A Co-operative Society is a body corporate which has the power to enter into agreements, hold movable and immovable property and can sue and be sued like a normal company. However, the main differences between a co-operative and a company, is that a co-operative is set up to achieve a common goal among its members. A company on the other hand is set up to purely generate profits by trading.

Types Of Co-operatives

There are three types of cooperatives:

  1. Primary Society – A co-operative which the majority of the members are individual persons;
  2. Secondary Society – A co-operative in which the majority of members are themselves primary societies; and
  3. Tertiary Society – A co-operative society in which the majority of members are themselves primary and, or, secondary.

Procedure Of Registering A Co-operative

The registration of co-operatives is handled by the Cooperatives Board by filling out and submitting the relevant application form. Together with the application form and the cooperatives’ statute, a business plan must be submitted to the Cooperatives Board for evaluation.

The three types of societies available have criteria as to whom the members can consist of;

  • In case of a Primary Society, the founding members must be at least 5 persons.
  • A secondary society must consist of at least two primary societies.
  • A tertiary society must consist of at least two societies which at least one is a secondary society.

The founding members of secondary and tertiary societies must elect at least three individuals forming part of a committee for the management of the society.

The Board of Co-operatives will monitor and supervise the operatives and ensure compliance with the provisions of the Co-operatives Act. When satisfied with this and that the co-operative is viable, a registration certificate is issued.

Once to co-operative is registered, it must hold general meetings, obliged to keep audited accounts (which must be submitted to the Co-operatives Board annually) and it can increase its share capital and can be liquidated and dissolved.

Co-operatives Are Subject To Limited Liability

A member of a co-operative society has a limited liability. Just like a company, the limited liability is capped at the amount of unpaid (if any) shares held by him.

The Act also regulates the liability of previous members of the society. It is limited to the members which existed on the date on which he ceased to be a member and expires after 2 years after ceasing to be a member of the society.

A Co-operative or a Company?

Although both a co-operative and a company are subject to very similar regulations and obligations, there is one main difference between the two. Voting rights are fundamentally different. A company shareholder will have more voting power depending on the number of shares held, while the voting power in a cooperative will always remain the same.

A co-operative is a great alternative to establish among competitors, in order to establish a body corporate being able to enter into agreements, fund and achieve a common goal.