Organizational Structure of

a Co-operative
Contents
1.Organizational Structure of Co-operative Institutes
2. Meetings
3.Board of Directors
4. Chairman
5.Distinguishing factors of Co-operatives

1.Organizational Structure of Co-operative Institutes

With 70% of the population engaged in agriculture of which
majority of them being poor,the co-operative movement in
India was more or less confined to agricultural credit
thusforming the oldest and the mist important forms of co-
operative movement.

The credit co-operatives can be classified as either

1.Agricultural credit co-operative
2.Non-agricultural credit co-operative
Agricultural Credit Co-operative
The first co-operative legislation in respect to credit was
the co-operative credit societyact 1904. The society was
then known as Agricultural Co-operative Credit Society,
whichengage themselves mainly in the disbursement of
credit to their members, following theReiffeisen pattern of
organization.

Agricultural Credit Co-Operative Structure

1.Short term and medium term: It is basically a 3-tire system
with primary creditsociety at village level, central co-
operative banks at district level and also the stateco-
operative banks at the state level. (They are also the APEX
banks)2.The long-term agricultural co-operative structure:
is of 2-tires. The primary co-operative land
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development bank at sub-divisional level and the state co-

operative land development
bank at state level.
3.Short term and medium term co-operative credit: It’s a 2-
tire system with primary co-operative credit society at the
village level affiliated to the district central co-operative
bank which is also APEX co-operative bank.
Features:
 A.A village is to be the limit for societies membership and
area of operation.
B.Members must know each other personally and admit no
new member whom they
don’t trust.
C.The local members on voluntary basis carry out
administration of the society.
D.Liability of members is unlimited.
E.All profits to be carried in the visible reserve fund.
F.Loans to be given to members for definite objectives.
Non Agricultural Credit Co-operative Society

I.Short term credit: Duration is 12-15 months and is provided

for meeting the seasonalagricultural purchase of manure
implements seeds etc. The credit is provided at
thebeginning of the season and is collected after the
harvest is sold. This is known ascrop loan.

II.Medium term: Loans ascending from 15 months to 5 years

for purchasing farmanimals, carts and other heavy
implements. It is also given for digging wells, land
orconsolidation of land holdings.

III.Long Term: Loans granted for a period of more than 5

years to make permanentimprovements of land declaiming
waste lands, tube wells, purchase of tractors etc.Such
loans are to be repaid within 20 years maximum. The short
and medium termloans are provided by the agricultural
credit societies but co-operative landdevelopment banks
provide the long-term loans.
Urban Co-operative Banks

The urban co-operative banks are co-operative banks,

which are situated in the urbanareas. They play an
 important role for the benefit of small industrialist, trader,
middleclass population etc.

The Role
1.They organize and bring together middle and working class
population in urban andsemi-urban areas and inculcate in
them the habit of thrift and self-help and acquaintthem
with the elements of banking principles.
2.Mobilization of savings and fulfilling the needs of finance
for rural, industrial and
other development functions.
3.Providing credit on reasonable terms to protest them
from exploitation by the hands
of moneylenders and unscrupulous agency.
4.To make available essential banking facilities to remote
areas and to provide
experienced and effective leadership to the co-operative
movement.
Dual Statutory Control
The urban co-operative banks are subject to a dual
statutory control of:
 The Registrar of the co-operative society (state government)
 The RBI
Co-operative Banks are governed by the respective state
co-operative act and also thebanking regulation act 1949.
Matters such as registration of banks, approval of
theamendments of the byelaws, amalgamation and division
of banks, explosion ofmembers, appointment of an
administrator, audit, and liquidation etc., fall within
thestatutory jurisdiction of the registrar under the
provision of the co-operative law.
Matters like issue of banking license, banking transaction
and business, supervision,policy matters fall within the
statutory authority of the RBI under the provision of
theBanking regulation act 1949.
G.Meetings
1.General Body Meeting:
It is the general meeting of the shareholder after the
registration of the co-operative. It isobligatory on the part
of the society to hold its first general meeting within 3
months afterthe registration of the society. It is the duty of
the chief promoter to convene such ameeting. If the chief
promoter fails to do so it shall be called by any person
authorized todo so by the registrar.

Agenda for the First Meeting:

A.Election of a president for the co-operative.
B.Admission of new members.
C.Receiving statement of accounts and reporting all
transactions entered into by the
promoter’s upto 14days before the meeting.
D.Constitution of a provisional committee under regular
election is held.
E.Any other matter as decided by the chair.

2.Annual General Meeting (AGM):

These meetings are held annually to enable the members
who are the real owners toexercise ultimate control over
the affairs of the co-operative. In the case of the co-
operative the interval between 2 Annual General Meetings
shall not exceed 15monthsunless extended by the registrar.
Procedure:
1.The meeting shall be convened by the secretary under
intimation to the registrar who
may depute his representative to attend.
2.The meeting shall be presided over by the president or a
member who will be elected
to preside in their absence.
3.The secretary shall read out the agenda for the meeting
and the items of discussions.
 4.Voting can be undertaken for any particular cause, which
will be conducted by the
president.

5.If all items in the agenda cannot be finished on the same

day, the meeting may bepostponed to a suitable day not
exceeding 30 days or as decided by the memberspresent.
3.Extra Ordinary General Meeting (EOGM):
Extra Ordinary General Meeting may be called at any time
by the chairman or by a
majority of the committee and has to be called within 1
month. It is called when:
a.A requisition in writing of 1/5th of the members of the
society or by that number of the members mentioned in
the byelaws.
b.At the instance of the Registrar.
c.At the instance of the committee of the Federal Society
of which the society is a member.
F.Board Of Directors: (Democratic – through election)

Functions
1.Admission of new members and allotment of shares.
2.Approval for transfer of shares.
3.Preparation of guidelines for the conduct of the operation
as per byelaws, rules and
acts.
4.Approval of annual budget and its submission to general
body.
5.Sanction of the expenditure for the management in the
allotted budget.
6.Ensuring maintenance record and its submission to the
registrar.
7.Raising resources for managing the day-to-day affairs.
8.Sanctions of investment of funds.
9.Appointing staff and agencies.
10. Appointing sub committees or exclusive committee and
delegating necessary powers
to them.
11. Electing the chairmen amongst themselves.
Relations between Board Of Directors and the Executives
The Board Of Directors are elected representatives of the
members who are the realowners of the organization. The
main function of Board Of Directors is policyformulation
and deciding the overall objective and goals of the
organization. Theimplementation or execution of the
policies is carried out by the managerial hierarchylead by
the general manager. The duties of the Board Of Directors
are to see that thepolicies formulated are implemented
properly. But many times it happens so that theBoard Of
Directors interference in day to day functioning of the
executive due towhich conflict situation is created as the
executive feels that they lack in independentdecision
making capacity and have been treated as mere clerks.
The Chairman of the Board has to perform a crucial
function of co-ordination becausehis main task is to
provide necessary guidance and also to give the
executiveautonomy in the implementation of the decisions
by the board.
Steps to control/handle conflicts
1.The board while taking decisions on policy matters
should involve the chief
executive.
2.The executive and the board should hold combine
meetings for mutual understanding
and respect.
3.The board should consider practical difficulties of the
executive.
4.The objective of service to the members should be given
prime focus.
5.The Chairman should achieve co-ordination between the
professional and the non-
professional group.
6.The executive should not keep the Board Of Directors in
dark while implementing
decisions.
Responsibility of the Board Of Directors/Managing
Committee
1.It should be cost conscious.
2.All members should be given equal opportunity to discuss
and voice their views.
3.Decision taken should be collective and no members
must be allowed to jeopardize
the decisions.
4.Decisions taking should be with full consent and proper
understanding of the
problem.
5.The Board Of Directors should be responsible towards:
a.Responsibilities towards Employees
b.Responsibilities towards Consumer
c.Responsibilities towards Government
d.Responsibilities towards Shareholder
e.Responsibilities towards Environment
f.Responsibilities towards Society
G.Chairman
The chairman is responsible for the overall management
and guidance to the co-operatives. He performs all such
duties and exercises all such powers as may beconfined on
him by the respective state co-operative act. His role is
most crucial as heperforms the leader of the top
management, which is the board of directors.

The powers of the Chairman:

1.To conduct and regulate the proceedings in the meeting.
2.To decide the priority of the speakers.
3.To regulate their speeches.
4.To order and conduct poll..
5.To exclude certain matters from the minutes if they are
irrelevant or detrimental to
the society.

Duties of the Chairman

1.To see that the meeting is duly and properly constituted
in accordance with the rules
and regulations
2.To see that the business is conducted in accordance with
the agenda unless willing
changed by the members.
3.To maintain order and discipline in the meeting.
4.To act impartially.
5.To accept valid demand for election and make
arrangements for it.
6.To declare the meeting closed.
7.To ensure that correct minutes are entered by the
secretary in the minute book and to
sign them.

1.Distinguish between Co-operative Organization and Joint

Stock
Company
1. Definition:
Co-operative Organization – This is an association of persons who
have come together
on a voluntary basis to promote their economic interest.
2. Basic Objective:
Co-operative Organization – The primary objective of a co-operative
society is to
provide basic or essential service to its members. Profit
earning is a secondary motive.
purely commercial organization.
3. Minimum Members
Co-operative Organization – A minimum of 10 adults are required to
form a co-
operative organization.
for a Pub. Ltd. Company minimum 7 members are required.
4. Share List
Co-operative Organization – It is always kept open for new members.
A person can
become a member of the society by purchasing a share.
Co-operative shares are not sold
beyond their face value and hence they are not subject to
speculation.
.
Thus shares of a company are subject to speculation and
normally the face value and
market value differ.
5. Voting Rights
Co-operative Organization – They are based on the principle of ‘One
Man One Vote’.
Share One Vote’.
6.Transfer of Shares.
Co-operative Organization – Shares are non-transferable. A member
of the society can
withdraw his capital by giving a notice.
of the company. Shares are freely transferable in the
market.
7.Distribution of Surplus
Co-operative Organization – Co-operative provide a certain amount
of Interest on
Capital. Surplus is not distributed in proportion to the
capital contribution. The return to
the members are called as ‘Bonus’
.
8. Privileges
Co-operative Organization – The basic objective being service they
enjoy lot of
incentives from the Government and also have exemptions
from Income Tax,
Registration Fees, Stamp Duty etc.
9.Area of Operation
Co-operative Organization – Generally co-operatives operate in a
limited area such as a
Town, Locality, Tribe etc.
.
10. Members Interest
Co-operative Organization – Members take personal Interest in the
working of the
society.
of the company.
11. Capital Holding
Co-operative Organization – An individuals holding is generally
limited. Dividend on a
share cannot exceed 12% of the net profit of the current
year.
12. Management
Co-operative Organization – Election by democratic process.
Management is
responsible to the members.
13. Financial Resources
Co-operative Organization – They are limited because they don’t
have the capacity to
raise and borrow funds.

.
Co-operatives – Formation is not as easy as it is an association of people.
Co-operatives – It is governed by the Maharashtra State Co-operative
Society Act
1960.
 Co-operatives – It has to be registered
.
Co-operatives – Minimum number of members is 10.
Co-operatives – Liability is Limited
Co-operatives – The identity is separate.
.
Co-operatives – It does not come to an end by the death of any of the
members.

Co-operatives – Not more than 12% of the net profit can be distributed
as bonus.

Role of State Government

The responsibility of making co-operative movement a

success is with the respective
state government because co-operative is included in the
state subject list.
Co-operative Department
1.Co-operative Education and Training: The department helps
in the training anddevelopment of members. The various
co-operative schools and colleges have beenstarted in
Maharashtra. Eg. Pune, Nagpur, Satara etc.
The Training of highest cadre of personnel is provided by
the Vaikuntbhai Mehta
National Co-operative Management Institute at Pune.
2.Financial Assistance: Direct financial assistance is
provided by the co-operative
department to the cotton mills, sugar factories, co-
operative banks and co-operative
unions in the way of: -
a.Purchase of shares of co-operative societies.
 b.To take underwriting
c.To allow raising of loans beyond stipulated limit.
d.To provide facilities for repayment of loans.
3.Guidance to new co-operative societies: The department
provides guidance to newly
registered societies and motivates them in their
functioning.
4.Administration Expenditure: The co-operative department
has the power to frame therules and according to the
various laws to help the co-operatives function
efficiently.The department issues circulars, directions from
time to time to guide the co-operative.
5.Co-operative development also takes over inefficient and
economically weak
societies and help in the reconstruction process.

2. Registrar
The Registrar occupies crucial position in the co-operative
system. He is thefacilitator in the implementation of the
declared policy of the state-governmenttowards rural
development through the co-operative sector. He is the
most importantmedia through which a democratic
government fulfills the social and economicaspirations of
the people. He has also to co-ordinate between the
government and thenon-official leadership. He has also to
maintain administration realism and thus givecorrect
advise to the popular government.
The Registrar of the co-operative society executes the co-
operative law.
 The powers in regard to Formation/Registration, to widening up of
co-operatives
remain with the Registrar, while the financial help and
other assistance is done by the
 co-operative department.
 The Registrar is assisted by the Assistant Registrar, District
Registrar and other
officers appointed by the Co-operative Department.
 The powers and functions of the Registrar are prescribed by the
respected Co-
operative Acts. The Government can also delegate some
additional powers to the
registrar for promoting co-operative movements.

Functions of the Registrar can be divided into:

1.Statutory Functions: The statutory functions of the
registrar are to carry out dutiesentrusted on him by the
Maharashtra Co-operative Acts 1960. These are
registration,amendment of byelaws, audit of Accounts,
execution of awards, liquidation processetc. In certain
conditions the registrar has the authority t
o suspend the management ofthe society for its malpractices
in accounts. He also has to see the day-to-day affairsof the
society are carried out without hindrances. He is also
responsible for thesettlement of disputes between and
within societies.
2.Development and Promotional Functions: The co-operative
movement has to playan important role in the social and
economic development of India. The registrarbeing a
facilitator and coordinator of the developmental process,
he has to do variousfunctions as a friend, guide and
philosopher in relation to co-operative society.
Criticisms on the Role of the Registrar
The Registrar is being criticized that instead of being a
friend, philosopher and guideof societies he has become
the inspector general of co-operative police carrying
outfunctions like imposition of penalties, suspension and
filling legal charges againstsocieties.
Excessive control of Registrar has lead to ill effects like
corruption, rivalry between
societies, high handedness, beaureacratic delays and red-
tapism

Role of Leadership in Co-operatives

1.Educating the people on co-operative principles.
2.Influencing the masses to form co-operative organization.
3.Organizing the group and explaining to them the
objectives and goals of the venture.
4.Motivating the masses.
5.Giving direction to the movement and coordinating and
controlling the activities.
6.Explaining a vision to the people and showing uttermost
commitment and faith
towards it.
7.Reforming the role of a councilor and a troubleshooter.
Other problems include:
1.Dependence on external sources
2.Conforming financial assistance through few rich due to
favoritism
3. Unemployment
4. Poverty.
5.Lack of Infrastructure
6.Unequal distribution of wealth and resources
7.Low per capita income
8. Casteism
9. Religion fundamentalism
10. Linguistic Conflicts
11. Regionalism
12. Lack of women empowerment
13. Population Explosion
14. Corruption

Professionalisation of management is desirable due to the

following reasons:
(i) Professionalisation will lead to increase in the knowledge and skills of
managers as minimum educational qualifications would be prescribed for
would be managers.
Managerial environment of the future is giving to be more challenging
requiring a high degree of Professionalisation from managers. It would no
longer be possible to manage successfully with intuition or trial and error.
(ii) Professionalisation of management would improve the status and
prestige of management career and of managers. It would remove the
impression that managers are interested only in maximizing profits for
shareholders.
(iii) Professionalisation would involve statutory control over managers.
Such control will minimize the malpractices like underhand payments to
managers, speculation in the company's shares, frauds in practices and
management, etc. Managers indulging in such practices will be debarred
from practicing management.
(iv) Professionalisation will define the duties and responsibilities of
managers precisely. A code of conduct would be prescribed. This will
improve the ethical environment of business and unreasonable demands
on managers would be checked.
(v) Professionalisation would speed up management education and
training. It would also attract more talented people into management
career.