## Cooperative Society: Key Restrictions and Financial Provisions
### Records, Books and Accounts
- State Governments can frame rules to prescribe the books of accounts to be kept.
- Maharashtra Co-operative Societies Act rules require recording of:
- All sums received or expended and the matters in respect of which receipts/expenses occur
- All sales and purchases
- Assets and liabilities
- Maintained at the discretion of the society but must be presented in a clear and best possible manner.
---
### Restriction on Shareholding
- Where liability of a member is limited, no member (other than a registered society) can hold more than:
- 20% of the total share capital, OR
- Shares of value exceeding Rs. 1,000
- (whichever is lower)
- Auditor checks if any bye-laws contradict this statutory provision.
---
### Restriction on Loans
- A registered society shall not make a loan to any person other than a member.
- Exception: With special sanction of the Registrar, a loan can be made to another registered society.
---
### Restriction on Borrowings
- A registered society can accept loans and deposits from non-members, subject to restrictions in its bye-laws.
---
### Investment of Funds
A cooperative society can invest in:
1. Central or State Cooperative Bank
2. Securities under Section 20 of the Indian Trusts Act
3. Shares, securities, bonds, debentures of any other society with limited liability
4. Any cooperative bank other than Central or State Cooperative Bank
5. Any other mode permitted by Central or State Government
---
### Appropriation of Profits
- A prescribed percentage of profits must be transferred to the reserve fund before distribution of dividends or bonuses to members.
---
### Contribution to Charitable Purposes
- Contribution shall not exceed 10% of Net Profit after the compulsory transfer to reserve fund.
---
### Investment of Reserve Fund
- Reserve fund can be used in the business of the society as working capital
- May be invested as per provisions of the Act
- May be used for public purposes to promote the objects of the society
- Auditor must ensure strict compliance with State Acts and rules.
---
### Contribution to Education Fund
- Some State Acts require every society to contribute annually towards the education fund of the state federal society.
- This is a charge on profits (not an appropriation).
> Key distinction: Education fund contribution = charge (mandatory, before profit); Dividend/bonus = appropriation (after reserve transfer).