Short Answer

Yes, as per Section 67 of the Gujarat Cooperative Societies Act, 1961, a society is required to transfer a portion of any surplus to the statutory reserve.

Detailed Explanation

Section 67 of the Gujarat Cooperative Societies Act, 1961 states that every cooperative society shall transfer a portion of its net profits to the statutory reserve before declaring dividends or making any payment to members. This statutory reserve is essential for the financial stability and sustainability of the society. The purpose of this provision is to ensure that societies maintain a reserve fund to cover any unforeseen losses or contingencies.

In practice, this means that when a cooperative society generates surplus income after meeting all expenses and liabilities, it must allocate a certain percentage of this surplus to the statutory reserve before distributing profits to its members. This ensures that the society remains financially sound and can withstand any financial challenges that may arise in the future.

Real-world Scenarios

• Example: ABC Cooperative Society earns a surplus of Rs. 1,00,000 after deducting all expenses. As per Section 67, they are required to transfer 20% of this surplus, i.e., Rs. 20,000, to the statutory reserve before distributing dividends to members.

• Example: XYZ Cooperative Society faces a financial crisis due to unexpected expenses. Thanks to the statutory reserve created as per Section 67, they can cover these expenses without affecting the members' interests.

Reference

• Section 67 of the Gujarat Cooperative Societies Act, 1961: Official PDF