DCFS | Get Your Facts on Co-operative Societies

Get Your Facts on Co-operative Societies

Quick Links: Co-operative Concept | Definition of a Co-operative | Categories of Co-operative | Co-operative Principles | Co-operative has five (5) Basic Features | Requirement for a successful Co-operative | Advantages | Obligations | Jamaica’s Co-operative Societies Law

Co-operative Concept

The word Co-operative means working together; and people have been working together ever since the world began. People have worked together in communities and groups and have organized themselves for their own mutual benefit.

Various categories of people use Co-operatives as a means of improving their social and economic well being, for example, farmers, fishermen and industrial workers to name a few.

Co-operative comes from the word cooperation. Co-operation means unity and in unity there is strength. It is therefore more likely that people will accomplish more by working together than by working individually. Working together has also been the basis of human advancement and progress.

Definition of a Co-operative

A Co-operative is an autonomous association of people, usually of limited means, who join together on a voluntary basis to achieve a common objective. This objective may be to market products, to purchase supplies or to provide services such as housing, credit, irrigation and domestic water. To achieve this objective the people form a business organization, that is democratically controlled through which they pool their skills and resources.

Categories of Co-operatives in Jamaica

Agriculture

Community

Consumer

Credit Union

Culture

Development

Federation

Fishermen

Housing

Industry

Irrigation & Water

Religion

Transport

Thrift

Co-operative Principles

Co-operatives also operate under certain principles, which make them different from other types of business. These principles are:

Open and Voluntary Membership
Co-operatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political, or religious discrimination

Democratic Control
Co-operatives are democratic organizations controlled by their members, who actively participate in the setting of polices and making decisions. Men and women serving as elected representatives are accountable to the membership. In Primary Co-operatives, members have equal voting rights (i.e. one member, one vote), and Co-operatives at other levels are also organized in a democratic manner

Members Economic Participation
Members contribute equitably to, the capital of their Co-operative. At least part of that capital is usually the common property of the Co-operative. Members usually receive compensation on capital subscribed if the Society makes a surplus. From the surplus members allocate funds for any or all of the following purposes: developing their Co-operative by setting up reserves; patronage refund; benefiting members in proportion to their transactions with the Co-operative; payment of dividend on shares; and supporting other activities approved by the membership

Autonomy and Independence
Co-operatives are autonomous self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, or raise equity capital from external sources, they do so on the terms that ensure democratic control by their members and maintain their Co-operative autonomy.

Education, Training and Information
Co-operatives provide education and training for their members, elected representatives, managers and employees so that they can contribute effectively to the development of their Co-operatives. They inform the general public – particularly, young people and opinion leaders – about the nature and benefits of Co-operation

Co-operation among Co-operatives
Co-operatives serve their members most effectively and strengthen the Co-operative Movement by working together through local, regional and international structures

Concern for Community
Co-operatives work for the sustainable development of their communities, through policies approved by their members

A Co-operative has Five (5) Basic Features

It is a form of business organization

It is owned by the members who make all the broad policy decisions

It is democratically controlled, that is everyone has an input in the making of decisions

It provides goods or services to the members

Members share profits or losses incurred

A co-operative is also a means of adult education, as the farmer through his co-operative can be taught to produce better crops and the best way of applying fertilizer.

Additional Features of Co-operative Societies:

Co-operatives are established primarily to provide goods and services to their members

Shareholders are called members

Members jointly own the Cooperative

All members have one vote only on each issue regardless of their investment in the Cooperative

The basic price of a share (par value) remains constant unless changed in the Cooperative’s Rules

All profit (called surplus by co-ops) belongs to the members to be used according to the Rules of the Society or as members decide in General Meetings

Supreme authority of the Society resides with members in General Meetings

For a Co-operative to be successful the following should be present:

Members must have a common need

Members must have the will and the desire to better themselves

Members must assist by financing their business though purchasing of shares and patronizing their Co-operative

The co-operative must have good leadership and proper management

Members must support their co-operatives

Proper accounts must be kept of all financial and trading transactions

Advantages

The main advantages of establishing a Co-operative are:

The business is owned and managed by the members who share the risks and benefits of the enterprise in which they actively participate

Members share in making the decisions at Annual and other meetings and decide how the profits, if any, should be shared

Members are entitled to a refund of their shares on leaving the Society upon retirement or otherwise, subject of course, to the Rules of the Society

People are provided with the opportunity to pool their efforts and skills to help themselves in a variety of ways. Co-operatives require an investment of the self, that is, "for my own improvement".

The members make the Rules for the operation of the Society in accordance with the Co-operative Societies Act, Regulations and any other Act that may impinge on the activities of the Society

Continuous education is provided

Management is participatory

Decision-making is participatory

Obligations

Members provide the capital required to operate the business. In some cases, however, in which loan funds may be accessed from other sources, cost of these funds will be borne by the owners/members.

Occasionally Co-operatives suffer losses like any other business. Hence, Co-operatives are advised to create adequate reserves from surplus generated from the business, to tide them over bad times. The Board is required to meet on a timely basis to make policies and take decisions prudent to the successful management of the Co-operative.

Audited Financial Statements approved by the Registrar are required in order to ensure that Annual General Meetings of members are convened annually to enable the members to take critical decisions pertaining to the management of the Co-operative.

Annual and other Returns to the Department is mandatory. If conducting a business where staff is employed, Statutory Returns are to be filed in accordance with existing statutes.

Criteria for Determining Whether or not Co-operatives should be established

Only Co-operatives, which are seen with potential to be successful, should be established

It is important that Co-operatives are only established where they can genuinely serve members. A Co-operative can only do harm both to its own members and to other successful Co-operatives, if for any reason it fails.

The experience both in Jamaica and throughout the world tells that Co-operatives only succeed, if they can meet certain basic requirements. In brief, these requirements are that:

A genuine desire is felt for a Co-operative by the prospective membership

There is an economically viable operation, which can be conducted by the Co-operative

There is a genuine bond between the people wishing to start the Co-operative

There are sufficient members to make the operation economically viable and that these members have subscribed to or are able to raise sufficient capital to finance the business they intend to undertake

There is also a dedicated and well-informed leadership who can readily form a Management Committee

A suitably qualified Manager can be found and the Society is able and willing to pay the necessary salary to retain the services of such a Manager

New Groups Wishing To Establish A Co-operative

Any new group wishing to establish a Co-operative will be required to provide detailed information on the "Group'" and their intention by means of presenting a basic information schedule. The preparations of the schedule will allow the Department of Co-operatives to advise the group whether or not it is likely to be successful in attempting to seek registration under the Co-operative Societies Act. At the same time it enables the Group to revisit and clarify its aims and objectives, by having to set them out on the schedule.

It must be clearly understood that Co-operatives are not and should not be established as a device for the avoidance of taxes. Once this basic information required is established the Department of Co-operatives and Friendly Societies will decide whether or not the establishment of a Co-operative should be encouraged. When a decision is made that the group should be encouraged to form a Co-operative, a Pre-Co-operative group will be established and a Co-operative officer will be designated to work with the Group.

The Co-operative Officer so designated will work with the group on the preparation of the proposed Rules, training and education of ordinary and Committee members, finding and training suitable employees, and the preparation of a detailed feasibility study or business plan.

When the Officer is satisfied that the group meets certain minimum standards, he/she will recommend that it make an application for registration. At this time, a Supervising officer will arrange to examine the state of readiness of the group to become a Registered Co-operative.

During the unregistered period, if the group should become involved in any commercial activities as a group, it will not be recognized as a legal entity and cannot have the necessary protection of the Law or the membership.

Where the "individuals” are an existing “corporate body” and are already transacting business, it is of course, in order for them to continue, but this business can only be carried on in the present legal capacity (i.e. not as a group).

When is a Group ready for registration

A group is only regarded as being ready to be registered and to commence trading as a body corporate when it can meet at least the minimum requirements mentioned above as well as the following:

The Steering Committee should be able to demonstrate its clear understanding of its role in the management of the entity and the procedures necessary to conduct the profitable operation of the business

Suitable arrangements for the management of the organisation is in place. The Department of Co-operatives and Friendly Societies needs to be satisfied that a suitable manager can be found. Manager should have been identified who has the necessary qualification and experience to manage the Society. In any event, an agreement should be reached on the level of salary to be paid.

The Group must be able to show that it can conduct a viable Business Operation. Through convincing the Department of Co-operatives and Friendly Societies, that it has sufficient capital, or can raise sufficient capital to finance the enterprises.

An appropriate accounting system has been prepared and implemented. The system should be standardized as far as possible.

Adequate Facilities: There must be a secured office with relevant furniture and adequate facilities necessary for the operation of the Society’s business.

Jamaica’s Co-operative Societies Law

Co-operative Law is comprised of three (3) distinct parts:

The Act of 1950
Co-operative Societies Act forms the basis of the Law. Acts such as these can only be passed or amended by legislative body of the Country. Contained, in the Act is the basic statutes governing the running of Co-operative Societies. Also contained is the power of the Minister to make Regulations.

The Regulations
The Regulations are made by the Minister and their object is to lay down detailed guidelines for the administration and operations of the Co-operative Societies in General. The Regulations also require every registered Co-operative Society to make Rules governing certain aspects of its operations.

The Rules
Every member in a Society should contribute to the making of the Rules and they can be amended by the members in General Meeting and by no other authority. However, any amendments to the Rules must be approved by the Registrar of Co-operative Societies before they can be effected. The Rules are the constitution of the Society and cover its detailed running.