Cooperatives and Companies | Similarities and Differences

Cooperatives vs Company
Cooperatives vs Company

Similarities between Cooperatives & Companies

The companies and co-operatives are similar in the following respects.

1. Both are body corporates registered under their respective laws.

2. The members of both the forms of organisation enjoy the feature of limited liability.

3. Both are associations of persons who contributed capital into the business.

4. In both the cases the management is entrusted to an elected body and the ultimate control lies with their members.

Differences between Cooperatives & Companies

1. Objective

The primary objective of a company form of organization is profit making. But in the case of co-operatives, its main objective is service and not profit.

2. Formation

A company is formed and registered under the Companies Act. But a co-operative society is formed either under the Co-operative societies Act or under the State Co-operatives Act.

3. Capital

In a company form of organization, mobilization of large amount of capital is possible. But it is not possible in the case of co-operatives.

4. Number of Members

The minimum number of members required to start a co-operative society is 10 and there is no maximum limit. But in a public company, the minimum member is seven and there is no maximum limit and in a private company the minimum number of member is 2 and the maximum limit is 50.

5. Voting Rights

In a joint stock company, the principle of “One share and one vote” is followed. But in case of co-operatives the principle followed is “One man-one vote“. Here members have equal voting rights.

6. Locality of the Members

In a co-operative society, the members are located in a particular place or town. But in a company, they are generally scattered over a wide area.

7. Transfer of Shares

In the case of co-operatives, the shares are not transferable. But a member of the co-operatives can withdraw his capital by giving due notice to the society. In companies the shares are freely transferable. But the withdrawal of capital is not possible as in the case of co-operatives.

8. Closure of Share List

As there is no restriction as to the maximum membership in co-operatives, the share list is always kept open. It is not closed at any time. On the other hand, the share list of the companies is closed immediately on the subscription of the capital issued. Hence the membership is also restricted.

9. Motives for becoming a Member

The motives for becoming a member in a co-operative society is to further their common economic and social interest by eliminating middlemen and eradicating the exploitation of capitalists.

But the motives for becoming a member in a company is only getting dividend on the shares held by them and other benefits given by the company like bonus shares, rights shares etc. and no public welfare activity is generally involved.

10. Disposal of Profit

In the case of companies, the profit earned is distributed to its members in the form of dividend in proportion to the shares held by them, whereas in co-operatives the surplus is distributed to the members in proportion to the business transacted by them with the society.

11. Operational Area

The area of operation of a society is limited within certain locality i.e. it functions in a limited area, whereas in a company the area of operation is wider. Many companies generally function on national as well as international level.

12. Ownership and Control

In co-operatives, the members belong to same area. So they find it very convenient to attend all meetings and take active part in the management of the society. But in companies, the members are scattered over a wide area. So they cannot attend all meetings and also cannot take active part in the management of the company.

13. Incentives

There are various incentives and aids, which are offered by the Government to the co-operatives such as exemption from income tax up to a limit, exemption from stamp duty etc. Such exemptions and aids are not granted to companies.