by its members. So societies need not spend large amount on management
personnel.

5. Government Support: Govt. provides support by giving loans at lower interest rates,
subsidies &by charging less tax. So, societies get proper support from the government.

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

LIMITATIONS

1. Shortage of capital – It suffers from shortage of capital as it is usually formed by people
with limited means.The co-operative society arestarted by economically weaker section of
the society. So, cooperative societies suffer from lack of resources.

2. Inefficient management - Co-operative 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 - Member is not inclinedto put their best efforts as there is no direct
link between efforts and reward.

4. Lack of Secrecy – Its affairs is openly discussed in its meeting which makes it difficult
to maintain secrecy.