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PRESENTATION ON THE ICA Asia and Pacific Study on Bye Laws of Primary Co-operative Societies

PRESENTATION ON THE ICA Asia and Pacific Study on Bye Laws of Primary Co-operative Societies By Rangan Dutta Principal Consultant AT THE 1 st ASIA PACIFIC CO-OPERATIVE REGISTRARS’ CONFERENCE 10 December 2013 - Kuala Lumpur, Malaysia.

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PRESENTATION ON THE ICA Asia and Pacific Study on Bye Laws of Primary Co-operative Societies

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  1. PRESENTATION ON THE ICA Asia and Pacific Study on Bye Laws of Primary Co-operative Societies By Rangan Dutta Principal Consultant AT THE 1st ASIA PACIFIC CO-OPERATIVE REGISTRARS’ CONFERENCE 10 December 2013 - Kuala Lumpur, Malaysia. ‘SOUND TUNING OF COOPERATIVE LAW, POLICY & REGULATION AND PRIMARY COOPERATIVES BY-LAWS’ 1 1

  2. OUTLINE • Bye laws are made in conformity with the cooperative law- a form of delegated legislation upon approval of the Registrar or the competent authority. • Bye laws provide legal and functional framework of a co-operative and legally a contract. • As bye laws are made at the formation stage, the process of making the same has a bearing on the autonomy a co-operative enjoys. • Capacity building of co-operatives has to begin at this formation stage – often ignored in practice by the Government and not given due importance in almost all country laws.

  3. Basisof the Study • This is an in house study – a status report, and not an evaluation according to set criteria, and hence no value judgement is made • The co-operatives evolve according to changing socio-political environment necessitating the change in co-operative laws and bye laws. This does not happen quickly which results in mismatches between laws and policies observed in the matter of bye laws as summarised in the next slide.

  4. Issues and Constraints • Main issues and constraints on bye law making identified in the study of co-operative laws, policies and practices in this region. • The co-operative Principles embodied in ICIS – 1995 has been the touchstone of assessing the co-operative laws and policies. From this perspective it has been found that the process of bye law making is a ‘directed activity’ rather than participatory as most co-operative laws and common law countries provide either a model bye law for adoption or empower the Registrar or the concerned authority to lay down a model bye laws and its contents leaving little scope for the intending co-operators to exercise any other course of action when an easier option is available. • Even in countries, like some states in India which have amended their co-operative laws in tune with international accepted Principles, the provisions relating to Bye laws have remained the same and a dialogue process of bye law making is not being encouraged.

  5. Reforms in co-operative laws should begin at the formation stage of the primary co-operatives which require enabling provisions to address the constraints being faced by the co-operatives due to the rigidity of the system in the fourteen country laws studied. Some of these constraints the measures to remove them are summed up in the next slide.

  6. DISTINCT ROLES OF VARIOUS GROUPS • Lack of appreciation of the difficulties faced by most primary co-operatives as the Founders’ Group though recognized in law may not have the expertise in drafting bye laws. There is thus a requirement of a handholding role by the co-operative apex bodies without which the primary cooperative society will be prone to opt for the easier way of mechanically adopting bye laws. • A statutory role for the Apex federations is therefore a functional need to assist the Founders’ Groupand the latter’s role and function need to be put down in more detail in the law itself to institutionalise the dialogue process, and the pre-registration education and training. • The power of the Government to make Rules under the co-operative Act covering all functional aspects including the contents of the bye laws, model bye laws and the power of supervision and control given to the Registrar has been found to reduce the autonomy of the co-operatives. This power has been overused and hence the need for a review by the Governments concerned to make the Rules harmonise the objects of the law and its instruments, including bye laws.

  7. d) A pragmatic approach is needed to define an ‘active member’ and the minimum level of service that must be availed, the grant of patronage refund, and stricter conditions for inclusion of non-members and extension of services to them. e) Taking note of the challenges faced by the co-operatives from SHG and Microfinance institutions and other ‘financial intermediation agencies’. The study argues, based on the experience of Sadguru Foundation (India) [Chapter Three], an NGO mobilising the SHGs first and then grouping the SHGs into cooperatives and even federating these co-operatives on functional basis is a model worthy of emulation as it promoted integration of SHGs into cooperatives. This is line with the Point no. 12 in the Joint Declaration of Co-operative Ministers at the Asia Pacific Co-operative Ministers’ Conference held in Bangkok, Thailand in February 2012.

  8. CONCERN FOR THE COMMUNITY a) Sustainability of co-operatives in the true sense requires financial sustainability because unless the co-operative achieves a surplus over expenditure, it cannot survive and at the same time, it has to build up social capital by actually practicing user driven enterprise providing service to the members to improve their socio economic well being. The first step towards these objectives is to carry out an economic survey/ feasibility survey of businesses proposed which though unmentioned in the law could be demanded by the Registrar and therefore should be a part of the pre-registration training. b) In Bhutanese co-operative law (Art. 22) puts the onus of the General Assembly to authorise the Board of Directors to carry out its activities in a manner that makes the co-operative sustainable. A provision for the conduct of economic survey is recommended for inclusion in the co-operative law and in the bye laws as one of its objects. This survey will be carried out by the Founders’ group.

  9. c) To achieve sustainability, a ‘Monitoring’ committee is necessary as provided in the co-operative law of Mongolia. If constituted on rotational basis, the committee will provide all Members with an opportunity to oversee the functioning of the co-operative. d) The bye laws must contain provisions for inclusion of women and youth members in the Monitoring committee as well as the board of directors regardless of their strength in the co-operative. e) The lack of social audit makes it often difficult to assess the socio economic benefits accrued to the Members. The Social Audit requires fixation of norms, standards and practices different from financial audit and distinct expertise. It is suggested that the Apex federation could step in to provide the same and the task assigned to the Audit committee with the support of the Monitoring Committee.

  10. INDICATIVE BYE LAWS BASED ON THESE GUIDELINES • The indicative bye laws in chapter 4 have been prepared on the basis of examination of several bye laws being followed by single and multipurpose cooperatives in India while retaining the structure of the bye laws. Following new measures are included. • Section 4.1 has been expanded to include a role for the apex cooperative federation to provide training, education and legal advice to the Founders Group or Protem Committee in making bye laws and such other matters as may be necessary. • Statement of objects in Sections 3.4, 3.5, 3.6 has been expanded so as to include Financial sustainability, social audit, ongoing monitoring and evaluation, technology transfer, participation of women and youth and such other objects that may be decided by the society.

  11. Inclusion of the role of the co-operative federation in pre registration and training, formation of a preliminary working committee to undertake all pre registration activities necessary to initiate proper growth of co- operatives. [Section 3.d] • Determination of the size and nature of membership [Section 6.1.1] provides for nominal or associate memberswhich suggest that every society will lay down its own membership criteria. (This might require a legal definition of nominal or associate members in the co-operative law itself or the Rules made there under). • Section 6.8.1 emphasises the need to have clear Rules regarding the minimum level of service of a society that a member must avail to become an active member of the society and the maximum proportion of transactions/service that could be extended to non members preferably not exceeding 25% of the total business turnover. A provision for Patronage refund allowed to active members under the bye laws is a measure to achieve stability and sustainability of the co-operative.

  12. g) Six committees have been proposed the indicative bye laws including committees such as Monitoring , Education and Social audit under Section 6.9.4G (7.1) and if need be other committees may be constituted. h) Under section 8.6, a stricter procedure (requirement of signature of two persons )for disbursement, payment and receipt etc. is to avoid any fraud. i) Section 7.2.2. l which makes the managing committee responsible for assessing the need for a loan and negotiating/obtaining the same is designed to safeguard the interest of the co-operative as before seeking approval of the Registrar, Managing Committee is to obtain the approval of the Monitoring and supervision committee and place it before the General Assembly in its next meeting for confirmation. j) The provisions in the bye laws regarding the capital structure including creation of reserve funds, liability, amalgamation, disposal of surplus and disputes and matters connected with the meetings of the general body of the society have to necessary follow the provisions of the co-operative law.

  13. CONCLUSION • To Conclude, the harmonisation of bye laws with the Co-operative laws , Rules and Policies is possible only if an enabling environment is created for the primary co-operative societies to prepare bye laws through a dialogue process as in a legislative process, and in the spirit of the ICIS – 1995. • A good beginning towards this direction could be a formation of a Registrar’s Network under the aegis of the ICA to promote inter alia internationally accepted practices and conventions for the bye law making process to be truly participatory.   ----xxx----

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