Chapter 5 FINANCE

1. (1) A Co-operative may mobilise funds in the shape of equity capital, deposits and loans from its members in such form, to such extent and under such conditions as may be specified in the articles of association.
2. (2) A Co-operative may raise funds and other forms of financial support such as guarantee from non-members, including banks, other financial and non-financial institutions, on mutually agreed terms, to such extent and under such conditions as may be specified in the articles of association.

1. (1) The funds mobilised by a Co-operative shall be for the furtherance of its objects.
2. (2) Such of its funds as are not needed for use in its business, a Co-operative may invest or deposit, outside its business, in the manner specified under sub-section
3. (5) of section 11, of the Income Tax Act, 1961.

1. (1) Surplus, if any, arising out of the business of a Co-operative in a financial year may be used in one or more of the following ways, namely:-
   • (a) deficit cover fund;
   • (b) surplus refund among its members;
   • (c) development of its business;
   • (d) reserves and funds constituted in accordance with the articles of association;
   • (e) common services to its members;
   • (f) rewards or incentives to employees; and
   • (g) nondivisible corpus fund.
2. (2) Surplus arising out of services provided to potential members may not be distributed amongst members or staff, but may be used for the purpose of common services to the community at large, and for encouraging potential members to become members.
3. (3) Surplus must be fully disposed of at the annual general body meeting in which the audited statements of accounts for the financial year in which the surplus arose are presented for the consideration of the general body.

1. (1) Deficit, if any, arising out of the business of a Co-operative in a financial year, shall be fully settled by debiting a part or all of the deficit to the deficit cover fund, if any, and/or as deficit charge, among its members: Provided, that nothing in this sub-section shall preclude a Co-operative from proceeding against its directors, or employees for recovery of amount contributing to the deficit, where such deficit is the result of deviation from the approved plan and/or budget, and where such deviation does not receive the approval of the general body, or is the result of gross negligence or mismanagement: Provided further that where such amounts are recovered, the general body may resolve to credit a part or all of the amount to the deficit cover fund and/or to the account of each member in proportion to the deficit charge levied on him/her in this regard.
2. (2) No member shall be allowed to withdraw from the membership of the Co-operative without paying his/her share towards clearing the deficit, if any.

1. (1) A Co-operative may, in the interest of its members, and towards the fulfilment of its objectives, create reserves and such other funds as are specified in the articles of association.
2. (2) Funds so created may be used in the business of the Co-operative, but at the end of every Co-operative business year, on that portion of such fund which was not applied for the purpose for which it was created, the Co-operative shall credit to the account of such fund an annual interest, at not less than the rate paid by scheduled banks on long term fixed deposits, debiting such interest as operational expenditure.

Notwithstanding anything in any law for the time being in force, but subject to any claim of the Government in respect of land revenue, any debt or other amount due to a Co-operative by any member shall be a first charge upon such properties of the member as agreed to by the Co-operative, and as the member may declare in the manner specified in the articles of association.