(a) State five merits of co-operative societies (b) Explain five procedure to be followed in the formation of a Private Limited Company

Answer Details

(a) Five merits of co-operative societies

1. Easy formation. A co-operative is simple and cheap to form, needing only a small number of members and little legal formality.
2. Democratic control. It is run on the principle of one-member-one-vote, so every member has an equal say regardless of shareholding.
3. Limited liability. Members' liability is limited to their capital contribution, protecting personal property.
4. Payment of dividend/bonus. Surpluses are shared among members as dividends, usually in proportion to their patronage.
5. Elimination of middlemen. Members buy and sell collectively, cutting out middlemen so goods are cheaper and better prices are obtained.

(Also acceptable: continuity of existence, access to loans/credit, and encouragement of thrift and savings.)

(b) Five steps in forming a Private Limited Company

1. Choose a name and check its availability. The promoters select a suitable company name and apply to the Corporate Affairs Commission (Registrar of Companies) to confirm it is not already in use.
2. Prepare the necessary documents. They draw up the Memorandum of Association, Articles of Association and other required documents.
3. File the documents and pay fees. The documents, together with a statement of share capital, particulars of directors and the registration fees and stamp duty, are filed with the Registrar.
4. Registration and issue of Certificate of Incorporation. The Registrar examines the documents and, if satisfied, registers the company and issues a Certificate of Incorporation.
5. Commencement of business. On receiving the Certificate of Incorporation, a private company may begin business immediately (it need not obtain a certificate of trading).