Regulatory Framework
and Legal Issues in
Business
COOPERATIVE
LAW
RA 9520
ATTY. MARGA M. CASTILLO,
CPA
DEFINITION
• Autonomous
• Duly registered associations of persons
• Common bond of interest
• Voluntarily joined together
• To achieve their needs
⚬ Social
⚬ Economic
⚬ Cultural
• Giving equitable contribution
• Patronizing their products and services
• Accepting fair share of risks and benefits
COOPERATIVE PRINCIPLES
ART. 4
1.Voluntary and Open membership
2.Democrative Member control
3.Member Economic Participation
4.Autonomy and Independence
5.Education, Training and Information
6.Cooperation among cooperatives
7.Concern for Community
PURPOSES
ART. 6
1) To encourage thrift and savings mobilization among the members;
"(2) To generate funds and extend credit to the members for productive and provident
purposes;
"(3) To encourage among members systematic production and marketing;
"(4) To provide goods and services and other requirements to the members;
"(5) To develop expertise and skills among its members;
"(6) To acquire lands and provide housing benefits for the members;
"(7) To insure against losses of the members;
"(8) To promote and advance the economic, social and educational status of the members;
"(9) To establish, own, lease or operate cooperative banks, cooperative wholesale and retail
complexes, insurance and agricultural/industrial processing enterprises, and public
markets;
"(10) To coordinate and facilitate the activities of cooperatives;
"(11) To advocate for the cause of the cooperative movements;
"(12) To ensure the viability of cooperatives through the utilization of new technologies;
"(13) To encourage and promote self-help or self-employment as an engine for economic
growth and poverty alleviation; and
OBJECTIVES AND GOALS
ART. 7
(a) Provide goods and services to its members to enable them to attain
increased income, savings, investments, productivity, and purchasing power,
and promote among themselves equitable distribution of net surplus through
maximum utilization of economies of scale, cost-sharing and risk-sharing;
"(b) Provide optimum social and economic benefits to its members;
"(c) Teach them efficient ways of doing things in a cooperative manner;
"(d) Propagate cooperative practices and new ideas in business and
management;
"(e) Allow the lower income and less privileged groups to increase their
ownership in the wealth of the nation; and
"(f) Cooperate with the government, other cooperatives and people-oriented
organizations to further the attainment of any of the foregoing objectives.
POWERS AND CAPACITIES
ART. 9
(1) To the exclusive use of its registered name, to sue and be sued;
"(2) Of succession;
"(3) To amend its articles of cooperation in accordance with the provisions of this Code;
"(4) To adopt bylaws not contrary to law, morals or public policy, and to amend and repeal the same in accordance with this
Code;
"(5) To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage, and otherwise deal with such real and
personal property as the transaction of the lawful affairs of the cooperative may reasonably and necessarily require, subject
to the limitations prescribed by law and the Constitution;
"(6) To enter into division, merger or consolidation, as provided in this Code;
"(7) To form subsidiary cooperatives and join federations or unions, as provided in this Code;
"(8) To avail of loans, be entitled to credit and to accept and receive grants, donations and assistance from foreign and
domestic sources, subject to the conditions of said loans, credits, grants, donations or assistance that will not undermine the
autonomy of the cooperative. The Authority, upon written request, shall provide necessary assistance in the documentary
requirements for the loans, credit, grants, donations and other financial support;
"(9) To avail of preferential rights granted to cooperatives under Republic Act No. 7160, otherwise known as the Local
Government Code, and other laws, particularly those in the grant of franchises to establish, construct, operate and maintain
ferries, wharves, markets or slaughterhouses and to lease public utilities, including access to extension and on-site research
services and facilities related to agriculture and fishery activities;
"(10) To organize and operate schools in accordance with Republic Act No. 9155, Governance of Basic Education Act of 2001
and other pertinent laws; and
"(11) To exercise such other powers granted by this Code or necessary to carry out its purpose or purposes as stated in its
ORGANIZATION AND
REGISTRATION
Registration requirements:
1. Articles of Cooperation
2.A sworn statement of the treasurer
elected by the subscribers
3.By-laws
4.Bond of accountavle officers
5.General Statement describing the
structure which shall include
bookkeeper and purposes of the
proposed cooperative
ORGANIZATION AND
REGISTRATION
Organization of Primary Cooperative:
ORGANIZERS: 15 or more natural persons
⚬ Filipino Citizens
⚬ Of legal age
⚬ Having a common bond of interest; and
⚬ Are actually residing or working in the
intended area of operation
MINIMUM SUBSCRIPTION: 25% of authorized
share capital
MINIMUM PAID-UP CAPITAL: 25% of total
subscription but not less than
⚬ Php 15,000.00
⚬ Php 100,000 (if multi-purpose)
ORGANIZATION AND
REGISTRATION
REGISTRATION:
GR: It shall only acquire juridical
personality from the date the Authority
issues a certificate of registration under its
official seal.
X: if the authority did not act within 60
days from filing, it is DEEMED APPROVED.
XX: cause of delay is attributable to the
applicant
RULES ON COOPERATIVE NAME
1.REQUIRED: the word “Cooperative”, “Kooperatiba” or
“Cooperativa”.
2.DISCOURAGED: the word “Development” and
“Integrated”
3.NOT ALLOWED:
a. identical, deceptive or confusingly similar to any
exixting cooperative, contrary to public policy,
morals, and exixting laws.
b. Use of “Incorporated”, “Corporation”, “Company”
MERGER AND CONSOLIDATION
1.MEANING: Two or more cooperatives may merge
into a single cooperative
2.APPROVAL: ¾ votes of all members with voting
rights, present and constituting a quorum of each
of the constituent cooperatives at separate general
assembly meetings.
a. Note: Dissenting members shall have the right
to exercise their right to withdraw their
membership.
3.EFFECTIVITY: Upon issuance of the certificate of
merger or consolidation by the CDA
TYPES OF COOPERATIVES
1.Advocacy- advocates cooperativism through socially
oriented projects, education and trainings.
2.Dairy- production of fresh milk
3.Fishermen- marginalized firshermen in localities
4.Multipurpose- 2 or more business activities
5.Workers- provide employment and business
opportunity
6.Education- owning and operating licensed educational
institutions
7.Water Services- own, operate and manage water
TYPES OF COOPERATIVES
8. Agriculture- raising plants, animals, fungi and other
living organisms
9. Agrarian reform- agrarian reform beneficiaries
10. Consumers- produce and distribute commodities
11. Marketing- supply of production inputs
12. Producers- joint production whether agricultural or
industrial
13. Cooperative Bank- wide reange of financial services
(coop their members)
14. Credit- Savings and lending services (members only)
TYPES OF COOPERATIVES
Service Cooperative
1.Electric
2.Health Service
3.Housing
4.Insurance
5.Transport
Note: The list is not exclusive.
CATEGORIES OF
COOPERATIVES
PRIMARY
GR: The members of which are natural persons
X: electric cooperative, water service cooperative and
other cooperatives which
the implementing rules and the Authority may allow.
SECONDARY- The members of which are primaries
TERTIARY- The members of which are secondary
cooperatives;
MEMBERSHIP (kinds)
1. REGULAR- one who has complied
with all the membership requirements
and entitled to all the rights and
privileges of membership.
2. ASSOCIATE- one who has no right to
vote nor be voted upon and shall be
entitled only to such rights and
privileges as the by-laws may provide.
Requirements to be a Regular
1.Meets the minimum
requirements of regular
membership
2.Continues to patronize the
cooperative for two (2) years,
and
3.signifies his/her intention to
remain a member.
TERMINATION OF MEMBERSHIP
1.WITHDRAWAL
2.VALID GROUD:
a. The death or insanity of a member in a primary cooperative
b. The insolvency or dissolution of a member in a secondary or
tertiary cooperative
3.BY VOTE OF THE MAJORITY OF ALL THE MEMBERS OF THE BOD
FOR ANY OF THE FF:
a. Member does not patronize any services of the coop.
b. continuously failed to comply with hhis obliagtions;
c. violation of the by-laws and the rules of the cooperative;
d. any act or omission injurious or prejudicial to the interest or
the welfare of the cooperative.
VOTING SYSTEM
Make your own summary table
BOARD OF DIRECTORS
FUNCTION: The direction and management of the affairs of
the cooperatives shal be vested in a Board of Directors, unless
the by-laws provide otherwise.
COMPOSITION: not less than 5 but not more than 15 elected
by the general assembly.
TERM: 2 years (maximum term allowed as per CDA MC 2012-
20)
POWERS:
1. Strategic planning;
2. Direction-setting; and
3. Policy formulation
COMMITTEES
Executive committee: may be created under the
by-laws and appointed by the board of directors
with such powers and duties as may be delegated
to it in the by-laws or by a majority vote of all the
members of the board of directs
Those required to be provided under the
by-laws:
1. Audit
2. Election
3. Mediation and conciliation
4. Ethics
5. Such other whose
Committees committees as mayare
members be elected
necessary
by
the GA:
1. Audit
CAPITAL, PROPERTY AND
FUNDS
Sources:
1.Member’s share capital
2.Loans and borrowings including
deposits;
3.Revolving capital which consist of the
deferred payment of patronage
refunds, or interest on share capital;
and
4.. Subsidies, donations, legacies,
grants, aids and such other
AUDIT, INQUIRY AND MEMBER’S RIGHT TO EXAMINE
ANNUAL AUDIT:
1.Cooperatives shal be subject to an annual
financial, performance and social audit.
Financial audit shall be conducted by an external
auditor who satisfies all the following qualifications:
• He is independent of the cooperative or any of its subsidiary that he is
auditing; and
• He is a member in good standing of the Philippine Institute of Certified
Public Accountants (PICPA) and is accredited by both the Board of
Accountancy and the CDA..
AUDIT, INQUIRY AND MEMBER’S RIGHT TO EXAMINE
Social Audit - is a procedure wherein the cooperative
assesses its social impacted ethical performance vis-à-
vis its stated mission, vision, goals and code of social
responsibility for cooperatives to be established by the
Authority in consultation with the cooperative sector.
Performance Audit -shall refer to an audit on the
efficiency and effectiveness the cooperative as a whole;
its management and officers; and its various
responsibility centers as basis for improving individual
team or over all performance.
NET SURPLUS (distribution)
• RESERVE
⚬ GR: minimum of 10%
⚬ X: First 5 years of the Cooperative-
minimum of 50%
• EDUCATION AND TRAINING - maximum of
10%
• COMMUNITY DEVELOPMENT - minimum of 3%
• OPTIONAL- maximum of 7%
• REMAINING SURPLUS
DISSOLUTION
Modes:
1. Voluntary: if initiated through the voluntary decision of
the members of cooperatives
2. Involuntary: if ordered by the CDA or a competent
court having jurisdiction over the cooperatives on
grounds as specified by law, and after due process.
By court Order:
• Violation of any law, regulation or provisions of its bylaws;
or
• Insolvency.
DISSOLUTION
By order of the CDA:
1. Having obtained its registration by fraud;
2. Existing for an illegal purpose;
3. Willful violation, despite notice by the CDA, of
the provisions of RA 9520 or its bylaws;
4. Wilfull Failure to operate on a cooperative basis;
and
5. Failure to meet the required minimum number
of members in the cooperative
