What are the Characteristics or Features of Co-operatives?

Based on above definitions some of the main features of Co-operative enterprises are:

1. Voluntary association:

A co-operative enterprise is essentially a voluntary association of individuals seeking to improve their economic status through joint efforts.

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Individuals having common interest can join a cooperative enterprise as members of their own accord. They are also free to leave the enterprise after fiving due notice.


While leaving a member can withdraw his capital from the society but he cannot transfer his share to another person.

There is no binding either to become a member or to continue as a member similarly, a member of co-operative society may or may not avail the services provided by the co operative society. This is the specialty of any cooperative society.

2. Open membership:

Membership of co-operative enterprise is open to all irrespective of their caste, creed, religion, sex, color, political affiliations and beliefs.

Besides, normally the membership list is not closed. New members are always welcome to a co-operative society. The membership fee or the value of the share in the capital of the society is kept low so as to enable the persons of low income to Join as a members.


But a member cannot own more than 10% of the total share capital of the society and sometimes it can even be less if it’s by laws so provide.

3. Variable Nature of Member’s Liability:

A co-operative may be organized on the basis of either limited liability or unlimited liability. The credit societies in rural areas, where the majority of the members are farmers, are generally formed with unlimited liability.

In the case of limited liability societies, the word, “limited “us be used as a part of their name.

4. Democratic control:

Equality is the essence of co-operative enterprises; each member is entitled to a single vote regardless of his contribution to the capital of the society.


The basic principle of co-operatives “one man one vote” ensures that nobody can dictate terms to other members just because of his greater command over excessive wealth.

Administration of co-operative society is entrusted to a Board of Directors elected on the principle of equality of vote. Thus, co-operative society is an emblem of true democracy.

5. Limited reward to capital invested:

The capital invested in a co-operative is not given an under preference. It is rewarded in the form of a limited rate of interest.

All members contribute capital at the time of joining as a member in the society. In return to the capital contributed, 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 is an incentive extended by the society to its members met from the surplus of that year.

6. Distributive justice:

The profits earned by a co-operative society are distributed equitably among its members according to the extent of the business transacted with it by the respective members.

A specified portion ( one fourth of its total profit) of the profits is transferred to Statutory Reserve and then a fair rate of interest is paid on the capital subscribed by the members.

As per the cooperative society act up to 10 per cent of the surplus generated by the society must have to be spent for the welfare of the members. The remaining profits are disbursed on the basis of the dealings of the individual members with the society.

7. Service motive:

The primary motive of co-operative societies is to provide service to their members. The aim is not to earn profits as is the case in all other forms of enterprises.

The spirit of co-operation operates under the noble motto “Each for all and all for each”. Service to others is expected to be given primary importance, while self-interest should be given only a secondary priority.

Even though profit is not at all agent of the cooperative society, still members it so like, they can take up any activities of their choice to generate surplus in order to meet their day to day expenses.

8. Perfect unity:

The basis of co-operation is united and joint action. Co-operatives thrive on the principle of mutual help. They are the enterprises of financially weaker sections of the society.

A poor man cannot individually fight against the evils of capitalism. But when many poor persons unite they get real strength.

Co-operatives convert the weakness of members into strength by adopting the principles of “Self-Help Through Mutual Help” and “Maximum Strength Through Perfect Unity”.

9. Moral emphasis:

A co-operative lays more emphasis on the development of the moral character of its members by capitalizing the honest, integrity and loyalty of its members.

Honesty is regarded as the best security. A co-operative is expected to prepare a band of selfless workers for the good of humanity.

10. Cash trading:

Cash and Carry” system has become an universal feature of the co-operative enterprises. Generally cooperative society operates with limited capital at their disposal collected from its members.

It is not a position to afford the liability of credit sales which is a common phenomenon with al other form of business. It is because a cash sale, as a rule, has always helped in avoiding the risk of bad debts and in conserving the limited resources of co-operatives.

But members can only purchase on the basis of credit, which is an exception to the present rule.

11. Principle of thrift:

One of the fundamental principles is to inculcate a habit of thrift among its members. This, in turn, implies economical management and avoidance of wasteful expenditure.

12. State control:

The co-operative societies are to follow certain rules and regulations framed by the government. In India, all cooperative societies are registered under the Co-operative Societies Act. The Central and State Government provides a number of incentives for the promotion of co-operatives.

13. Co-operative education and training:

The success of a co-operative will depend upon the awareness of its members towards the principles of co-operation. The members should be properly educated about the aims and objectives of the society.

The members should be trained to perform various activities of the society. Thus, proper education and training of its members is the basis ingredient of its success.

14. Legal Entity:

A cooperatives society after registration is recognized as a separate legal entity on the eyes of law. It acquires an identity quite distinct and independent of its members.

It can purchase, dispose its own assets, can sue and can be sued. The income of the cooperative society is legally taxable as per the Income Tax Act.

15. Equal voting Rights:

The organization of cooperative society is a democratic body. Every member has got equal right over the function and management of that society. As such each member is empowered it one vote irrespective of number of shares held or capital contributed.

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