Chapter VI PROPERTY AND FUNDS OF SOCIETIES

1. (1) No part of the funds or assets of a society, other than the dividend equalisation fund, if any, and the net profits thereof, shall be paid by way of rebate or dividend or otherwise distributed, to its members: Provided that in the case of a member, who is also a salaried servant of the society, payment on such scale as may be laid down by the bye-laws may be made to him for work done as such servant.
2. (2) No honorarium shall be paid out of the funds and assets of a society other than the net profits and such honorarium shall not exceed the prescribed limit.

1. (1) A society earning profit, shall calculate its annual net profits by deducting from the gross profits for the year, all accrued interest which is overdue for more than three months, establishment charges, contributions, if any, towards the provident fund and gratuity fund of its employees, interest payable on loan and deposits, audit fees, working expenses including repairs, rents, taxes and depreciation, and after providing for or writing off bad debts and losses not adjusted against any fund created out of profits.
2. (2) A society may, however, add to the net profits for the year, interest accrued in the preceding years, but actually recovered during the year and the net profits thus arrived at together with the amount of profits brought forward from the previous year shall be available for appropriation.
3. (3) A society may appropriate its profits to its reserve fund or any other fund created by it to payment of dividends to members on their shares, to contribution to the educational fund as the Administrator may, by notification, specify to the payment of rebate on the basis of support received from members and persons who are not members to its business and subject to the prescribed conditions to payment of honoraria, and to any other purpose which may be specified in the rules or bye-laws: Provided that no part of the profits shall be appropriated, except with the approval of the same in an annual general meeting and in conformity with the provisions of this Regulation, rules and bye-laws made thereunder.

1. (1) Every society which does, or may, derive a profit from its transactions, shall maintain a reserve fund.
2. (2) At least one-fourth of the net profits of the society each year, shall be carried to the reserve fund and such reserve fund may be used in the business of the society or may, subject to the provisions of section 63, be invested, as the Administrator may by general or special order in writing direct, or may, with the previous sanction of the Administrator, be used in part for public purpose likely to promote the objects of this Regulation, or for such other purpose of the Union territory or of local interest: Provided that if the Registrar is satisfied that the financial condition of the society is such that it is unable to carry to its reserve fund an amount up to the aforesaid limit of one-fourth of its net profits, he may by order in writing, for such period as he may specify in the order, fix for the society a limit lower than the aforesaid limit but not lower than one-tenth of its net profits.
3. (3) Where the reserve fund of a society exceeds its authorised share capital, then, notwithstanding anything contained in sub-section (1), the society may, with the prior approval of the Registrar carry to its reserve fund each year an amount which may be less than one-fourth but not less than one-tenth of its net profit.

No society shall pay dividend to its members at a rate exceeding fifteen per cent. except with the prior approval of the Registrar.

1. (1) Every society which declares, out of the current year’s profit, dividend to its members, shall contribute towards the education fund at such rate as may be prescribed.
2. (2) No society, liable to contribute towards the education fund, shall pay dividend to its members, unless the said contribution is made to the Registrar within a period of sixty days from the date on which its accounts are adopted by the general body of members at its annual general meeting.
3. (3) An officer who wilfully fails to comply with the provisions of this section, shall be personally liable for making good the amount to the Registrar.

After providing for the reserve fund and the education fund, a society may set aside a sum not exceeding twenty per cent. of its net profits, and utilise from time to time, with the approval of the Registrar, whole or part of such sum in contributing to any purpose as may be prescribed, or to any charitable purpose within the meaning of section 2 of the Charitable Endowments Act, 1890, or to any other public purpose.

A society may invest or deposit its fund,—

1. (a) in a Central Bank or the State Co-operative Bank;
2. (b) in the State Bank of India or in any nationalised bank;
3. (c) in the Postal Savings Bank;
4. (d) in any of the securities specified in section 20 of the Indian Trusts Act, 1882;
5. (e) in shares, or security bonds, or debentures, issued by any other society with limited liability;
6. (f) in any land or building;
7. (g) in Employee’s Provident Fund; or
8. (h) in such other manner as may be determined by Administration, with the prior approval of the Administrator subject to such terms and conditions as may be prescribed in this behalf: Provided that in case of a co-operative society carrying on the business of banking, the investments therein shall be in accordance with the guidelines issued by the Reserve Bank in this regard from time to time. Explanation.––For the purposes of this section, the expression “nationalised bank” means a corresponding new bank constituted under sub-section (1) of section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980.

1. (1) Any society may establish for its employees a provident fund, into which, shall be paid the contributions made by its employees and the society and such provident fund shall not be used in the business of the society, nor shall it form part of the assets of the society, but shall be invested under the provisions of section 63 and shall be administered in the prescribed manner.
2. (2) Notwithstanding anything contained in sub-section (1), a provident fund established by a society to which the provisions of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, is applicable, shall be governed by that Act. ---

1. (1) No expenditure from the funds of a society shall be incurred for the purpose of defraying the costs of any proceedings filed or taken by or against any officer of the society in his personal capacity under this Regulation.
2. (2) If any question arises whether any expenditure can be so incurred or not, such question shall be referred to and decided by the Registrar, and his decision shall be final.
3. (3) If any person incurs expenditure in violation of sub-section (1), the Registrar shall direct the person to repay the amount to the society within one month and where such person fails to repay the amount as directed, such amount shall, on a certificate issued by the Registrar, be recoverable as arrears of land revenue.
4. (4) The person against whom action is taken by the Registrar under sub-section (3) shall be disqualified to continue to be the officer of any society or to be officer of any society at any next election including any next bye-election held immediately after the expiration of a period of one month during which such person has failed to pay the amount referred to in sub-section (3). ---