AsiaPacific Cooperative Legislation Initiatives: Multistate Cooperative Societies Act 2002 of India

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AsiaPacific Co-operative Legislation
Initiatives Multistate Co-operative Societies
Act 2002 of IndiaA Model Law for the Region

• A Presentation by B. D. SharmaSenior
  Consultant, ICA Domus TrustNew Delhi (India)

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I. Back Drop

• Majority of countries in A-P region have started
  state-sponsored co-operatives
• Facilitate state assistance to state
  partnership in co-operatives
• Strengthen state control
• ICA ROAP activities
• Critical studies of co-operative legislation
  policies
• Regional consultations of government
  co-operatives
• Co-operative ministers conferences since 1990

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• ILO Recommendation 193 on the Promotion of
  Co-operatives 2002
• calls on Government to provide Supportive policy
  legal framework and to adopt legislation and
  regulation on co-operatives guided by the
  Co-operative Values Principles
• National Co-operative Policy 2002 of India
• emphasises co-operative legislation reforms to
  achieve Coop values Principles Level playing
  field Improved competitiveness Vibrant Inter
  coop relationships Improved access to market

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II. Major co-operative legislation initiatives in
India
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A. Model co-operative law

• Recommended by an expert committee
• Incorporates co-op principles
• Ensures autonomy independence of co-ops
• Specifies role of federation
• No govt control participation in equity
• Incorporates provisions for self-regulation
• Enables co-ops to create their support services
  e.g. audit HRD consultancy, financial systems
• Incorporates provisions for simplifying
  registration mergers division liquidation

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B. Parallel Co-operative Laws

• To promote self-reliant member controlled and
  member led co-operatives with no partnership and
  control of government
• Six (6) states have enacted such law including
  Andhra Pradesh

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C. Producers Co-op Company Law

• To develop competitive and market oriented
  producers co-operatives company law
• Co-operative company to be incorporated in
  company law
• Co-operative company to follow coop principles
• Shares non-tradable at stock exchange
• Company law applicable
• No interference of government

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III. Evolution of multi-state co-operative
legislation

• Definition of multi-state co-operative
  society-co-op having area of operation more than
  one province
• I law Multi-unit Co-op Law 1942
• Enabling law to make state co-op law applicable
  to multi-state co-operatives
• Repeal of 1942 in 1984
• Enactment of comprehensive Multistate
  Co-operative Societies Act 1984
• 1984 Act contained provisions contrary to the
  Co-operative Principles, strengthened state
  control
• 1984 Act replaced by Multi-state Co-operative
  Societies Act, 2002

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IV. Multi-state Co-operative Societies Act, 2002
(MSCS Act, 2002)
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A. Introduction

• Basis of formulation
• Model Co-operative Law
• Co-operative Identity Statement
• Consultation process
• Central Co-operative Council
• All national co-operative federations
• Researchers educators
• Other government ministries in India dealing with
  co-operatives

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B. Objectives

• To consolidate law relating to multi-state
  co-operatives
• To facilitate voluntary formation and democratic
  functioning of co-ops
• To enable coops to promote economic and social
  betterment of members
• To provide functional autonomy to co-operatives

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C. Co-operative Identity Statement (ICIS)

• ICIS included in the first schedule of the Act
• Adherence to co-op principles made essential
  pre-condition for registration, basis to
  formulate byelaws
• Federations made accountable to member co-ops to
  promote effective inter-cooperative relations
• Provision to prescribe maximum limit of share
  holding of members made
• Restriction on transactions with non-members

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D. Transforming state controlled co-ops

• Provision to redeem shares of government or other
  authorities
• Restrictions on government officials becoming
  chairpersons of co-operatives
• Responsibility to conduct elections of board
  member assigned to co-ops
• No nominee of the govt on board where govt does
  not hold shares
• Power to appoint chief executive given to the
  board of management

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E. Ensuring autonomy independence

• Discretionary power of registrar to register
  co-ops curtailed
• Provision of deemed registration made
• Amalgamation and division of co-ops at the
  discretion and expressed will of members
• Expulsion of member with the approval of general
  body only
• Board of management empowered to conduct elections

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E. Ensuring autonomy independence

• General Body empowered to appoint Auditor
• State aid / support to co-operatives only at the
  request of co-operatives
• Co-ops not allowed to make contributions to
  political parties
• No approval of the Government required for
  business decisions
• Co-operatives empowered to develop their support
  services

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F. Provisions for Market Orientation,
Competitiveness Capitalisation

• Co-operatives are free to take their business
  decisions
• Specific provisions to promote subsidiary
  companies/ institutions by co-ops made
• Federations assigned following roles
• Develop market information, brand promotion,
  quality control technology upgradation
• Undertake business services on behalf of members

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F. Provisions for Market Orientation,
Competitiveness Capitalisation

• Co-ops required to make provisions in byelaws
  regarding minimum level of services to be used by
  members
• Exercise of rights by members linked to payment
  of the economic responsibility as assigned in
  byelaws
• Mode of working out net profits prescribed

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F. Provisions for Market Orientation,
Competitiveness Capitalisation

• Provisions for priority charges on net profits
• Minimum 25 to reserve fund
• 1 to Coop education fund
• Minimum 10 to reserve fund for unforeseen losses
• Investment of funds made flexible
• Bye Laws to make specific provisions regarding
  utilisation of funds

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G. Provisions to Ensure Accountability
Transparency of Management

• Audit report to be presented to General Body by
  Auditor
• General Body authorised to remove elected member
  of the Board if s/he acts against the interest of
  the co-operative
• Members entitled to inspect Audit Report

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G. Provisions to Ensure Accountability
Transparency of Management

• Byelaws list of members, registration of
  debentures holders, annual returns, copies of
  certificate, documents open for inspection by
  members creditors
• Books of account and other books open for
  inspection by members
• Minutes of General meeting open for inspection by
  members

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H. Provisions for Professionalisation of
Management

• Compulsory for Coop to organise educational
  programmes for members, directors employees
• Provision for contribution to cooperative
  education fund maintained by National Coop Union
  of India
• Provision to empower Board to formulate personnel
  policies
• Provision to make Chief Executive accountable to
  Board
• Enabling provision for associate experts with
  Board made

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I. Promotion of Inter-Coop Relationship
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J. Delinquent Management

• Government empower to intervene in case of
  violation of law
• Offences and penalties specified

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V. Concluding Remarks

• Can MSCS Act 2002 be a model for Asia Pacific
  region?
• Perhaps if adapted to country specific situations
• Amend State Laws on the basis of MSCS Act
• Single law may be better
• Watch carefully co-operative company law it may
  beTrojan Horseto corporatise co-operatives