Multi-State Cooperative Societies Act

The Multi-State Cooperative Societies Act (MSCS Act) is legislation which provides a regulatory mechanism for cooperative societies. The Act applies to cooperative societies which conduct operations in multiple states. The Act mentions the procedure to register a multi-state cooperative society and the contents which should be available in the bye-laws of a cooperative society. The Act also specifies the other regulatory guidelines which should be followed by all cooperative societies registered under the Act. Registration under the MSCS Act is voluntary. However, the Act mentions the grounds under which registration becomes necessary. Cooperative societies are listed under list II of the seventh schedule to the Indian Constitution. Hence, cooperative societies fall under the category of a state subject. As a result, the state governments have the right to form laws governing cooperative societies. The state governments formulate laws for cooperative societies depending upon the circumstances unique to each state. Thus, the MSCS Act is a legal framework which applies in addition to the cooperative society laws passed by the various states. The advantage of registering under the MSCS Act is similar to the benefits acquired by registering a company. A registered multi-state cooperative society has the privileges of limited liability, separate legal identity, and the ability of members to transfer their membership. Government-owned companies are allowed to subscribe for membership in a registered multi-state cooperative society. Contribution of capital by the government enhances the credit-worthiness of the cooperative society.

Objectives of the MSCS Act

To encourage the public to form cooperative societies voluntarily
To provide a legal platform which allows cooperative societies to function as democratic institutions
To enable the members of cooperative societies to promote their social and economic betterment
To provide functional autonomy for matters connected with governance and administration of cooperative societies
To facilitate the achievement of the common economic interest for which the cooperative society was formed
To serve the interests of the Below Poverty Line (BPL) category of citizens and empowering them to derive economic benefit through the principle of self-help and mutual help
To establish a framework for the provision of monetary support to the members during times of financial distress
To formulate and implement guidelines for the formation of cooperative societies among agriculturists, artisans and individuals having limited means to sell the products manufactured

Contents of Bye-Laws

The bye-laws of a cooperative society are the provisions which define its roles and functions. The bye-laws are agreed upon by the members at the time of forming the society. Once the bye-laws are registered, any change can be made only after obtaining the approval of the registrar. The MSCS Act provides the guidelines on the contents which should be available in the bye-laws. The contents should include the following:

The states in which the cooperative society is conducting its operations
The scope of business and objectives of the cooperative society
The services which the cooperative society is providing to its members
The eligibility criteria and procedure which should be followed for obtaining membership in the cooperative society, and also for cancellation and transfer of membership
The rights and obligations among the members towards each other and also towards the cooperative society
The maximum amount of capital which a member is eligible to subscribe
The sources from which the cooperative society is eligible to raise funds and the purposes towards which the funds can be applied
The officers who are authorised to sign documents and enter into agreements on behalf of the cooperative society
The powers and functions of the promoter of the cooperative society
The provisions relating to the appointment and removal of auditors
The nomination procedures which should be followed in case of death of a member
The provisions granting authority to the cooperative society to levy penalty from members

Circumstances for Mandatory Registration

Registration of cooperative societies is not mandatory under the MSCS Act. Registration is required only under the following circumstances:

When there is a need to hold property and enter into contracts in the name of the society
When there is a need to initiate and defend suits and other legal proceedings in the name of the society
When the members of the cooperative society are residing in more than one state
When there is a need to advance loans exceeding five thousand rupees to the members of the society without sanction from the registrar
When there is a need to advance loan to another cooperative society after obtaining permission from the registrar
When there is a need to obtain loans from banks by pledging property in its name
When the members of the cooperative society who are residing in a particular state exceeds fifty
When another cooperative society is proposed to be enrolled as a member of a cooperative society

Conditions for Registration

The cooperative society should serve the interests of the public in more than one state
The bye-laws of the cooperative society should lay down the process of bringing about social and economic upliftment of the members
The cooperative society should have at least fifty members for each of the states for which registration is requested
The bye-laws of the cooperative society should not be in contravention of the provisions of the MSCS Act
The cooperative society should pursue the goal of mutual help and cooperation among the members as the primary justification for its existence

Procedure for Registration

A cooperative society may register under the MSCS Act by making an application to the Central Registrar of Cooperative Societies. The application should be made as per the prescribed format. The format is given below for reference: [pdf-embedder url="https://www.indiafilings.com/learn/wp-content/uploads/2019/12/Application-for-Formation-of-Cooperative-Society.pdf"] The following documents should be attached to the application:

The list of members classified state-wise, along with the name, address and date of birth of each member (The registration will be allowed if there are at least fifty members for every state.)
Copies of Aadhar Card and PAN Card for all members, attested by the promoter of the society
The list of states in which the society is currently conducting operations and the states in which the cooperative society plans to conduct its operations in the future (For the first two years from the date of registration, the society is allowed to conduct operations in two states only.)
Certified copies of the resolution passed by the society for the appointment of the promoter
A certificate from the bank should be obtained stating the specified particulars. The certificate should be obtained from each nationalised bank in which the applicant has an account. The particulars are the following:
- The account balance of the applicant as on the date of application
- The solvency position of the applicant as on the date of application
- Whether the applicant has availed of any overdraft facility (ODF) with the bank during the past three financial years (FYs)
- In case an ODF was availed, the number of occasions during the preceding three FYs when the ODF has crossed the permissible limit
- In case there were instances of violation of the permissible ODF limit, the amount and reasons for the violations
Audited Financial Statements for the preceding three FYs (The requirement will be waived in case the cooperative society has not completed three years of existence.)
A statement explaining the steps taken by the cooperative society to ensure democratic participation in the decisions taken by the cooperative society
Four copies of the bye-laws attested by the promoter of the cooperative society

The contact number and e-mail address of the promoter should be written on the top of the application in bold characters. There is no need for payment of fees for the application. To know more about cooperative societies, click here.

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