Co-operative Society Business in Nigeria: A Closer Look

Over the years, co-operative enterprises have made positive contributions to sustainability through the ability to utilize the dynamics of human and natural resources within a given community for the benefit of such a community and beyond.

According to the Nigerian Co-operatives Societies Act (“Act”), co-operative society means a voluntary association of individuals, united by common bond, who have come together to pursue their economic goals for their own benefits.

In another form, a cooperative society is an association of people that come together to pool resources together to engage in business or economic activities for the purpose of improving their welfare. It is a jointly owned commercial enterprise duly registered and managed by individuals of the same purpose and for the benefit of members.

Co-operative societies in Nigeria are governed by the Act which empowers the Governor of each state to establish a Directorate for Co-operatives which will be in charge of registering and regulating co-operatives, pursuant to Section 1(2) of Nigerian Co-operative Societies Act. Hence, the Lagos State Co-operatives Societies Law 2014 (“Law”) regulates co-operative societies in Lagos State.

Types of Co-operative Societies

Under the Act, there are four types of co-operative society:

Industrial society: This is a registered society whose principal objective is manufacturing, making, servicing or assembling of industrial goods and whose members are respectively manufacturers; craftsmen, artisans, industrial workers and apprentices.

Primary society: means a registered society consisting of individuals as members. Section 73 of the Law buttresses this category stating that primary society means (a) a co-operative thrift and credit society registered to save and grant loans only; (b) a co-operative organisation made up of ten (10) members; or (c) a co-operative organisation whose membership is made up of primary cooperative societies and individuals who have come together for a specific investment purpose.

School co-operative society: means a registered society whose members are pupils or students attending school or any institution of learning.

Secondary society means a registered society established to facilitate the operations of registered societies in accordance with co-operative principles and includes a central financing society. Using the prism of the Law, a secondary co-operative organisation’’ means a co-operative society whose membership is made up of at least five (5) primary co-operative societies and which has as its objective the facilitation of the operations of its members.

Ditto, Section 73 of the Law provides that a “Multipurpose Co-operative Union” means an association of all primary cooperative societies within a jurisdiction as defined by the State Department of Cooperative societies.

Registration of a Co-operative Society

Subject to the provisions of the Law, a society which has as its object the promotion of the economic interests of its members in accordance with co-operative principles, or a society established for the purpose of facilitating the operations of such societies, may be registered under this Law with limited liability, provided that a registration fee as may be prescribed by the Commissioner is paid to the Director of Co-operatives.

While Section 3 of the Act stipulates that: a primary society may be registered under this Act, if it consists of at least ten persons each of whom is qualified for membership under section 22 of the Act; an industrial society may be registered under this Act if it consists of a minimum of six persons and is economically viable; no secondary society which is established for the purpose of facilitating the operations of a registered society shall be registered unless it has as members at least five registered societies and in the case of a Federal apex society it has as members at least five registered State apex societies, Section 4 of the Law states only that: a society must consist of at least ten (10) persons qualified for membership or have a registered society as a member, to be registered under this Law. (2) A society established for the purpose of facilitating the operations of registered societies will not be registered unless it has at least two (2) registered societies as its members.

Despite the above tweak, both provisions states to the effect that the word “Co-operative” or its vernacular equivalent shall form part of the name of every society registered; the word “limited” or its vernacular equivalent shall be the last word in the name of every society registered under; and except in the case of a central financing society, the word “bank” or “banking” shall not form part of the name of any society registered under this Act.

Benefits of Registering a Co-operative Society

Upon registration a Cooperative Society becomes a legal entity with the right to sue or be sued in its corporate name and assumes capacity to enter into contracts or agreements.

Cooperatives can own movable and immovable property, of any description, in its corporate name.

Profit and Gains made from trading or business activities of Cooperative Societies is exempted from Corporate Tax Liabilities.

A cooperative society has a separate legal entity. Hence, the death, insolvency, retirement, lunacy, etc., of the members do not affect the perpetual existence of a cooperative society.

Government has adopted cooperatives as an effective instrument of socio-economic change. Hence, the Government offers a number of grants, loans and financial assistance to the cooperative societies.

The management of cooperative society is entrusted to the managing committee duly elected by the members on the basis of ‘one-member one -vote’ thus making the model democratic.

Restrictions on Co-operative Society

A registered society is restricted from giving out loans to persons that are non-members. Except with the approval of the Director of Co-operative Societies, a registered society is not permitted to give out loans to another registered society.

A registered society may receive deposits and loans from persons who are not members only to such extent and under such conditions as may be prescribed by the regulations made under this Law or its bye-laws.

Conclusion

The above gives an insight into co-operative society business in Nigeria. This business is legal and permissible and upon registration, it is a body corporate. However, necessary requirements must be met to lawfully transact as a registered body.

For further information, please contact:
Farouk Obisanya farouk.obisanya@roukco.com