CENTRAL REGISTRAR AND REGISTRATION OF MULTI-STATE CO-OPERATIVE SOCIETIESCentral

Section 19 of The Multi-State Co-operative Societies Act, 2002

(1)Any multi-State co-operative society may, by a resolution passed at general meeting by a majority of members present and voting, promote one or more subsidiary institutions, which may be registered under any law for the time being in force, for the furtherance of its stated objects.
(2)Any subsidiary institution promoted under sub-section (1) shall exist only as long as general body of the multi-State co-operative society deems its existence necessary: Provided that a multi-State co-operative society while promoting such a subsidiary institution, shall not transfer or assign its substantive part of business or activities undertaken in furtherance of its stated objects. Explanation.--For the purposes of this section,--
1. (a)an institution shall be deemed to be a subsidiary institution if the multi-State co-operative society--
  1. (i)controls the management or board of directors or members of governing body of such institution; or
  2. (ii)holds more than half in nominal value of equity shares of such institutions; or
  3. (iii)if one or more members of such multi-State co-operative society, hold whether by themselves or together with subsidiary institution or their relatives, as the case may be, the majority of equity shares in that institution;
2. (b)a subsidiary institution shall not include a partnership firm.
(3)The annual reports and accounts of any such subsidiary institution shall be placed each year before general meeting of the promoting multi-State co-operative society.

Summary

A multi-state cooperative can promote, which means create, one or more subsidiary institutions under any law in force.
Promoting a subsidiary requires a resolution passed by a simple majority of members present and voting at a general meeting.
The subsidiary can only exist as long as the general body of the parent society thinks it is necessary.
The parent cooperative must not transfer or assign a major or substantive part of its core business or activities to the subsidiary.
An institution is a subsidiary if the parent cooperative controls its board or management, or holds more than half of its equity shares in nominal value.
A partnership firm cannot be promoted as a subsidiary.
Every year, the subsidiary's annual report and financial accounts must be presented before the general meeting of the parent cooperative.

Practical examples

1Scenario: Saraswati Milk Producers Multi-State Co-operative wants to set up a separate packaging company. At their annual general meeting, a majority of members present and voting pass a resolution to promote Saraswati Packaging Private Limited under the Companies Act. Saraswati Milk Co-operative holds 55 percent of the new company's equity shares, making it a legal subsidiary. Every year, the milk co-operative places the packaging company's financial sheets before its general body.

2Scenario: Green Harvest Multi-State Co-operative decides to establish an educational trust to train local farmers. They pass a simple majority resolution. The trust is registered as a society, and Green Harvest controls its entire governing body. Green Harvest does not transfer any of its core seed-distribution business to this trust, as that would violate the prohibition against transferring substantive business.

FAQ

1. Can a multi-state cooperative transfer its core business to a subsidiary under the Multi-State Co-operative Societies Act, 2002?

No, under Section 19 of the Multi-State Co-operative Societies Act, 2002, a promoting society is prohibited from transferring or assigning its substantive part of business or activities to the subsidiary.

2. How is a subsidiary institution defined under Section 19 of the Multi-State Co-operative Societies Act, 2002?

Under Section 19 of the Multi-State Co-operative Societies Act, 2002, a subsidiary is defined as an institution where the cooperative controls its board or management, or holds more than half of its equity shares in nominal value. It does not include a partnership firm.

3. Who decides how long a subsidiary can exist under the Multi-State Co-operative Societies Act, 2002?

Under Section 19 of the Multi-State Co-operative Societies Act, 2002, the subsidiary exists only as long as the general body of the parent multi-state cooperative society deems its existence necessary.

4. What financial documents of the subsidiary must be reviewed by the parent cooperative under the Multi-State Co-operative Societies Act, 2002?

Under Section 19 of the Multi-State Co-operative Societies Act, 2002, the annual reports and accounts of the subsidiary must be placed each year before the general meeting of the promoting cooperative.

Test yourself

Q1.Under Section 19 of the Multi-State Co-operative Societies Act, 2002, what type of business entity is explicitly excluded from being a subsidiary institution?

Q2.What type of majority is required in the general meeting of a cooperative to promote a subsidiary under Section 19 of the Multi-State Co-operative Societies Act, 2002?

Q3.Under Section 19 of the Multi-State Co-operative Societies Act, 2002, what restriction is placed on the parent cooperative when promoting a subsidiary?

Q4.To be considered a subsidiary under Section 19 of the Multi-State Co-operative Societies Act, 2002, what minimum portion of nominal value of equity shares must the promoting cooperative hold if it does not control the board?

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