In this post we will be looking at meaning of cooperative society, how to Register a Cooperative Society in Nigeria, the requirements and Benefits of Cooperative Societies.
INTRODUCTION
Investment entities may take several forms in Nigeria. Investors may set up a Limited Liability Company (LLC) to buy shares or other investment vehicles. They may also set up a Limited Liability Partnership (LLP) or even a Cooperative Society depending on the needs of the investors, the advantage a particular entity for investment has over others, or the type of investments the entities intend to hold.
A Cooperative Society is one formed by a group of persons who share common goals relating to their social and economic advancement. Although, not as popular as LLCs or LLPs, Cooperative Societies afford certain advantages that investors may find favorable. In Nigeria, co-operative societies are governed by the Nigerian Cooperative Societies Act which sets out regulations as to how it can be registered as well as carry out its activities.
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However, the Act has been repealed in various states, and is governed by Cooperative Societies Law of such states. The registration of corporative societies in Nigeria is done at designated cooperative society ministries in the various states. The Act gives power to the Governor of each state to appoint a Director of Co-operatives as well as a person(s) to assist him/her in the discharge of duties. The Director of Co-operatives is in charge of registering and regulating Cooperatives across various states.
Cooperative Societies are also exempt from the provisions of the Companies and Allied Matters Act (CAMA). Consequently, obligations required of LLCs and LLPs by CAMA such as the filing of annual returns and registration of charges and debentures do not apply to Cooperative Societies. However, returns are expected to be submitted to the Director of Cooperatives at intervals determined by the Director or such agency that regulates Cooperative Societies.
What is Cooperative Society?
A co-operative society is an autonomous association of persons united voluntarily with the aim of promoting the socio-economic interests of its members in accordance with co-operative principles, and facilitating the operation of those principles. Upon registration, it acquires the status of a body corporate by the name under which it is registered, with perpetual succession and a common seal with power to;
- hold movable and immovable property of any description
- enter into contracts
- institute and defend suits and other legal proceedings in its name; and
- do all things necessary for the purpose of its constitution.
Categories of Cooperative Society in Nigeria.
There are three (3) Major categories of cooperative society in Nigeria namely;
- Agricultural Cooperative Society (Also known as Farmers Cooperative) – Meant for farmers.
- Saving and Credit Cooperative Society (Also known as Microfinance Cooperative) – Meant for members that contribute fund together and lend to members for personal or business purpose.
- Multi-purpose Cooperative Society (General Cooperative) – Meant for general purpose.
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To be a member of a cooperative society in Nigeria, members must be at least sixteen (16) years, except that in the case of a school co-operative society, then the age limit shall not apply. To register any of the above listed cooperative societies, you must have at least;
- Agricultural Cooperative Society – Minimum 50 members
- Saving and Credit Cooperative Society – Minimum 20 members
- Multi-purpose Cooperative Society – Minimum 10 members
Information/Document Required for Registration
The following is required to successfully register a cooperative in Nigeria;
- Proposed name of the society.
- Proposed location of the society (example Local Government Area and address)
- Objectives of the Cooperative
- Membership rules (Example Terms of joining, entrance fee, penalty etc)
- Four (4) copies of proposed by-laws of the Society
- Letter of intent
- Feasibility study on how the cooperative intend to operate
- Certified copy of resolution passed at the first meeting of members with the cooperative officer.
- Official stamp duty of the cooperative (To be tendered after name selection, availability and approval)
Procedure for Registering a Cooperative
- An application is made to the Director of Cooperatives requesting your intention to be duly registered as a Cooperatives Society.
- The application must be duly signed by the minimum required members depending on the category of cooperative. For example, 10 persons must sign if you are applying for a multi-purpose cooperative society.
- A form is issued to the members to fill in their details and return while a name search is made to ascertain availability.
- Upon availability, a stamp bearing the cooperatives name and logo with other documents (listed above) shall be submitted for verification and approval.
- After verification, if the Director of Cooperatives is satisfied, a letter of recognition is issued. This letter gives the cooperative approval to operate as a cooperative society for 3 years.
- A certificate of Registration with the certified copy of the by-laws governing the cooperative will be issued after 3 years. (Note: The number of years of certificate issuance could be less in some states)
Cost of registering a cooperative society in Nigeria. The fees payable for registering a cooperative society defer according to the category of interest and subject to the state.
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Benefits of Cooperative Societies
Similar to an LLC, Cooperative Societies are of limited liability and have a legal personality separate from that of its members. They also have the powers to hold movable and immovable property, enter into contracts, and perform such functions or actions as stated in their constitution. Members can hold shares in Cooperative Societies; however, no individual member can hold more than 20% of the shares of the society.
- Investment of Funds: Cooperative Societies may invest their funds in a bank, in federal government-backed securities, or in any other manner provided for in their constitution.
- Taxes: Cooperative Societies are exempt from payment of company income tax on the profit or income generated from its activities including shares or interest held in other entities. Cooperative Societies are also exempt from the payment of stamp duties and registration fees payable in relation to the registration of instruments.
- Registration: Cooperative Societies are to apply to the Director of Cooperatives for registration and such application must be signed by at least ten individuals qualified for membership of the society. The bye-laws of Cooperative Societies, which will govern its affairs, are to accompany the application.
CONCLUSION
Investors are constantly looking for opportunities to increase profits while reducing expenses such as operational costs and tax liabilities. Cooperative Societies provide for lower tax exposure and less regulatory oversight than LLCs and LLPs.