Business studies study module

A co-operative society is a form of business organization that is owned by and run for the economic welfare of its members

-It is a body of persons who have joined together to do collectively what they were previously doing individually for mutual benefit.


In Kenya the co-operative movement was started by white settlers in 1908 to market their agricultural produce. In this case, they knew that they could sell their produce better if they were as a group and not alone

Principles of co-operatives

Open and voluntary membership

Membership is open and voluntary to any person who has attained the age of 18 years. No one should be denied membership due to social, political, tribal or religious differences. A member is also free to leave the society at will

Democratic Administration

The principle is one man one vote. Each member of the co-operative has only one vote irrespective of the number of shares held by him or how much he buys or sells to the society

  • Dividend or repayment

-Any profit/surplus made at the end of every financial year should be distributed to the members in relations to their contribution.

-Part of the profit may be retained/reserved/put in to strengthen the financial position of the society.

Limited interest on share capital

-A little or no interest is paid on share capital contributed (co-operatives do not encourage financial investment habits but to enhance production, to encourage savings and serve the members)

Promotion of Education

Co-operative societies should endeavor to educate their members and staff on the ideas of the society in order to enhance/improve quality of decisions made by the concerned parties.

Education is conducted through seminars, study tours, open days

Co-operation with other co-operatives

C-operatives must learn from each other’s experience since they have a lot in common.

-Their co-operation should be extended to local national and international.

Features of co-operatives

  • Membership is open to all persons so long as they have a common interest. Members are also free to discontinue their membership when they desire so
  • Co-operative societies have a perpetual existence; death, bankruptcy or retirement of a member does not affect its operations
  • They are managed in a democratic manner. Every member has one vote when electing the managerial committee irrespective of the number of shares held.
  • The main aim is to serve the interest of the members where profit is not the overriding factor.
  • Co-operative societies have limited liabilities
  • There must be a minimum of 10 people with no maximum membership.
  • Co-operatives have a separate legal entity from the members who formed it i.e they can own property sue and be sued
  • Any profit made by the society is distributed to the members on the basis of the services rendered by each member but not according to the capital contributed.


-Co-operative societies can be formed by people who are over eighteen years regardless of their economic, political or social background.

-There must be a minimum of 10 persons and no maximum no.

-The members draft rules and regulations to govern the operations of the proposed society i.e. by-laws, which are then submitted to the commissioner of co-operatives for approval

-The registrar then approves the by-laws and issues a certificate of registration

-If the members are unable to draw up their own by-laws, the co-operative societies Act of 1966 can be adopted in part or whole


-A co-perative society is composed/run by a committee usually of nine members elected by the members in a general meeting

-The management committee elects the chairman, secretary and treasurer as the executive committee members, who act on behalf of all the members and can enter into contracts borrow money institute and depend suits and other legal proceedings for the society

-The committee members can be voted out in an A.G.M if they don’t perform as expected.

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