DAUDALLY LALANI & CO

CHARTERED ACCOUNTANTS

Check list from the Co-operative Societies Act 1925 REMARKS

for audit of co-operative societies

1) Restriction on interest of member of society

with limited liability and a share capital –SEC 6

• No member can hold more than one fifth of the

total share capital.

• No member can have interest in the shares of

the society exceeding Rs 10,000.

2) Annual General Meeting –SEC 12

• Within a period of three months after the date

fixed for marking up its recounts i.e. to say
financial year-end.

3) Votes of Members ---SEC 18

• No member shall have more than one vote in

the society affairs.

• A society may appoint one of its members to

vote in the affairs of audit other society in
which it has invested.

• Disqualification for being and for voting at

An election of Director Manager or other
Officer of the society-------SEC 18-A

• Has taken a loan from society which has been

outstanding for six months or more and has not
been repaid up to the date preceding the date of
the election.
• Has taken a loan repayable by installments and
the amount of three or more installment has
been outstanding for six months or more from
the date on which the last installment became
payable and has not been re-paid up to the date
preceding the date of the election.

4) Restriction on transfer of share or interest –SEC

19.

• Unless he has held share or interest for not

less than one year.

• Transfer only to society or to a member or

to a person whose application for
membership has been accepted.

5) Address of societies. Every society shall

have an address registerd in accordance
with the rules, to which all notices and
communtication should be may sent, and
shall send notice in writing to the Registrar
of any change in the said address within 30
days of such change. Sec – 20

6) Copy of Act, etc., to be open to inspection.

Every society shall keep open to inspection
at all reasonable times at the registered
address of society:-
• A copy of this Act,
• A copy of the rules governing such society,
• A copy of the bye-laws, of such society, and
• A register of its members.
Sec - 21

7) Society to have charge in respect of shares,

deposit or any kind of interest of member in
respect of any debt due from such member
(past or present)-----SEC 25
 8) Liability of past member----- SEC 28

• The liability of a past member for the debts of a

society as they existed at the time of when he
ceased to be member, shall continue for a
period of two years from the date of his ceasing
to be member.

9) Liability of the estates of deceased members

-
SEC—29

• The estate of deceased member shall be liable

for period of one year from the date of his
deceased for the debts of society as they existed
at the time of his death.

10) Register of members or list of members or

shares showing the date when his name was
entered as a member and the date on which he
ceased to be a member –SEC 30.

11) Restriction on loans to non member except

with the general or special sanction of the
Registrar - - SEC 34.

12) Restriction on borrowing or deposit from

non member to the extent as may be
prescribed by the rules or the by laws of the
society –SEC 35.

Further Rule 7 requites that:

• Every society with limited liability shall not

incur liabilities from non-members exceeding in
total 15 times the total amount of the paid up
share capital, accumulated reserve and the
building found minus accumulated losses.

13) Investment of fund –SEC 37

May invest:
• In the Government saving Bank.

• In any of the securities as specified in Section

20 of the Trust Act 1882 ( Govt. securities such
as DSC.SSC etc.)

• In the shares and the security of societies with

limited liability only.

• With any bank.

Further Rule 7 states that (Registrar sanction

required):

• In the shares of SBP

• In the purchase or leasing of land or building.

• In the construction of buildings.

14) Restriction on dividend - SEC 38

• No society shall pay a dividend to its members

at a rate exceeding 10%.

15) Reserve Fund - SEC 39

• Every society, which does or can derive a profit

from its transactions, shall maintain a reserve
fund, and profit shall be carried in the fund:

• In case of Resource society, at least 1/4th of the

net profits.

• In case of any other society at least 1/10th of the

net profit.

• Reserve fund may be used in the business of

society or invested in accordance with SEC 37.

16) Restriction on distribution of profits - SEC

40

• After making provisions as under Sec 39 the

 balance of profits together with profits of the
last year shall be distributed among its members
in accordance with the Rule 25 or by the bye-
laws.

17) Provident fund - SEC 41

• A provident fund may be established for its

member out of contributions from such
members in accordance with the bylaws.

• Contributions to such provident fund may be

made from net profit after prescribed payment
to reserve fund.

• No part of such provident fund to be considered

as an asset of the society and accordingly shall
not be used in the business of the society.

Provident fund maybe invested in accordance with

- Sec 37

18) Contribution to charitable purposes - SEC

42

• After payments to reserve fund, any society

may set aside a sum not exceeding 20% of its
net profits (approval of the Registrar required)
for charitable purpose

• Utilize this sum to contributing to any public or

co-operative purpose or to a charitable purpose
(charitable purpose shall include relief of the
poor, education, medical relief, and the
advancement of any other object of general
utility, but would not include a purpose which
relates exclusively to religions teaching or
worship).

17) Matters in respect of which a society shall or

may make by-laws-Rule 4
• The objects of the society, the purpose to which
its funds are applicable, the terms of admission
of members, and their rights and liabilities, the
consequence of default in payment of any sum
due by member and in the case of credit
societies, the conditions on which loan may be
granted, and the rate of interest and the system
of calculation of interest and the maximum;
number of members that me be admitted; and
the case of non-credit societies the mode of
conducting business, purchase, sales, stock-
taking and other like matters:

• The mode of appointments and removal of

members of committee and the officers, if any
and they duties and powers of the committee
and officers.

• The made of custody and investment of funds

as prescribed in the rules, the mode of keeping
of accounts;

• The distribution of profits.

18) Amendment of by-laws –Rule 6

• May be altered by a resolution of 2/3rd of the

members present at a general meeting and such
amendment is required to be registered with the
Registrar.

19) Loans to members on surely ship of non

members not allowed except with the approval
of the Registrar - Rule 11.

20) Witing off of losses-Rule 12

• Losses maybe written off against reserve fund,

and in case of limited liability societies if the
losses exceed reserve fund, then against the
share capital.
• Sanction of general meeting required.

• Approval of Registrar required

21) A Loan and includes a deposit made by one

Society with another Society Rule -13

21) Accounts, Returns and documents - Rule 14

• Register of members, register of shares and

debentures, share transfer register, cash account,
member’s loan account, deposit account, Loan
register, interest account, expense account ,bank
account, minute books, register of members
credit worthiness

22) Annual balance sheet – Rule 19

• On or before 15th September of each years shall

publish annual balance sheet showing profit and
loss, the receipts and expenditure of the
previous financial year, and the assets and
liabilities as they stood on June 30th

23) Distribution of Bonus - Rule 23

• No registered society shall distribute any bonus

or shares beyond the dividend under section 38.

24) No dividends shall paid by any society otherwise

than out of its profits of the year or any other
un-distributed profits Rule 24-A.

25) Distribution of balance of profits-Rule 25

• Any distribution of the remaining balance of

profit under Section 40 and after appropriation
under section 39, shall be in accordance with
the bylaws.

• In case of housing society, in proportion of rent

 paid by each member.

• In case of resource society. in proportion of the

goods obtained or sold through the society by
each member, or to the loans borrowed.

26) Co-operative Conference and contributions to

expenses-Rule 26-A

• No society shall contribute any money towards

the expense of co-operative conference unless
such conference is held under the auspices of
society which is authorized by its by-laws to
hold such conference.

27)Building Fund –Rule 28-A

• The fund created by a registered society for the

purpose of constructing buildings shall be
called the building fund.

• The amount of such fund may when it is not

utilized for the construction of building be used
in business or be invested or deposited in the
same manner and subject to the same condition
as the reserve fund.

28)Powers and duties of the management

committee - Rule 52.

• Not with standing anything contained in the by-

law of any society, except societies having less
than Rs. 20,000 paid up share capital, a
committee shall not sanction a loan in any form
to member of the committee or to a officer or
servant of the society without the prior sanction
of the Registrar.

• The committee of every society shall frame

rules with the sanction of the Registrar to
regulate the grant of loans to members of the
 society, These rules shall prescribe the
maximum limits of loans, which can be granted
to a member inclusive of loans for which a
member is surely under the various classes of
loans. Such rule may be amended with the prior
sanction of the Registrar.

29) Qualifications of members of committee - Rule

53.

No member of a society shall be on the

Committee who:

• Has been sentenced by the a criminal court

• Has been removed from office.

• Who is un-discharged insolvent or uncertified

bankrupt

• Who is less than 21years of age.

• Who is declared by the Registrar as a persistent

defaulter

• Who is a servant or officer and at a same time a

borrower of the society

In Co-operative Banks and in such Societies as

have a paid – up Shares Capital of Rs. 20,000 or
above , no member of the society shall be on the
committee if:

• Any disqualification as specified above.

• Who is a barrower or surly of borrower

• Who is interested, directly or indirectly in any

contract or employment with or under or any or
on behalf of the society.

• Who does not hold shares of the paid up value

of the least Rs. 500 or
• Incase of a representative of society, if he or the
society of which his member, is a defaulter in
payment of loan to bank or society from which
he or it has borrowed a loan.