Section 16 of MSCS Act, 2002 : Section 16: Liability

Explanation using Example

Imagine a multi-State co-operative society named "GreenFarm Co-operative" that was registered with unlimited liability before the enactment of The Multi-State Co-operative Societies Act, 2002. After the commencement of the Act, the society's management decides to limit the liability of its members to protect their personal assets from being used to pay off the society's debts. They follow the procedure outlined in the Act:

1. The society amends its bye-laws to change from unlimited to limited liability.
2. GreenFarm Co-operative then notifies all members and creditors about the change, allowing them a month to withdraw their shares, deposits, or loans if they disagree with the new liability structure.
3. After a month, those members and creditors who did not withdraw their contributions are considered to have agreed to the change.
4. The society ensures that all members and creditors who wanted to exit are either paid in full or reach a satisfactory agreement.
5. Finally, the amendment to the bye-laws is registered, and the society officially operates with limited liability, protecting its members' personal assets from any future debts incurred by the society.