■​ Training & research 2.

​ Democratic Member Control

COOPERATIVE LAW ■​ Audit & support services a.​ Democratic organizations controlled
CHAPTER I – General Concepts and ○​ With government assistance where by members
necessary b.​ Members actively participate in
Principles
Art. 3 – General Concepts policies and decisions
Art. 1 – Title
●​ A cooperative is: c.​ Accountability of elected
Known as the “Philippine Cooperative Code of 2008”
○​ Autonomous representatives, directors, officers
Art. 2 – Declaration of Policy
○​ Duly registered association of persons d.​ Equal voting rights in primary
●​ Policy of the State: foster creation and
○​ With a common bond of interest cooperatives: one-member, one-vote
growth of cooperatives
●​ Members voluntarily join to achieve: e.​ Higher-level cooperatives organized
●​ Cooperatives as a vehicle for:
○​ Social needs in the same democratic manner
○​ Self-reliance
○​ Economic needs 3.​ Member Economic Participation
○​ People power
○​ Cultural aspirations a.​ Members contribute equitably and
○​ Economic development
●​ Members contribute through: democratically control capital
○​ Social justice
○​ Equitable capital contributions b.​ Part of capital = common property of
●​ Private sector encouraged to:
○​ Patronizing products & services cooperative
○​ Undertake formation and organization
○​ Accepting fair share of risks & benefits c.​ Members receive limited
of cooperatives
●​ Operates in accordance with universally compensation/interest on subscribed
●​ Government role:
accepted cooperative principles capital
○​ Provide technical guidance
Art. 4 – Cooperative Principles d.​ Surplus allocation for:
○​ Offer financial assistance
Cooperatives must align with Filipino culture, good i.​ Reserves (part indivisible)
○​ Deliver other services
values, experience, and universally accepted ii.​ Benefits to members (based
●​ Goal: develop cooperatives into viable and
principles of cooperation. on patronage)
responsive economic enterprises
1.​ Voluntary and Open Membership iii.​ Support for other approved
●​ Ensure a strong cooperative movement:
a.​ Voluntary organizations activities
○​ Free from conditions infringing
b.​ Open to all persons able to use 4.​ Autonomy and Independence
autonomy or organizational integrity
services a.​ Cooperatives are autonomous,
●​ Recognition of principle of subsidiarity:
c.​ Must accept responsibilities of self-help organizations
○​ Cooperative sector initiates and
membership b.​ Agreements with other
regulates:
d.​ No discrimination (gender, social, orgs/government/external capital
■​ Promotion & organization
racial, cultural, political, religious) must:
 i.​ Ensure democratic control by 2.​ General Assembly a.​ Worldwide cooperative principles
members a.​ Full membership of cooperative adhered to by cooperatives
ii.​ Maintain cooperative b.​ Exercises rights & obligations under 10.​ Representative Assembly
autonomy Code/bylaws a.​ Body of representatives elected by
5.​ Education, Training, and Information c.​ For large/dispersed membership → sectors/chapters/districts
a.​ Provide education & training for: may be delegates elected by b.​ Exercises delegated powers from GA
i.​ Members sector/chapter/district 11.​ Officers of the Cooperative
ii.​ Elected/appointed 3.​ Board of Directors a.​ Includes: Board members, committee
representatives a.​ Body entrusted with management of members, GM/CEO, secretary,
iii.​ Managers & employees cooperative affairs treasurer, others per bylaws
b.​ Goal: enable effective and efficient b.​ Guided by articles of cooperation & 12.​ Social Audit
contribution to cooperative bylaws a.​ Procedure to assess social impact &
development. 4.​ Committee ethical performance
a.​ Body with specific b.​ Based on mission, vision, goals, code
functions/responsibilities of social responsibility
6.​ Cooperation Among Cooperatives b.​ Created by bylaws or resolutions of c.​ Ensures accountability to members &
a.​ Cooperatives strengthen movement GA/Board community
by working together 5.​ Articles of Cooperation 13.​ Performance Audit
b.​ Collaboration through local, national, a.​ Registered articles under this Code a.​ Audit on efficiency & effectiveness of
regional, and international structures b.​ Includes amendments cooperative
7.​ Concern for Community 6.​ Bylaws b.​ Covers management, officers,
a.​ Cooperatives promote sustainable a.​ Registered bylaws under this Code responsibility centers
development b.​ Includes amendments c.​ Basis for performance improvement &
b.​ Guided by policies approved by 7.​ Registration informing membership
members a.​ Act granting juridical personality 14.​ Single-Line / Single-Purpose Cooperative
Art. 5 – Definition of Terms b.​ Evidenced by certificate of a.​ Undertakes activities related to its
1.​ Member registration main business/purpose
a.​ Person (natural/juridical) admitted by 8.​ Cooperative Development Authority (CDA) 15.​ Service Cooperatives
cooperative a.​ Government agency for registration & a.​ Provide services to members (e.g.,
b.​ Must adhere to principles in Code & regulation of cooperatives transport, ICT, insurance, housing,
Articles of Cooperation 9.​ Universally Accepted Principles
 electric, health, education, banking, 9.​ Establish/own/lease/operate: ●​ (d) Propagate cooperative practices & new
savings & credit) a.​ Cooperative banks ideas in business & management
b.​ Wholesale & retail complexes ●​ (e) Enable lower income & less privileged
16.​ Subsidiary Cooperative c.​ Insurance enterprises groups to increase ownership in national
a.​ Formed by 3+ primary cooperatives in d.​ Agricultural/industrial processing wealth
same line of business enterprises ●​ (f) Cooperate with government, other
b.​ Organized at e.​ Public markets cooperatives, and people-oriented
municipal/provincial/city/ 10.​ Coordinate & facilitate activities of organizations to achieve objectives
metropolitan/economic zones cooperatives Art. 8 – Cooperatives Not in Restraint of Trade
c.​ Registered with CDA to support 11.​ Advocate for the cooperative movement ●​ Any cooperative complying with this Code
member-cooperatives 12.​ Ensure viability through new technologies shall NOT be considered:
CHAPTER II – Organization and 13.​ Promote self-help/self-employment → ○​ A conspiracy or combination in
engine for economic growth & poverty restraint of trade
Registration
alleviation ○​ An illegal monopoly
Art. 6 – Purposes of Cooperatives
14.​ Undertake other activities for effective ○​ An attempt to lessen competition
A cooperative may be organized/registered for the
implementation of this Code ○​ An act to fix prices arbitrarily in
following purposes:
Art. 7 – Objectives and Goals of a Cooperative violation of Philippine laws
1.​ Encourage thrift & savings mobilization
Primary Objective → Improve quality of life of Art. 9 – Cooperative Powers and Capacities
among members
members A registered cooperative shall have the following
2.​ Generate funds & extend credit for
Specific Goals: powers, rights, and capacities:
productive/provident purposes
●​ (a) Provide goods & services to members → 1.​ Exclusive use of registered name → right to
3.​ Promote systematic production & marketing
attain: sue and be sued
among members
○​ Increased income, savings, 2.​ Succession → continuity of existence
4.​ Provide goods, services, and other
investments, productivity, purchasing 3.​ Amend Articles of Cooperation in
requirements to members
power accordance with Code provisions
5.​ Develop expertise & skills of members
○​ Promote equitable distribution of net 4.​ Adopt bylaws (not contrary to law, morals,
6.​ Acquire lands & housing benefits for
surplus via economies of scale, public policy) → amend/repeal as needed
members
cost-sharing, risk-sharing 5.​ Deal with property (real & personal):
7.​ Insure against losses of members
●​ (b) Provide optimum social & economic purchase, receive, grant, hold, convey, sell,
8.​ Promote & advance economic, social,
benefits lease, pledge, mortgage → subject to law &
educational status of members
●​ (c) Teach efficient cooperative practices Constitution
 6.​ Enter into division, merger, or consolidation ○​ Requirement: completion of Art. 13 – Term
(as provided in Code) Pre-Membership Education Seminar ●​ Cooperative existence: not exceeding 50
7.​ Form subsidiary cooperatives & join (PMES) years from registration
federations/unions ●​ Registration rules: ●​ May be sooner dissolved or extended
8.​ Avail of loans, credits, grants, donations, ○​ Newly organized → may register as ●​ Extension rules:
assistance (foreign/domestic) → must not multipurpose cooperative only after ○​ Periods not exceeding 50 years per
undermine autonomy meeting minimum requirements set instance
a.​ Authority (CDA) provides assistance by Authority ○​ Done via amendment of Articles of
in documentary requirements ○​ Single-purpose cooperative → may Cooperation
9.​ Avail of preferential rights under RA 7160 transform into multipurpose or create ○​ No extension earlier than 5 years
(Local Government Code) & other laws: subsidiaries only after 2 years of before expiry, unless justifiable
a.​ Franchises to establish/operate operations reasons determined by Authority
ferries, wharves, markets, Art. 14 – Articles of Cooperation
slaughterhouses Art. 11 – Economic Survey 1.​ Filing Requirement
b.​ Lease public utilities ●​ Groups intending to form a cooperative must ○​ All cooperatives applying for
c.​ Access to extension & research submit to Authority: registration must file Articles of
services (agriculture/fishery) ○​ General statement describing Cooperation with the Authority
10.​ Organize & operate schools under RA 9155 structure & purposes ○​ Must be signed by organizers:
(Governance of Basic Education Act of 2001) ○​ Staffing pattern must include a i.​ Natural persons →
& other laws bookkeeper acknowledged before notary
11.​ Exercise other powers granted by Code or ●​ Condition: cannot operate without necessary public
necessary to carry out purposes in Articles of personnel ii.​ Juridical persons → signed by
Cooperation ●​ Must also submit economic survey chairpersons/secretaries
Art. 10 – Organizing a Primary Cooperative indicating: 2.​ Required Contents
●​ Requires 15 or more natural persons ○​ Area of operation ○​ Articles must set forth
○​ Must be Filipino citizens, legal age, ○​ Size of membership i.​ (a) Name of cooperative
with common bond of interest ○​ Other pertinent data (format provided (must include word
○​ Must be residing/working in intended by Authority) cooperative)
area of operation Art. 12 – Liability ii.​ (b) Purpose(s) and scope of
●​ A cooperative duly registered under this business
Code has limited liability iii.​ (c) Term of existence
 iv.​ (d) Area of operation & 1.​ At least 25% of iv.​ (d) Procedure for termination
principal office address authorized share of membership
v.​ (e) Names, nationality, postal capital subscribed v.​ (e) Conditions for transfer of
addresses of registrants 2.​ At least 25% of total shares/interest of members
vi.​ (f) Common bond of subscription paid vi.​ (f) Rules & procedures for
membership iii.​ Minimum paid-up share meetings:
vii.​ (g) List of directors who will capital = ₱15,000 1.​ Agenda, time, place,
manage cooperative iv.​ Authority (CDA) may assess & manner of
viii.​ (h) Share capital details: increase required paid-up convening/conducting
1.​ Amount of share capital every 5 years (with 2.​ Quorum requirements
capital consultation from cooperative 3.​ Voting systems
2.​ Names & residences of sector & NEDA) 4.​ Other matters re:
contributors Art. 15 – Bylaws General Assembly,
3.​ Statement if 1.​ Adoption & Filing Board of Directors,
cooperative is primary, a.​ Each cooperative must adopt bylaws Committees
secondary, or tertiary consistent with this Code vii.​ (g) General conduct of affairs
(per Art. 23) b.​ Filed simultaneously with the Articles of cooperative:
3.​ Additional Provisions of Cooperation 1.​ Powers & duties of GA,
○​ May contain other provisions not 2.​ Required Provisions in Bylaws Board, Committees,
inconsistent with Code or related laws a.​ Bylaws must provide for: Officers
4.​ Submission Copies i.​ (a) Qualifications for 2.​ Qualifications &
○​ Must submit 4 copies each of admission to membership disqualifications of
i.​ Proposed Articles of 1.​ Payments/interest officers
Cooperation required for exercise of viii.​ (h) Capital raising methods &
ii.​ Bylaws membership rights purposes of utilization
iii.​ General statement (per Art. 11) ii.​ (b) Rights & liabilities of ix.​ (i) Custody & investment of net
5.​ Capital & Registration Requirements membership surplus
○​ Registration requires: iii.​ (c) Circumstances when x.​ (j) Accounting & auditing
i.​ Bonds of accountable officers membership is acquired, systems
ii.​ Sworn statement of treasurer maintained, lost xi.​ (k) Loaning & borrowing rules,
showing: including limitations
 xii.​ (l) Distribution of net surplus Art. 18 – Amendment of Articles of Cooperation & ●​ A registered cooperative may divide into 2 or
xiii.​ (m) Adoption, amendment, Bylaws more cooperatives
repeal, abrogation of bylaws ●​ Amendments allowed for legitimate ●​ Requires 3/4 vote of all members with voting
xiv.​ (n) Conciliation/mediation purposes rights (present & quorum)
mechanism for amicable ●​ Requires 2/3 vote of all members with voting ●​ Procedure prescribed by Authority
settlement of disputes among rights regulations
members, directors, officers, ●​ Dissenting members may withdraw ●​ Conditions:
committees membership (per Art. 30) ○​ New cooperatives must comply with
xv.​ (o) Other matters incident to ●​ Both original & amended articles/bylaws Code requirements
cooperative purposes & must contain all required provisions by law ○​ Division in fraud of creditors → invalid
activities ●​ Amendments must be: Art. 21 – Merger and Consolidation of Cooperatives
Art. 16 – Registration ○​ Indicated clearly 1.​ Two or more cooperatives may merge into:
●​ Cooperative acquires juridical personality → (underscoring/marking changes) a.​ A single cooperative (one of the
from date Authority issues certificate of ○​ Certified under oath by cooperative constituents) OR
registration (official seal) secretary + majority of directors b.​ A consolidated cooperative
●​ Applications for registration: ○​ Must state that amendments were 2.​ Validity requires:
○​ Must be disposed of within 60 days approved by required vote a.​ 3/4 vote of all members with voting
from filing ●​ Submission to Authority required rights
○​ If not acted upon → deemed ●​ Amendments take effect: b.​ Separate general assembly meetings
approved, unless delay is applicant’s ○​ Upon approval by Authority OR of each constituent cooperative
fault ○​ Within 30 days of filing if not acted c.​ Dissenting members → right to
●​ Denial of application: upon (cause not attributable to withdraw membership (per Art. 30)
○​ Appeal to Office of the President cooperative) 3.​ Authority issues guidelines for
within 90 days of notice Art. 19 – Contracts Executed Prior to Registration merger/consolidation procedure
○​ If Office of the President fails to act ●​ Contracts between private persons & 4.​ Merger/consolidation becomes effective
within 90 days → application is cooperatives before registration → remain upon issuance of certificate by Authority
deemed approved valid & binding Art. 23 – Types and Categories of Cooperatives
Art. 17 – Certificate of Registration ●​ Upon registration → cooperative must adopt ●​ Credit Cooperative
●​ Certificate issued by Authority under official a formal written contract in its name or on its ○​ Promotes savings & lending services
seal = conclusive evidence of registration behalf among members
○​ Valid unless proved cancelled Art. 20 – Division of Cooperatives
 ○​ Generates common pool of funds → ○​ Combines two or more business ○​ Utilizes renewable energy sources
financial assistance for productive & activities of different cooperative (including hybrid systems)
provident purposes types ○​ Handles subtransmission/distribution
to household members
●​ Advocacy Cooperative ●​ Financial Service Cooperative
○​ Promotes & advocates cooperativism ○​ Engages in savings, credit services,
●​ Consumers Cooperative ○​ Through social projects, education, and other financial services
○​ Primary purpose: procure & distribute training, research, communication ●​ Fishermen Cooperative
commodities to members and ●​ Agrarian Reform Cooperative ○​ Organized by marginalized fishermen
non-members ○​ Organized by marginal farmers ○​ Products marketed as fresh or
●​ Producers Cooperative (majority agrarian reform processed
○​ Undertakes joint production beneficiaries) ●​ Health Services Cooperative
(agricultural/industrial) ○​ Purpose: land tenure, development, ○​ Provides medical, dental, and other
○​ Members produce/process raw consolidation, management in health services
materials → finished/processed agrarian reform areas ●​ Housing Cooperative
products ●​ Cooperative Bank ○​ Assists/provides access to housing for
○​ End products sold in cooperative’s ○​ Provides financial services to regular members
name = deemed product of cooperatives & members ○​ Members must actively participate in
cooperative & members ●​ Dairy Cooperative savings program for housing
●​ Marketing Cooperative ○​ Members engaged in production of ○​ Co-owned and controlled by
○​ Engages in supply of production fresh milk members
inputs ○​ Milk may be processed/marketed as ●​ Insurance Cooperative
○​ Markets members’ products dairy products ○​ Engaged in insuring life and property
●​ Service Cooperative ●​ Education Cooperative of cooperatives and members
○​ Provides services: medical, dental, ○​ Organized to own & operate licensed
hospitalization, transport, insurance, educational institutions
housing, labor, electricity, ○​ Notwithstanding RA 9155 (Governance
communication, professional services of Basic Education Act of 2001) ●​ Transport Cooperative
●​ Multipurpose Cooperative ●​ Electric Cooperative ○​ Covers land and sea transportation
○​ Organized for power generation (limited to small vessels under PH
maritime laws)
 ●​ Water Service Cooperative ●​ Carry on cooperative enterprises (per Art. 6) ●​ (a) Represent member organizations
○​ Owns, operates, manages water that complement/augment/supplement but ●​ (b) Acquire, analyze, disseminate economic,
systems do not conflict/supplant members’ activities statistical, other information about members
○​ Provides/distributes potable water to ●​ Encourage & assist educational/advisory & cooperatives in area
members & households work for member cooperatives ●​ (c) Sponsor studies (economic, legal,
●​ Workers Cooperative ●​ Render services to promote simplicity, financial, social, etc.) → publish results
○​ Organized by workers/self-employed efficiency, economy in business operations ●​ (d) Promote knowledge of cooperative
○​ Members are owners of the enterprise ○​ Facilitate bookkeeping, accounting, principles & practices
○​ Purpose: provide employment & systems & procedures ●​ (e) Develop cooperative movement in
business opportunities ●​ Print, publish, circulate jurisdiction
○​ Managed in line with cooperative newspapers/publications for member ●​ (f) Advise authorities on cooperative-related
principles cooperatives matters
●​ Other types → as determined by the ●​ Coordinate & facilitate activities of member ●​ (g) Raise funds via membership fees, dues,
Authority (CDA) cooperatives contributions, donations, subsidies
●​ Enter into joint ventures with (local/foreign, private/government)
Categories of Cooperatives national/international cooperatives ●​ (h) Perform non-business activities
●​ By Membership: (manufacture & sale of products/services in necessary to attain objectives
○​ (i) Primary → members are natural PH & abroad)
persons ●​ Perform other functions necessary to attain Role with Government:
○​ (ii) Secondary → members are objectives ●​ Cooperative unions may assist national &
primary cooperatives Registration: local governments in development activities
○​ (iii) Tertiary → members are ●​ Federation may be registered by following within their jurisdictions
secondary cooperatives formalities of cooperative registration CHAPTER III – Membership
●​ By Territory: ●​ Registered cooperatives may organize Art. 26 – Kinds of Membership
○​ Categorized according to areas of federation based on type of business activity Two kinds of members
operation Art. 25 – Cooperative Unions 1.​ Regular members → complied with
○​ May or may not coincide with political Registered cooperatives & federations may requirements; entitled to all rights &
subdivisions of the country organize/join cooperative unions to represent privileges
Art. 24 – Functions of a Federation of Cooperatives interests at provincial, city, regional, national levels. 2.​ Associate members →
A federation of cooperatives shall undertake the a.​ No right to vote / be voted upon
following functions: Purposes of Cooperative Unions
 b.​ Entitled only to rights/privileges i.​ Condition: operations of office
provided in bylaws not adversely affected 2.​ Death, Insanity, Insolvency, Dissolution
c.​ May become regular member if: Art. 28 – Application a.​ Death/insanity of member in primary
i.​ Meets minimum requirements ●​ Applicant becomes member after: cooperative → valid ground
ii.​ Patronizes cooperative for 2 ○​ Approval by Board of Directors b.​ Insolvency/dissolution of member in
years ○​ Payment/acquisition of membership secondary/tertiary cooperative →
iii.​ Signifies intention to remain a interest (per bylaws) valid ground
member ●​ If membership denied: i.​ Exception: if agrarian reform
●​ Laboratory cooperative: ○​ Appeal to General Assembly → beneficiary-member
○​ Organized by minors decision is final dies/insane → next-of-kin may
○​ Must be affiliated with a registered ○​ GA may create Appeal & Grievance assume duties/responsibilities
cooperative Committee (1-year term) 3.​ Termination by Board of Directors
○​ Governed by special guidelines from ○​ Committee must decide within 30 a.​ Requires majority vote of all board
Authority days → if not, appeal deemed members
Art. 27 – Government Officers and Employees approved b.​ Grounds:
1.​ Authority officers/employees → disqualified Art. 29 – Liability of Members i.​ (a) Failure to patronize
from cooperative positions ●​ Member liable for cooperative debts only up services for unreasonable time
a.​ Exception: cooperatives organized by to contribution to share capital ii.​ (b) Continuous failure to
Authority officers/employees Art. 30 – Termination of Membership comply with obligations
2.​ Elective government officials → ineligible as 1.​ Voluntary Withdrawal iii.​ (c) Violation of bylaws/rules
officers/directors a.​ Member may withdraw for valid iv.​ (d) Acts/omissions injurious or
a.​ Exception: party-list representative reason prejudicial to cooperative
may be officer of cooperative b.​ Must give 60-day notice to Board of welfare
represented Directors c.​ Due process:
3.​ Government employees/officials → may use c.​ Entitled to refund of share capital & i.​ Member must be informed in
official time to attend: interests (subject to bylaws) writing
a.​ General assembly, board, committee d.​ Refund not allowed if payment would ii.​ Given opportunity to be heard
meetings reduce cooperative assets below before decision
b.​ Seminars, conferences, workshops, debts/liabilities (excluding share iii.​ Decision must be in writing →
technical meetings, training capital contribution) communicated personally or
(local/abroad) via registered mail
 d.​ Appeal process: c.​ Bylaws b.​ Notice in writing sent 1 week prior to all
i.​ Member may appeal within 30 ●​ Exclusive Powers (cannot be delegated): voting members
days to General Assembly a.​ Determine & approve amendments to c.​ Must be called if 10% of voting
(decision final) Articles of Cooperation and Bylaws members request → to transact
ii.​ GA may create Appeal & b.​ Elect/appoint Board of Directors and specific business
Grievance Committee (1-year remove them for cause d.​ If Board fails → Authority (CDA) may
term) ■​ Exception: Electric order petitioners to call meeting with
iii.​ Committee must decide within cooperatives → elections proper notice
30 days → if not, appeal follow their bylaws/election 3.​ Newly Approved Cooperative
deemed approved in favor of guidelines a.​ Must call a special GA within 90 days
member c.​ Approve developmental plans of the from approval
e.​ Pending appeal → membership cooperative 4.​ Authority-Initiated Meeting
remains in force ●​ Delegation of Powers (limited): a.​ CDA may call special meeting to
Art. 31 – Refund of Interests a.​ GA may delegate some powers to a report results of
●​ All sums due (per bylaws) to a former smaller body of the cooperative examination/investigation of
member must be paid: b.​ Requires 3/4 vote of all members with cooperative affairs
○​ By the cooperative OR voting rights (present & quorum) 5.​ Waiver of Notice
○​ By the approved transferee c.​ Delegated powers must be a.​ Notice of meeting may be waived
●​ Must be in accordance with this Code enumerated in bylaws expressly or impliedly by any member
CHAPTER IV – Administration Art. 34 – Meetings Art. 35 – Quorum
Art. 32 – Composition of the General Assembly 1.​ Regular Meeting ●​ General rule:
●​ The General Assembly (GA) is composed of a.​ Held annually by General Assembly ○​ Quorum = 25% of voting members
members entitled to vote b.​ Date fixed in bylaws OR within 90 days ○​ Cooperative banks → quorum as
●​ Voting rights are determined by the Articles after fiscal year close provided in Art. 99
of Cooperation and Bylaws c.​ Notice must be sent (writing, posting, ○​ Electric cooperatives → quorum = 5%
Art. 33 – Powers of the General Assembly publication, electronic means) to all of voting members (unless bylaws
●​ GA = highest policy-making body of the members of record provide otherwise)
cooperative 2.​ Special Meeting Art. 36 – Voting System
●​ Exercises powers stated in: a.​ May be called anytime by majority ●​ Primary cooperatives → each member has
a.​ This Code vote of Board of Directors or as one vote only
b.​ Articles of Cooperation provided in bylaws ●​ Secondary/Tertiary cooperatives →
 ○​ One basic vote + incentive votes (per b.​ Must have qualifications and no a.​ Majority of BOD members (unless
bylaws, max 5 votes) disqualifications under law/bylaws bylaws provide otherwise)
○​ Votes cast by delegates = votes of 2.​ Financing institution appointee: 4.​ Proxy voting:
members a.​ Cooperative may admit a a.​ Not allowed → directors cannot
●​ Proxy voting allowed (except in primary director/committee member attend/vote by proxy
cooperatives) → appointed by financing institution (if Art. 41 – Vacancy in the Board of Directors
○​ Delegate may represent/vote on cooperative received financial ●​ Vacancy (not due to expiration of term) may
behalf of another delegate of same assistance) be filled by:
cooperative b.​ Such appointee has no ○​ Majority vote of remaining directors (if
powers/rights/responsibilities except quorum still exists)
Art. 37 – Composition and Term of the Board of to provide technical assistance ■​ Otherwise → filled by General
Directors 3.​ Restriction: Assembly in regular/special
●​ Direction & management of cooperative a.​ BOD members cannot hold other meeting
affairs → vested in Board of Directors (BOD) positions directly involved in ●​ Director elected to fill vacancy → serves only
●​ Composition: 5–15 members (unless bylaws day-to-day operations/management unexpired term of predecessor
provide otherwise) 4.​ Disqualification: Art. 42 – Officers of the Cooperative
●​ Elected by General Assembly a.​ Any person engaged in similar ●​ Board of Directors elects:
●​ Term: 2 years business OR with conflict of interest → ○​ Chairperson & Vice-Chairperson
●​ Hold office until: disqualified from election as director (from among themselves)
○​ Successors are duly elected & Art. 40 – Meetings of the Board & Quorum ○​ Other officers (from outside board,
qualified OR Requirement per bylaws)
○​ Removed for cause 1.​ Primary cooperatives → BOD must hold ●​ Officers serve during good behavior →
Art. 38 – Powers of the Board of Directors regular meetings at least once a month removal only for cause after due hearing
●​ Responsible for: 2.​ Special meetings: ●​ Loss of confidence not valid ground unless
○​ Strategic planning a.​ May be called anytime by chairperson backed by acts/omissions showing
○​ Direction-setting or majority of BOD dishonesty/integrity issues
○​ Policy formulation b.​ Requires written notice (agenda ●​ Restrictions:
Art. 39 – Directors specified) → sent at least 1 week ○​ No two or more persons related up to
1.​ Eligibility: before meeting 3rd civil degree
a.​ Must be a member with voting rights 3.​ Quorum: (consanguinity/affinity) may serve as
(per bylaws) appointive officers
 ○​ No person engaged in similar b.​ Replacement serves only unexpired 1.​ Directors:
business or with conflict of interest portion of term a.​ No compensation unless fixed in
may serve Art. 44 – Functions, Responsibilities & Training bylaws
Art. 43 – Committees of Cooperatives Requirements b.​ Allowed only reasonable per diems
1.​ Executive Committee ●​ Functions, responsibilities, and training i.​ No per diems if:
a.​ May be created by bylaws requirements of directors, officers, committee 1.​ Cooperative reported
b.​ Appointed by BOD members → governed by rules & regulations net loss in preceding
c.​ Powers/duties delegated via bylaws issued by Authority (CDA) year OR
or majority vote of BOD Art. 45 – Liability of Directors, Officers, and 2.​ Dividend rate < official
2.​ Mandatory Committees (per bylaws) Committee Members inflation rate
a.​ Audit Committee → elected by GA, ●​ Joint & several liability applies when ii.​ Any compensation beyond per
directly accountable to GA directors/officers/committee members: diems → requires majority vote
i.​ Monitors management control ○​ Willfully/knowingly vote for or assent of GA members with voting
system to unlawful acts rights in a meeting specifically
ii.​ Audits performance of ○​ Are guilty of gross negligence or bad called for the purpose
cooperative & responsibility faith in directing cooperative affairs iii.​ Restriction: No additional
centers ○​ Acquire personal/pecuniary interest in compensation beyond per
b.​ Election Committee → elected by GA conflict with their duty diems during first year of
c.​ Mediation & Conciliation Committee ●​ Consequences: existence of cooperative
→ appointed by BOD ○​ Liable for all damages or profits 2.​ Officers & Committee Members:
d.​ Ethics Committee → appointed by resulting to cooperative, members, or a.​ Compensation may be fixed in bylaws
BOD other persons 3.​ Other Employees:
e.​ Other committees as necessary ●​ Trustee principle: a.​ Compensation determined by Board
○​ If director/officer/committee member of Directors (unless fixed in bylaws)
acquires interest/equity adverse to Art. 47 – Dealings of Directors, Officers, or
3.​ Vacancy in Committees cooperative (breach of confidence) → Committee Members
a.​ Unless bylaws provide otherwise → ■​ Liable for damages ●​ Contracts with directors/officers/committee
BOD may: ■​ Accountable for double the members are voidable unless ALL conditions
i.​ Call election OR profits that would have are met:
ii.​ Appoint replacement accrued to cooperative a.​ Director’s presence not necessary for
Art. 46 – Compensation quorum
 b.​ Director’s vote not necessary for b.​ Accountable for any 1.​ Documents accessible for inspection (during
approval benefit/advantage received or to be reasonable office hours at official address):
c.​ Contract is fair & reasonable under received a.​ Copy of this Code & laws on
circumstances 2.​ Cooperative must take necessary steps to cooperatives
d.​ For officer/committee member → enforce liabilities b.​ Copy of Authority regulations
contract must be previously Art. 50 – Removal of Officers c.​ Articles of Cooperation & Bylaws
authorized by GA or BOD ●​ Complaints for removal → filed with Board of d.​ Register of members
●​ If condition (a) or (b) absent → contract may Directors e.​ Minutes books (GA, BOD, committees)
be ratified by 3/4 vote of GA (quorum ●​ Officer must be given opportunity to be f.​ Share books (if applicable)
present) heard g.​ Financial statements
a.​ Requires full disclosure of adverse ●​ Preventive suspension may be imposed by h.​ Other documents required by
interest majority of BOD pending investigation law/bylaws
b.​ Contract must still be fair & ●​ If prima facie evidence of guilt found → BOD 2.​ Responsibilities:
reasonable recommends removal to GA a.​ Accountant/Bookkeeper → maintain
Art. 48 – Disloyalty of a Director ●​ Removal process: records per GAAP (Generally
●​ Director who acquires for himself an ○​ Requires 3/4 vote of regular members Accepted Accounting Practices)
opportunity belonging to cooperative → present (quorum) in GA i.​ Must produce records during
○​ Liable for damages (regular/special meeting) audit/inspection
○​ Must account for double the profits ○​ Officer must be given opportunity to b.​ Audit Committee → continuous &
that would have accrued to be heard at assembly periodic review of books/records
cooperative CHAPTER V – Responsibilities, Rights and i.​ Ensure compliance with GAAP
●​ Exception: Act may be ratified by 3/4 vote of ii.​ Responsible for producing
Privileges of Cooperatives
GA (quorum present) records during
Art. 51 – Address
●​ Applies even if director used own funds in audit/inspection
●​ Every cooperative must have an official
venture c.​ Records of Accounts:
postal address
Art. 49 – Illegal Use of Confidential Information i.​ Must reflect true & correct
○​ All notices & communications sent to
1.​ Director/officer (or associate) who uses condition of cooperative
this address
confidential info for personal operations
○​ Any change of address must be
benefit/advantage → ii.​ Financial statements →
registered with the Authority (CDA)
a.​ Liable to compensate cooperative for audited per GAAS (Generally
Art. 52 – Books to be Kept Open
direct losses Accepted Auditing Standards)
 iii.​ Must be published annually & f.​ Fiscal year = calendar year, unless a.​ Cooperative (or person in possession
posted conspicuously at bylaws provide otherwise of books) cannot be compelled to
principal office 2.​ Non-Compliance produce them if cooperative is not a
3.​ Disposition of Old Records: a.​ If cooperative fails to file/publish party
a.​ Allowed to destroy (burn/other reports or omits required matters: i.​ Exception: only by order of a
method) documents > 5 years old i.​ Authority must send written competent court
b.​ Exception: records related to civil, notice within 15 days after Art. 56 – Bonding of Accountable Officers
criminal, administrative proceedings deadline ●​ Covered persons: directors, officers,
c.​ Inventory of audited documents → ii.​ Notice states non-compliance employees handling funds, securities,
certified by Board Secretary & Audit + fines/penalties until property
Committee Chair cooperative complies ●​ Must be covered by a surety bond (issued by
d.​ Must be approved by Board of Art. 54 – Register of Members as Prima Facie registered insurance/bonding company)
Directors before destruction Evidence ●​ Purpose: ensure faithful performance of
Art. 53 – Reports ●​ Register/list of members’ shares = prima duties
1.​ Annual Reports facie evidence of: ●​ Board of Directors → determines adequacy
a.​ Must cover program of activities ○​ Date when person’s name was of bonds
(including socio-civic undertakings) entered in register/list ●​ Bonds required upon application for
b.​ Show progress & achievements at ○​ Date when person ceased to be a registration of cooperative
end of fiscal year member ●​ Bonds must be renewed annually → Authority
c.​ Reports must be: must be informed
i.​ Accessible to members Art. 57 – Preference of Claims
ii.​ Copies furnished to all Art. 55 – Probative Value of Certified Copies of 1.​ First lien: Any debt due to cooperative from
members of record Entries member → lien on:
iii.​ Filed with Authority (CDA) 1.​ Certified copies of entries (books, registers, a.​ Raw materials, production inputs,
within 120 days from end of lists kept in ordinary course of business): products produced
calendar year a.​ Admissible as evidence of existence b.​ Land, buildings, facilities, equipment,
d.​ Form & contents prescribed by of entry goods, services acquired via
Authority rules b.​ Prima facie evidence of matters & cooperative loan/credit
e.​ Failure to file → fines, penalties, transactions recorded c.​ Lien exists until debt fully paid
possible revocation of authority to 2.​ Production of books in legal proceedings:
operate
 2.​ Property subject to lien → cannot be ○​ Overrides contrary provisions of other transferee liable for double the
sold/conveyed to third parties without laws tax/duties
cooperative’s permission Art. 60 – Tax Treatment of Cooperatives ●​ Cooperatives with reserves/net savings >
a.​ Lien continues even after ●​ Duly registered cooperatives that transact ₱10M
sale/conveyance until extinguished only with members (no dealings with a.​ Must pay taxes at full rate:
3.​ Any sale/conveyance violating (2) → void non-members/general public): ■​ (a) Income Tax → on amount
Art. 58 – Instrument for Salary or Wage Deduction ○​ Not subject to any taxes/fees under allocated for interest on
1.​ Member may authorize employer (via written internal revenue laws or other tax laws capital
instrument) to deduct salary/wages/benefits ●​ Cooperatives that transact with ●​ Not imposed on interest
→ remit to cooperative for debt payment non-members → governed by Art. 61 individually received by
2.​ Employer must remit deducted amount Art. 61 – Tax and Other Exemptions members
within 10 days after payroll month ●​ General rule: ●​ Cooperatives exempt
a.​ Deduction continues until debt fully a.​ Transactions with members → not from income tax from
paid subject to tax/fees (including final tax date of registration with
3.​ Employer definition: includes private firms, on deposits, documentary tax) Authority
national/local government, GOCCs b.​ Transactions with non-members → ■​ (b) Value-Added Tax (VAT) →
employing cooperative members subject to certain on transactions with
4.​ Applies to similar agreements enforced prior exemptions/conditions non-members
to Code approval ●​ Cooperatives with reserves/net savings ≤ ●​ Exempt if registered
5.​ Employer responsibilities are mandatory ₱10M with Authority, subject
(notwithstanding other laws) a.​ Exempt from all national, city, to Section 109 (L, M, N)
a.​ Private employers may collect actual provincial, municipal, barangay taxes of NIRC (RA 9337)
& reasonable cost of b.​ Exempt from customs duties, advance ●​ Exempt transactions
deduction/remittance sales/compensating taxes on include sales of
Art. 59 – Primary Lien importation of processed products
●​ Cooperative has primary lien on: machinery/equipment/spare parts from members’ raw
○​ Capital, deposits, or interest of a (not locally available, certified by DTI) materials (sold in
member c.​ Restriction: Tax-free importations cooperative’s
○​ Applies to any debt due from member cannot be sold/transferred within 5 name/account)
to cooperative years → otherwise cooperative & ●​ Condition: at least 25%
of net income returned
 to members a.​ Register of deeds must accept for papers in safes of municipal/city
(interest/patronage registration free of charge: treasurers or other government
refunds) ■​ Loan instruments ≤ ₱250,000 offices free of charge
■​ (c) All other taxes unless ■​ Titles of property acquired by ○​ Custodian must issue a receipt,
otherwise exempted cooperative witnessed by another person
■​ (d) Donations to charitable, ■​ Documents related to 2.​ Free Use of Government Space
research, educational cooperative ○​ Cooperatives organized among
institutions & reinvestment in actions/judgments government employees may use
socio-economic projects → tax ■​ Bonds of accountable officers available space in their agency
deductible ●​ Court & Sheriff’s Fees (owned or rented by government)
●​ All Cooperatives (regardless of reserves/net a.​ Cooperatives exempt from all free of charge
savings) court/sheriff’s fees in actions under 3.​ Franchise for Special Services
a.​ Exempt from local taxes and taxes on this Code or CDA enforcement cases ○​ Cooperatives providing special
transactions with banks/insurance ●​ Bond Requirement services (cold storage, ice plant,
companies a.​ Cooperatives exempt from putting up electricity, transportation, similar
b.​ Sales/services to non-members → appeal bonds/third-party claim facilities) must secure a franchise
subject to percentage taxes bonds ○​ Membership must be open to all
(producers, marketing, service b.​ Court accepts CDA certification qualified persons in area of operation
cooperatives) showing cooperative’s net assets 4.​ Preferential Right to Supply Government
c.​ Books of accounts may be examined exceed required bond ○​ Cooperatives have preferential right
by internal revenue officers (for tax ●​ Securities to supply government
purposes only, with CDA a.​ Securities issued by cooperatives institutions/agencies with:
authorization) exempt from Securities Act provisions i.​ Rice, corn, grains
●​ Notarial Services b.​ Condition: security must not be ii.​ Fish, marine products
a.​ In areas without notaries → judge (ex speculative iii.​ Meat, eggs, milk, vegetables,
officio) acts as notary free of charge Art. 62 – Privileges of Cooperatives tobacco, other agricultural
for: Registered cooperatives under this Code enjoy the commodities produced by
■​ Articles of cooperation following privileges: members
■​ Loan instruments ≤ ₱500,000 1.​ Free Safe-keeping 5.​ Preferential Treatment in Agricultural Inputs
●​ Registration of Deeds ○​ May deposit sealed cash boxes, ○​ Preferential allocation of fertilizers,
containers, documents, valuable seeds, agricultural
 inputs/implements, rice distribution ○​ PDIC & other government i.​ Exception: if adverse party =
by government agencies agencies/GOCCs/GFIs → provide Republic of the Philippines
6.​ Preferential Treatment in Shipping technical assistance to national 12.​ Educational Institution Cooperatives
○​ Preferential & equitable federations/unions engaged in ○​ Cooperatives organized by faculty &
allocation/control of bottomries of savings & credit operations employees → preferential right to
commercial shipping vessels for ○​ Goal: establish/strengthen manage:
shipment of cooperative autonomous cooperative deposit i.​ Canteen
goods/products insurance systems ii.​ Other services related to
7.​ Preferential Rights in Public Markets 9.​ Public Transport Service Cooperatives school operations
○​ Cooperatives/federations ○​ Entitled to financing support for ○​ Condition: services must be operated
(farm/fishery producers, suppliers, acquisition/maintenance of land & within school premises
market vendors, small industries) → sea transport equipment, facilities, 13.​ Housing Cooperatives
preferential rights in management of parts ○​ Government housing agencies & GFIs
public markets and/or lease of ○​ Preferential right to: must create special financing window
facilities, stalls, spaces i.​ Manage & operate public for cooperative housing projects
○​ Restriction: Rights can be used terminals/ports (land/sea ○​ Terms: equal to or better than
exclusively by cooperatives transport) socialized housing projects
○​ Prohibition: Cooperatives in joint ii.​ Secure franchise for ○​ Financing forms: blanket loans or
venture/partnership with active/potential routes long-term wholesale loans (no
non-cooperative entities cannot use 10.​ Government Transactions individual processing needed)
these rights ○​ Cooperatives transacting with ○​ Authority (CDA), with government
8.​ Credit Services & Federations Philippine Government, political agencies & cooperative sector, shall
○​ Entitled to loans, credit lines, subdivisions, agencies, GOCCs → issue rules & regulations on housing
rediscounting of loan notes, and other exempt from prequalification bidding cooperatives
eligible papers with: requirements
i.​ Development Bank of the ○​ Overrides RA 9184 (Government
Philippines (DBP) Procurement Act)
ii.​ Land Bank of the Philippines 11.​ Legal Representation
(LBP) ○​ Cooperatives may be represented by
iii.​ Other financial institutions provincial/city fiscal or Office of the
(except BSP) Solicitor General (OSG) free of charge
 CHAPTER VI – Insolvency of Cooperatives ■​ Published for 3 consecutive ○​ Authority action:
Art. 63 – Proceeding Upon Insolvency weeks in local newspaper (or ■​ Issues order stating petition
●​ Definition: Insolvency occurs when a national if none locally). purpose.
cooperative is unable to fulfill its obligations ■​ Sent to each member by ■​ Fixes hearing date (between
to creditors. registered mail/personal 30–60 days after order entry).
●​ Remedies: delivery at least 30 days ■​ Order published once a week
○​ Cooperative may apply for remedies before meeting. for 3 consecutive weeks in
under Act No. 1956 (Insolvency Law, as ○​ Resolution: Certified by majority of local/national newspaper.
amended). BOD, countersigned by board ■​ Order posted for 3 consecutive
●​ This law provides the legal framework for secretary. weeks in 3 public places in
handling insolvency cases. ○​ Authority (CDA) issues certificate of municipality/city of
●​ Creditor Rights: dissolution. cooperative office.
○​ Creditors are not precluded (not Art. 65 – Voluntary Dissolution (Creditors Affected) ○​ Objections:
prevented) from seeking protection ●​ Condition: Dissolution may prejudice rights of ■​ Members/creditors may file
under the Insolvency Law. creditors. objections within 5 days.
○​ They may initiate proceedings to ●​ Process: ■​ Authority hears petition +
protect their claims. ○​ Petition for dissolution filed with objections.
Authority. ○​ Order of dissolution issued if petition
■​ Signed by majority of sufficient & allegations proven.
CHAPTER VII – Dissolution of Cooperatives
BOD/officers managing affairs. ■​ Must set forth:
Art. 64 – Voluntary Dissolution (No Creditors
■​ Verified by chairperson, board ●​ Assets & liabilities of
Affected)
secretary, or director. cooperative
●​ Condition: Dissolution does not prejudice
■​ Must set forth: all ●​ Claims of creditors
rights of any creditor.
claims/demands against ●​ Number of members
●​ Process:
cooperative + resolution of ●​ Nature & extent of
○​ Requires majority vote of Board of
dissolution by 3/4 vote of members’ interests
Directors.
members with voting rights ○​ Authority directs disposition of assets
○​ Requires resolution adopted by 3/4
(quorum, meeting called for per rules & regulations.
vote of members with voting rights,
purpose).
present & quorum.
○​ Notice of meeting:
Art. 66 – Involuntary Dissolution Art. 69 – Liquidation of a Cooperative the provisions of this Code and the
●​ Cooperative may be dissolved by order of a ●​ Cooperative continues to exist for 3 years regulations which shall be issued
competent court after due hearing on after dissolution (not for business, but for): ART. 72 – Capital Source
grounds of: ○​ Prosecuting/defending suits ●​ Cooperatives registered under this Code
○​ Violation of law, regulation, or bylaws ○​ Settlement & closure of affairs may derive their capital from any or all of the
○​ Insolvency ○​ Disposition, conveyance, distribution following sources:
Art. 67 – Dissolution by Order of the Authority (CDA) of assets ○​ (1) Member’s share capital
●​ CDA may suspend/revoke certificate of ●​ During 3 years → cooperative may convey ○​ (2) Loans and borrowings including
registration after due notice & hearing if properties to trustees for benefit of members, deposits
○​ Registration obtained by fraud creditors, others in interest ○​ (3) Revolving capital (deferred
○​ Exists for an illegal purpose ○​ After conveyance → cooperative’s payment of patronage refunds, or
○​ Willful violation of Code/bylaws interest in properties terminated interest on share capital)
(despite notice) ●​ Unclaimed assets ○​ (4) Subsidies, donations, legacies,
○​ Willful failure to operate on (creditor/shareholder/member unknown or grants, aids and other assistance
cooperative basis cannot be found) → given to (local/foreign, public/private)
○​ Failure to meet minimum number of federation/union affiliated with cooperative ■​ Provided that capital from
members ●​ Assets/properties distributed only upon subsidies, donations, legacies,
Art. 68 – Dissolution by Failure to Organize & lawful dissolution and after payment of grants, aids, and other
Operate debts/liabilities assistance shall not be divided
●​ Grounds: ○​ Exception: decrease of share capital into individual share capital
○​ Cooperative has not commenced or as otherwise allowed by Code holdings but shall form part of
business within 2 years after Art. 70 – Rules & Regulations on Liquidation the donated capital/fund of
registration OR ●​ CDA shall issue implementing guidelines for the cooperative.
○​ Has not operated for 2 consecutive liquidation of cooperatives ■​ Upon dissolution, such
years donated capital shall be
●​ CDA issues formal notice → cooperative CHAPTER VIII – CAPITAL, PROPERTY AND subject to escheat.
must show cause ART. 73 – Limitation on Share Capital Holdings
FUNDS
●​ If no justifiable cause → CDA deletes ●​ No member of a primary cooperative (other
ART. 71 – Capital
cooperative’s name from roster → deemed than the cooperative itself) shall own/hold
●​ The capitalization of cooperatives and the
dissolved more than 10% of share capital.
accounting procedures shall be governed by
 ●​ If a member dies → heir entitled to shares of ●​ Share capital = money paid/required for ■​ Name
decedent: cooperative operations ■​ Amount
○​ Provided, total shareholding of heir ●​ Issuance of share certificates prescribed in ■​ Rate of interest to be paid
does not exceed 10%. bylaws ■​ Time of retirement
○​ Provided, further, heir qualifies and is ART. 77 – Fines ■​ Amounts to be returned
admitted as member. ●​ Bylaws may prescribe fine on unpaid CHAPTER IX – AUDIT, INQUIRY AND
○​ Provided, finally, if heir fails to qualify subscribed share capital
MEMBERS’ RIGHT TO EXAMINE
OR exceeds 10% → excess shares ●​ Provided, such fine is fair and reasonable
ART. 80 – Annual Audit
revert to cooperative (with payment under the circumstances
●​ Cooperatives registered under this Code
of value to heir). ART. 78 – Investment of Capital
shall be subject to an annual financial,
ART. 74 – Assignment of Share Capital Contribution ●​ Cooperative may invest capital in:
performance, and social audit.
or Interest ○​ (a) Shares/debentures/securities of
●​ Financial audit conducted by an external
●​ Subject to this Code, no member shall other cooperatives
auditor who:
transfer shares/interest unless: ○​ (b) Reputable banks in locality, or
○​ (1) Is independent of the cooperative
○​ (1) Held for ≥ 1 year other cooperatives
or any subsidiary being audited.
○​ Assignment made to cooperative, ○​ (c) Securities issued/guaranteed by
○​ (2) Is a member in good standing of
member, or person within Government
PICPA and accredited by both the
membership field ○​ (d) Real estate primarily for
Board of Accountancy and the
○​ Board of Directors has approved cooperative/members’ use
Authority.
assignment ○​ (e) Any other manner authorized in
●​ Social audit conducted by an independent
ART. 75 – Capital Build-Up bylaws
social auditor accredited by the Authority.
●​ Bylaws of every cooperative shall provide for ART. 79 – Revolving Capital
●​ Performance and social audit reports
a reasonable and realistic member capital ●​ General Assembly may authorize Board of
(findings & recommendations) → submitted
build-up program to allow continuing growth Directors to raise revolving capital by:
to Board of Directors.
of members’ investment as their economic ○​ Deferring payment of patronage
●​ The Authority, in consultation with the
conditions improve. refunds and interest on share capital
cooperative sector, shall promulgate rules
ART. 76 – Shares ○​ Authorized deduction of % from
and standards for social audit.
●​ “Share” = unit of capital in a primary proceeds of products/services
cooperative ○​ Board of Directors shall issue revolving
●​ Par value ≤ ₱1,000.00 capital certificates with:
■​ Serial number
ART. 81 – Audit Report examination OR was not acting ART. 86 – Order of Distribution
●​ Auditor shall submit financial audit report to in good faith/legitimate ●​ The net surplus of every cooperative shall be
Board of Directors and Audit Committee. purpose. distributed as follows:
●​ Report must follow generally accepted ART. 84 – Safety of Records ●​ (1) Reserve Fund – at least 10% of net surplus.
auditing standards for cooperatives (jointly ●​ Every cooperative shall, at its principal office, ○​ Provided, in the first 5 years of
promulgated by PICPA and the Authority). keep and carefully preserve records required operation after registration, this
●​ Thereafter, Board of Directors shall present by this Code. amount shall not be less than 50% of
the complete audit report to the General ●​ Must take necessary precautions to prevent net surplus.
Assembly in its next meeting. loss, destruction, or falsification. ○​ (a) Reserve fund used for stability of
ART. 82 – Non-liability for Defamations CHAPTER X – ALLOCATION AND the cooperative and to meet net
●​ Auditor is not liable in any action for losses.
DISTRIBUTION OF NET SURPLUS
defamation based on acts/statements made ■​ GA may decrease allocation
ART. 85 – Net Surplus
in good faith in connection with when the reserve fund exceeds
●​ Notwithstanding the provisions of existing
authorized/required duties under this Code. share capital.
laws, the net surplus of cooperatives shall be
ART. 83 – Right to Examine ■​ Any sum recovered on items
determined in accordance with its bylaws.
●​ A member has the right to examine records previously charged → credited
●​ Every cooperative shall determine its net
required under Art. 52 during reasonable back to the reserve fund.
surplus at the close of every fiscal year and
business hours. ○​ (b) Reserve funds shall not be utilized
at such other times as may be prescribed by
●​ Member may demand, in writing, for copy of for investment other than those
the bylaws.
excerpts (without charge, except cost of allowed in this Code.
●​ Any provision of law to the contrary
production). ■​ Excess reserve fund (beyond
notwithstanding, the net surplus shall not be
○​ Any officer refusing share capital) may be used for
construed as profit but as an excess of
examination/copying → liable for projects expanding
payments made by the members for loans
damages and guilty of an offense cooperative operations upon
borrowed, goods and services availed, or the
punishable under Art. 140. GA resolution.
difference of the rightful amount due to the
○​ If refusal is pursuant to Board ○​ (c) Upon dissolution, reserve fund
members for their products sold or services
resolution/order → liability imposed shall not be distributed among
rendered to the cooperative, including other
on directors who voted for refusal. members.
inflows of assets from operating activities.
■​ Defense: refusal valid if ■​ GA may resolve:
●​ Such net surplus shall be deemed returned to
member has improperly used ●​ (i) Establish
members if distributed as prescribed herein.
information from prior usufructuary trust fund
 for benefit of ●​ Said union/federation ○​ Used for projects/activities benefiting
federation/union shall submit to the the community where cooperative
affiliated. Authority and operates.
●​ (ii) Donate/ contributing ●​ (4) Optional Fund
contribute/dispose for cooperatives the ○​ May include land, building, and other
benefit of community following schedules: necessary fund.
where cooperative ○​ (i) List of ○​ Total shall not exceed 7% of net
operates. cooperatives surplus.
■​ If members cannot decide → which remitted ●​ (5) The remaining net surplus shall be made
reserve fund goes to the their CETF. available to the members in the form of:
federation/union to which the ○​ (ii) Business ■​ Interest on share capital (not
cooperative is affiliated. consultancy to exceed normal rate of return
●​ (2) Education and Training Fund assistance on investments)
○​ Shall not be more than 10% of net (nature and ■​ Patronage refunds
surplus. cost). ○​ Provided, any amount remaining after
○​ Bylaws may provide that certain fees ○​ (iii) Other allowable interest and patronage
or portions thereof be credited to such training refund → credited to reserve fund.
funds. activities ○​ The sum allocated for patronage
○​ Fund shall provide for training, undertaken refunds shall be made available at
development, and cooperative (nature, the same rate to all patrons of the
activities geared towards growth of participants, cooperative in proportion to their
cooperative movement. cost). individual patronage:
■​ (a) Half of the amount ■​ (b) Upon dissolution, ■​ (a) Member patron with
transferred annually → spent unexpended balance of paid-up share capital
by cooperative for education education and training fund → contribution → proportionate
and training purposes. credited to CETF of chosen refund paid to him, unless he
●​ Other half → remitted union/federation. agrees to credit amount as
to a union/federation ●​ (3) Community Development Fund additional share capital
chosen by a ○​ Shall not be less than 3% of net contribution.
cooperative or of which surplus. ■​ (b) Member patron with
it is a member. unpaid share capital
 contribution → proportionate ●​ Any non-member
refund credited to his account patron who has
until share capital contribution accumulated sum
fully paid. necessary for
■​ (c) Non-member patron → membership but does
proportionate refund set aside not request/agree to
in a general fund for such become member or
patrons. fails to comply with
●​ Allocated individually bylaws →
only upon request + ●​ Amount
presentation of accumulated/credited
evidence of patronage. + any part of general
●​ Amount credited fund for non-member
toward payment of patrons → credited to
minimum capital reserve fund or
contribution for education and training
membership. fund, at cooperative’s
●​ When accumulated option.
sum equals required
amount (within bylaws
period) → patron
deemed and becomes
a member if he
agrees/requests and
complies with bylaws
for admission.
■​ (d) If within bylaws period:
●​ Any subscriber who has
not fully paid
subscribed share
capital, OR