Regulatory Framework for Business Transactions

Philippine Cooperative Code of 2008

I. Cooperatives (Republic Act No. 9520 a.k.a. Philippine Cooperative Code of 2008)

a. Definition of Cooperative – A Cooperative is an autonomous and duly registered association

of persons, with a common bond of interest, who have voluntarily joined together to achieve
their social, economic, and cultural needs and aspirations by making equitable contributions to
the capital required, patronizing their products and services and accepting a fair share of the risks
and benefits of the undertaking in accordance withuniversally accepted cooperative principles.

b. Cooperative Principles - Every cooperative shall conduct its affairs in accordance with Filipino
culture, good values and experience and the universally accepted principles of cooperation which
include, but are not limited to, the following:

i. Voluntary and Open Membership - Cooperatives are voluntary organizations, open

to all persons able to use their services and willing to accept the responsibilities of
membership, without gender, social, racial, cultural, political or religious discrimination.
ii. Democrative Member Control - Cooperatives are democratic organizations that are
controlled by their members who actively participate in setting their policies and making
decisions. Men and women serving as elected representatives, directors or officers are
accountable to the membership. In primary cooperatives, members have equal voting
rights of one-member, one- vote. Cooperatives at other levels are organized in the same
democraticmanner.
iii. Member Economic Participation - Members contribute equitably to, and
democratically control, the capital of their cooperatives. At least part of that capital is
the common property of the cooperative. They shall receive limited compensation or
limited interest, if any, on capital subscribed and paid as a condition of membership.
Members allocate surpluses for any or all of the following purposes: developing the
cooperative by setting up reserves, part of which should at least be indivisible;
benefitting members in proportion to their patronage of the cooperative's business;
and, supporting other activities approved by the membership.
iv. Autonomy and Independence - Cooperatives are autonomous, self-help
organizations controlled by their members. If they enter into agreements with other
organizations, including government, or raise capital from external sources, they shall
do so on terms that ensure democratic control of their members and maintain their
cooperative autonomy.
v. Education, Training and Information - Cooperatives shall provide education and
training for their members, elected and appointed representatives, managers, and
employees, so that they can contribute effectively and efficiently to the development of
their cooperatives.
vi. Cooperation Among Cooperatives - Cooperatives serve their members most
effectively and strengthen the cooperative movement by working together through
local, national, regional and international structures.
vii. Concern for Community - Cooperatives work for the sustainable development of
their communities through policies approved by their members.
a. Definition of Terms.

i. Member includes a person either natural or juridical who adhering to the principles set
forth in this Code and in the Articles of Cooperative, has been admitted by the
cooperative as member;
ii. General Assembly shall mean the full membership of the cooperative duly assembled
for the purpose of exercising all the rights and performing all the obligations pertaining
to cooperatives, as provided by this Code, its articles of cooperation and bylaws: Provided,
That for cooperatives with numerous and dispersed membership, the general assembly
may be composed of delegates elected by each sector, chapter or district of the
cooperative in accordance with the rules and regulations of the Cooperative Development
Authority;
iii. Board of Directors shall mean that body entrusted with the management of the affairs
of the cooperative under its articles of cooperation and bylaws;
iv. Committee shall refer to any body entrusted with specific functions and responsibilities
 under the bylaws or resolution of the general assembly or the board of directors;
v. Articles of Cooperation means the articles of cooperation registered under thisCode and
includes a registered amendment thereof;
vi. Bylaws means the bylaws registered under this Code and includes any registered
amendment thereof;
vii. Registration means the operative act granting juridical personality to a proposed
cooperative and is evidenced by a certificate of registration;
viii. Cooperative Development Authority as such hereinafter referred to s the Authority;
ix. Universally Accepted Principles means that body of cooperative principles adhered to
worldwide by cooperatives;
x. Representative Assembly means the full membership of a body of representatives
elected by each of the sectors, chapter or district o the cooperative duly assembled for
the purpose of exercising such powers lawfully delegated unto them by the general
assembly in accordance with its bylaws;
xi. Officers of the Cooperative shall include the members of the board of directors,
members of the different committee created by the general assembly, general manager or
chief executive officer, secretary, treasurer and members holding other positions as may
be provided for in their bylaws;
xii. Social Audit is a procedure wherein the cooperative assesses its social impact and 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. It enables the cooperative to develop a process whereby it can account for its
social performance and evaluate its impactin the community and be accountable for its
decisions and actions to its regular members;
xiii. Performance Audit shall refer to an audit on the efficiency and effectiveness of the
cooperative as a whole; its management and officers; and its various responsibility centers
as basis for improving individual team or overall performance and for objectively
informing the general membership on such performance;
xiv. Single-Line or Single-Purpose Cooperative shall include cooperative undertaking
activities which are related to its main line of business or purpose;
xv. Service Cooperatives are those which provide any type of service to its members,
including but not limited to, transport, information and communication, insurance,
housing, electric, health services, education, banking,and savings and credit;
xvi. Subsidiary Cooperative refers to three or more primary cooperatives, doing the same
line of business, organized at the municipal, provincial, city, special metropolitan political
subdivision, or economic zones created by law, registered with the Authority to undertake
business activities in support of its member- cooperatives.
b. Purposes of Cooperatives

i. To encourage thrift and savings mobilization among the members;

ii. To generate funds and extend credit to the members for productive andprovident
purposes;
iii. To encourage among members systematic production and marketing;
iv. To provide goods and services and other requirements to the members;
v. To develop expertise and skills among its members;
vi. To acquire lands and provide housing benefits for the members;
vii. To insure against losses of the members;
viii. To promote and advance the economic, social and educational status of the
members;
ix. To establish, own, lease or operate cooperative banks, cooperative wholesaleand retail
complexes, insurance and agricultural/industrial processing enterprises, and public
markets;
x. To coordinate and facilitate the activities of cooperatives;
xi. To advocate for the cause of the cooperative movements;
xii. To ensure the viability of cooperatives through the utilization of newtechnologies;
xiii. To encourage and promote self-help or self-employment as an engine foreconomic
growth and poverty alleviation; and
xiv. To undertake any and all other activities for the effective and efficient
implementation of the provisions of this Code.

c. Objectives and Goals of a Cooperative.

i. 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;
ii. Provide optimum social and economic benefits to its members;
iii. Teach them efficient ways of doing things in a cooperative manner;
iv. Propagate cooperative practices and new ideas in business and management;
v. Allow the lower income and less privileged groups to increase their ownership inthe
wealth of the nation; and
vi. Cooperate with the government, other cooperatives and people-oriented
organizations to further the attainment of any of the foregoing objectives.

d. Powers and Capacities of Cooperative

i. To the exclusive use of its registered name, to sue and be sued;

ii. Of succession
iii. To amend its articles of cooperation in accordance with the provisions of this Code
iv. To adopt bylaws not contrary to law, morals or public policy, and to amend and repeal
the same in accordance with Cooperative Code;
v. 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 thelawful affairs
of the cooperative may reasonably and necessarily require, subject to the limitations
prescribed by law and the Constitution;
vi. To enter into division, merger or consolidation, as provided in Cooperative Code;
vii. To form subsidiary cooperatives and join federations or unions, as provided in
Cooperative Code;
viii. 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;
ix. 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;
x. To organize and operate schools in accordance with Republic Act No. 9155,
Governance of Basic Education Act of 2001 and other pertinent laws; and
xi. To exercise such other powers granted by Cooperative Code or necessary tocarry out
its purpose or purposes as stated in its Articles of cooperation.

e. Types and Categories of Cooperatives

i. Single-Line or Single-Purpose Cooperative shall include cooperative undertaking

activities which are related to its main line of business or purpose;
ii. Service Cooperatives are those which provide any type of service to its members,
including but not limited to, transport, information and communication, insurance,
housing, electric, health services, education, banking,and savings and credit;
iii. Credit Cooperative is one that promotes and undertakes savings and lending services
among its members. It generates a common pool of funds in order to provide financial
assistance to its members for productive and provident purposes;
1. Objectives of Credit Cooperative
a. To encourage savings among its members;
b. To create a pool of such savings for which loans for productive or
provident purpose may be granted to its members; and
c. To provide related services to enable its members to maximize the benefit
from such loans.
iv. Consumers Cooperative is one of the primary purpose of which is to procure and
distribute commodities to members and non-members;
v. Producers Cooperative is one that undertakes joint production whether agricultural or
industrial. It is formed and operated by its members to undertake the production and
processing of raw materials or goods produced by its members into finished or processed
products for sale by the cooperative to its members and non-members. Any end product
 or its derivative arising from the raw materials produced by its members, sold in the name
and for the account of the cooperative, shall be deemed a product of the cooperative and
its members;
vi. Marketing Cooperative is one which engages in the supply of production inputs to
members and markets their products;
vii. Multipurpose Cooperative is one which combines two (2) or more of the business
activities of these different types of cooperatives;
viii. Advocacy Cooperative is a primary cooperative which promotes and advocates
cooperativism among its members and the public through socially-oriented projects,
education and training, research and communication, and other similar activities to reach
out to its intended beneficiaries;
ix. Agrarian Reform Cooperative is one organized by marginal farmers majority of which
are agrarian reform beneficiaries for the purpose of developing an appropriate system of
land tenure, land development, land consolidation or land management in areas covered
by agrarian reform;
x. Cooperative Bank is one organized for the primary purpose of providing a widerange
of financial services to cooperatives and their members;
xi. Dairy Cooperative is one whose members are engaged in the production of fresh milk
which may be processed and/or marketed as dairy products;
xii. Education Cooperative is one organized for the primary purpose of owning and
operating licensed educational institutions notwithstanding the provisions of Republic
Act No. 9155, otherwise known as the Governance of Basic Education Act of 2001;
xiii. Electric Cooperative is one organized for the primary purposed of undertaking power
generations, utilizing renewable energy sources, including hybrid systems,acquisition and
operation of subtransmission or distribution to its household members;
xiv. Financial Service Cooperative is one organized for the primary purpose of engaging in
savings and credit services and other financial services;
1. Services of Financial Service Cooperative
a. The functions of credit cooperatives and other cooperatives, including
multipurpose cooperatives, that provide savings and credit to their
members, and"
b. Other financial services subject to regulation by the BSP.
xv. Fishermen Cooperative is one organized by marginalized fishermen in localities whose
products are marketed either as fresh or processed products;
xvi. Health Services Cooperative is one organized for the primary purpose of providing
medical, dental and other health services;
xvii. Housing Cooperative is one organized to assist or provide access to housing for the
benefit of its regular members who actively participate in the savings program for
housing. It is co-owned and controlled by its members;
xviii. Insurance Cooperative is one engaged in the business of insuring life and poverty of
cooperatives and their members;
xix. Transport Cooperative is one which includes land and sea transportation, limited to
small vessels, as defined or classified under the Philippine maritime laws, organized under
the provisions of this Code;
xx. Water Service Cooperative is one organized to own, operate and manage waters systems
for the provision and distribution of potable water for its members and their households;
xxi. Workers Cooperative is one organized by workers, including the self- employed, who
are at same time the members and owners of the enterprise. Its principal purpose is to
provide employment and business opportunities to its members and manage it in
accordance with cooperative principles
xxii. Laboratory Cooperative - shall refer to a cooperative duly recognized by the Authority,
formed and managed principally by minors and is affiliated with another registered
cooperative which is called the guardian cooperative. Fifteen
(15) or more minors who are Filipino citizens, actually residing in the community or
enrolled in an educational institution within or near the area of operation of the
Guardian Cooperative or out of school minor actually residing in the community, may
organize a Laboratory Cooperative composed of minors, which shall be seven (7) years old
but below eighteen (18) years of age. Purposes of Laboratory Cooperatives. A Laboratory
Cooperative shall be organized for any or all of the following purposes:
1. To serve as a training ground for its members to prepare them for membership
in regular cooperatives;
2. To teach the value of thrift and saving mobilization among its members;
3. To instil cooperative values, principles, financial discipline and leadership skills
 among its members;
4. To promote and advance Filipino social and cultural values, ecological awareness
and sustainable development.
xxiii. Guardian Cooperative - shall refer to duly registered cooperative to which alaboratory
cooperative is affiliated with.
xxiv. Primary Cooperative – The members of which are natural persons.
xxv. Secondary Cooperative – The members of which are primary cooperatives.
xxvi. Tertiary Cooperative – The members of which are secondary cooperatives.

f. Functions of a Federation of Cooperatives (Organization of Cooperatives) – A federation

of cooperatives shall undertake the following functions:
i. To carry on any cooperative enterprise authorized under Article 6 of Cooperative Code
that complements augments, or supplements but does not conflict, compete with, nor
supplant the business or economic activities of its member cooperatives;
ii. To carry on, encourage, and assist educational and advisory work relating to its member
cooperatives;
iii. To render services designed to encourage simplicity, efficiency, and economy in the
conduct of the business of its member cooperatives and to facilitate the implementation
of their bookkeeping, accounting, and other systems and procedures;
iv. To print, publish, and circulate any newspaper or other publication in the interest of its
member cooperatives and enterprises;
v. To coordinate and facilitate the activities of its member cooperatives;
vi. To enter into joint ventures with national or international cooperatives of other countries
in the manufacture and sale of products and/or services in the Philippines and abroad;
and
vii. To perform such other functions as may be necessary to attain its objectives.
1. A federation of cooperatives may be registered by carrying out the formalities for
registration of a cooperative.
2. Registered cooperatives may organize a federation according to the type of
business activity engaged in by the cooperatives.

g. Purposes of Cooperative Unions (Organization of cooperatives and federations of

cooperatives) – Registered cooperatives and federations at the appropriate levels may organize
or join cooperative unions to represent the interest and welfare of all types of cooperatives at the
provincial, city, regional, and national levels. Cooperative unions may have the following
purposes:
i. To represent its member organizations;
ii. To acquire, analyze, and disseminate, economic, statistical, and other information relating
to its members and to all types of cooperatives within its area of operation;
iii. To sponsor studies in the economic, legal, financial, social and other phases of
cooperation, and publish the results thereof;
iv. To promote the knowledge of cooperative principles and practices;
v. To develop the cooperative movement in their respective jurisdictions;
vi. To advise the appropriate authorities on all questions relating to cooperatives;
vii. To raise funds through membership fees, dues and contributions, donations, andsubsidies
from local and foreign sources whether private or government; and
viii. To do and perform such other non-business activities as may be necessary to attain the
foregoing objectives.
1. Cooperative unions may assist the national and local governments in the latter’s
development activities in their respective jurisdictions.

h. Cooperatives Not in Restraint of Trade. – No cooperative or method or act thereof which

complies with this Code shall be deemed a conspiracy or combination in restraintof trade or an
illegal monopoly, or an attempt to lessen competition or fix prices arbitrarily in violation of any
laws of the Philippines.

i. Organization of Primary Cooperative

i. Ordinary Cooperative - Fifteen (15) or more natural persons who are Filipino citizens,
of legal age, having a common bond of interest and are actually residingor working in the
intended area of operation, may organize a primary cooperative under this Code:
Provided, That a prospective member of a primary cooperative must have completed a
Pre-Membership Education Seminar (PMES).
ii. Any newly organized primary cooperative may be registered as multipurpose cooperative
 only after compliance with the minimum requirements formultipurpose cooperatives to
be set by the Authority. A single-purpose cooperative may transform into a multipurpose
or may create subsidiaries only after at least two (2) years of operations.
iii. Voting Requirement for Registration of Electric Cooperative. – In compliance with
the referendum as a voting procedure, the required number of votes for registration of
electric cooperative with the CDA shall be twenty percent(20%) of all members in good
standing

j. Economic Survey before Formation of a Proposed Cooperative - Every group of individuals

or cooperatives intending to form a cooperative under Cooperative Code shall submit to the
Cooperative Development Authority a general statement describing, amongothers the structure
and purposes of the proposed cooperative: Provided, That the structure and actual staffing
pattern of the cooperative shall include a bookkeeper; Provided, further, That they shall not be
allowed to operate without the necessary personnel and shall also submit an economic survey,
indicating therein the area of operation, the size of membership, and other pertinent data in a
format provided by the Cooperative Development Authority.

k. Liability of Cooperative duly registered under this Code - A cooperative duly registered
under this Code shall have limited liability.
l. Term of Cooperative - A cooperative shall exist for a period not exceeding fifty (50) years from
the date of registration unless sooner dissolve or unless said period is extended. The cooperative
term, as originally stated in the articles of cooperation, may be extended for periods not exceeding
fifty (50) years in any single instance by an amendment of the articles of cooperation, in
accordance with this Code: Provided, That no extension can be made earlier than five (5) years
prior to the original or subsequent expiry date/dates unless there are justifiable reasons for an
earlier extension as may be determined by the Authority.
m. Articles of Cooperation - All cooperatives applying for registration shall file with the CDA the
articles of cooperation which shall be signed by each of the organizers and acknowledged by them
if natural persons, and by the chairpersons or secretaries, if juridical persons, before a notary
public. Each cooperative to be registered under this Code shall adopt bylaws not inconsistent
with the provisions of this Code. The bylaws shall be filed at the same time as the articles of
cooperation.

i. Contents of Articles of Cooperation

1. The name of the cooperative which shall include the word cooperative;
2. The purpose or purposes and scope of business for which thecooperative is
to be registered;
3. The term of existence of the cooperative;
4. The area of operation and the postal addresses of its principal office;
5. The names, nationality, and the postal addresses of the registrants;
6. The common bond of membership;
7. The list of names of the directors who shall manage the cooperative; and
8. The amount of its share capital, the names and residences of its contributors and
a statement of whether the cooperative is primary, secondary or tertiary in
accordance with Article 23 hereof.
Note: The articles of cooperation may also contain any other provisions not inconsistent
with this Code or any related law.

ii. Contents of Cooperative By-Laws - Each cooperative to be registered under this Code
shall adopt bylaws not inconsistent with the provisions of Cooperative Code. The bylaws
shall be filed at the same time as the articles of cooperation.
1. The qualifications for admission to membership and the payment to be made or
interest to be acquired as a conditions for the exercise of the right of membership;
2. The rights and liabilities of membership;
3. The circumstances under which membership is acquired, maintained andlost;
4. The procedure to be followed in cases of termination of membership;
5. The conditions under which the transfer of a share or interest of the members
shall be permitted;
6. The rules and procedures on the agenda, time, place and manner of calling,
convening, conducting meetings, quorum requirements, voting systems, and
other matters relative to the business affairs of the general assembly, board of
directors, and committees;
7. The general conduct of the affairs of the cooperative, including the powers and
 duties of the general assembly, the board of directors, committees and the
officers, and their qualifications and disqualifications;
8. The manner in which the capital, may be raised and the purposes for which it can
be utilized;
9. The mode of custody and of investment of net surplus;
10. The accounting and auditing systems;
11. The manner of loaning and borrowing including the limitations thereof;
12. The method of distribution of net surplus;
13. The manner of adopting, amending, repealing, and abrogating bylaws;
14. A conciliation or mediation mechanism for the amicable settlement of disputes
among members, directors, officers and committee members of the cooperative;
and
15. Other matters incident to the purposes and activities of the cooperative.
iii. Requirement for Registration with CDA
1. No cooperative, other than a cooperative union as described underArticle 25
hereof, shall be registered unless the articles of cooperation is accompanied with
the bonds of the accountable officers and a sworn statements of the treasurer
elected by the subscribers showing that at least twenty-five per centum (25%) of
the authorized share capital has been subscribed and at least twenty-five per
centum (25%) of the total subscription has been paid: Provided, That in no case
shall the paid-up share capital be less than Fifteen thousand pesos (P15,000.00).
2. The Cooperative Development Authority shall periodically assess the required
paid-up share capital and may increase it every five (5) years when necessary upon
consultation with the cooperative sector and the National Economic and
Development Authority (NEDA).

n. Juridical Personality of Cooperative - A cooperative formed and organized under Cooperative

Code acquires juridical personality from the date the CDA issues a certificate of registration under
its official seal. All applications for registration shall be finally disposed of by the CDA within a
period of sixty (60) days from the filing thereof, otherwise the application is deemed approved,
unless the cause of the delay is attributable to the applicant: Provided, That in case of a denial of
the application for registration, an appeal shall lie with the Office of the President within ninety
(90) days from receipt of notice of such denial: Provided, further, That failure of the Office of
the President to act on the appeal within ninety (90) days from the filing thereof shall mean
approval of said application.

o. Evidence of juridical personality of cooperative A certificate of registration issued by the

CDA under its official seal shall be conclusive evidence that the cooperative therein mentioned
is duly registered unless it is proved that the registration thereof has been cancelled.

p. Amendment of Articles of Cooperation and By-laws - Unless otherwise prescribed by this

Code and for legitimate purposes, any provision or matter stated in the articles of cooperation
and by laws may be amended by two-thirds (2/3) vote of all the members with voting rights,
without prejudice to the right of the dissenting members to exercise their right to withdraw their
membership under Article 30. The amendments shall take effect upon (1) its approval by the
CDA or (2) within thirty (30) days from the date of filing thereof if not acted upon by the
Authority for a cause not attributable to the cooperative

q. Types of Membership in cooperatives

i. A regular member is one who has complied with all the membership requirements and
entitled to all the rights and privileges of membership.
ii. An associate member is one who has no right to vote nor be voted upon andshall be
entitled only to such rights and privileges as the bylaws may provide: Provided, That
an associate who meets the minimum requirements of regular membership, continues to
patronize the cooperative for two (2) years, and signifies his/her intention to remain a
member shall be considered a regular member.

r. Liability of Members - A member shall be liable for the debts of the cooperative to the extent
of his contribution to the share capital of the cooperative.

s. Termination of Membership

i. A member of a cooperative may, for any valid reason, withdraw his membership from
 the cooperative by giving a sixty (60) day notice to the board of directors. Subject to the
bylaws of the cooperative, the withdrawing member shall be entitled to a refund of his
share capital contribution and all other interests in the cooperative: Provided, That such
fund shall not be made if upon such payment the value of the assets of the cooperative
would be less than the aggregate amount of its debts and liabilities exclusive of his share
capital contribution.
ii. The death or insanity of a member in a primary cooperative, and the insolvency or
dissolution of a member in a secondary or tertiary cooperative may beconsidered valid
grounds for termination of membership: Provided, That in case of death or insanity of
an agrarian reform beneficiary-member of a cooperative, the next-of-kin may assume the
duties and responsibilities of the original member

iii. Required Vote for Termination of Membership in a Cooperative - Membership in

the cooperative may be terminated by a vote of the majority of all the members of the
board of directors for causes provided by law.
iv. Grounds for Membership Termination in a Cooperative

1. When a member has not patronized any of the services of the cooperative for an
unreasonable period of time as may be previously determined by the board of
directors;
2. When a member has continuously failed to comply with his obligations;
3. When a member has acted in violation of the bylaws and the rules of the
cooperative; and
4. For any act or omission injurious or prejudicial to the interest or the welfare of
the cooperative.

v. Procedures for Termination of Membership in a Cooperative - Member whose

membership the board of directors may wish to terminate shall be informed of such
intended action in writing and shall be given an opportunity to be heard before the said
board makes its decision. The decision of the board shall be in writing and shall be
communicated in person or by registered mail to said member and shall be appealable
within thirty (30) days from receipt thereof to the general assembly whose decision shall
be final. The general assembly may create an appeal and grievance committee whose
members shall serve for a period of one (1) year and shall decide appeals on membership
termination. The committee is given thirty (30) days from receipt thereof to decide on the
appeal. Failure to decide within the prescribed period, the appeal is deemed approved in
favor of the member. Pending a decision by the general assembly, the membership
remains in force.

t. Refund of Interests. – All sums computed in accordance with the bylaws to be due from a
cooperative to a former member shall be paid to him either by the cooperative or by the approved
transferee, as the case may be, in accordance with Cooperative Code.

u. Administration of Cooperative

i. Composition of the General Assembly – The general assembly shall be composed of

such members who are entitled to vote under the articles of cooperation and bylaws of
the cooperative.

ii. Power and Definition of the General Assembly – The general assembly shall be the
highest policy-making body of the cooperative and shall exercisesuch powers as are
stated in this Code, in the articles of cooperation and in the bylaws of the cooperative.

iii. Nondelegable Powers of General Assembly

1. To determine and approve amendments to the articles of cooperationand
bylaws;
2. To elect or appoint the members of the board of directors, and toremove them
for cause. However, in the case of the electric cooperativesregistered under this
Code, election of the members of the board shall be held in accordance with
its bylaws or election guideline of suchelectric cooperative; and
3. To approve developmental plans of the cooperative.
 iv. Procedure and Required Vote for Delegation of Powers of General Assembly to
Board of Directors or Smaller Body of the Cooperative - Subject to such other
provisions of this Code and only for purposes of promptand intelligent decision-
making, the general assembly may by a three-fourths (3/4) vote of all its members with
voting rights, present and constituting a quorum, delegate some of its powers to a smaller
body of the cooperative. These powers shall be enumerated under the bylaws of the
cooperative.

v. Cooperative Meetings. – A regular meeting shall be held annually by the general

assembly on a date fixed in the bylaws, or if not so fixed, on any dated within ninety (90)
days after the close of each fiscal year: Provided, That noticeof regular meetings shall be
sent in writing, by posting or publication, or through other electronic means to all
members of record.
1. Whenever necessary, a special meeting of the general assembly may be called at
any time by a majority vote of the board of directors or as provided for in the
bylaws: Provided, That a notice in writing shall besent one (1) week prior to
the meeting to all members who are entitledto vote. However, a special meeting
shall be called by the board of directors after compliance with the required notice
within from at least ten per centum (10%) of the total members who re entitled
to vote to transact specific business covered by the call.
2. If the board fails to call a regular or a special meeting within the given period, the
Authority, upon petition of ten per centum (10%) of all the members of the
cooperative who are entitled to vote, and for good cause shown, shall issue an
order to the petitioners directing them to calla meeting of the general assembly by
giving proper notice as required in this Code or in the bylaws;
3. In the case of a newly approved cooperative, a special general assembly shall be
called, as far as practicable, within ninety (90) days from such approval;
4. The Authority may call a special meeting of the cooperative for the purpose of
reporting to the members the result of any examination or other investigation of
the cooperative affairs; and
5. Notice of any meeting may be waived, expressly or impliedly, by any member.

vi. Quorum in General Assembly of Cooperative

1. Ordinary Cooperative - A quorum shall consist of at least twenty-five per

centum (25%) of all the members entitled to vote.
2. Electric cooperatives registered under this Code - A quorum, unless otherwise
provided in the bylaws, shall consist of five per centum (5%)of all the members
entitled to vote.
3. Cooperative Bank - As a general rule, the quorum in the regular or special
meeting of general assembly is at least one half plus one of the number of voting
shares of all the members in good standing. However, as an exception to general
rule, the quorum in the meeting of general assembly of a cooperative bank for the
amendment of its articles of cooperation or by-laws is at least 3/4 of all members
with voting rights present and constituting a quorum.

vii. Voting System. – Each member of a primary cooperative shall have only one
(1) vote. In the case of members of secondary or tertiary cooperatives, they shallhave one
(1) basic vote and as many incentive votes as provided for in the bylaws but not exceed
five (5) votes. The votes cast by the delegates shall be deemed as votes cast by the
members thereof.
1. However, the bylaws of a cooperative other than a primary may provide for voting
by proxy. Voting by proxy means allowing a delegate of a cooperative to represent
or vote in behalf of another delegate of the same cooperative.
viii. Composition and Term of the Board of Directors. – Unless otherwiseprovided in the
bylaws, the direction and management of the affairs of acooperative shall be vested in a
board of directors which shall be composed of not less than five (5) nor more than fifteen
(15) members elected by the general assembly for a term of two (2) years and shall hold
office until their successors are duly elected an qualified, or until duly removed for caused.

ix. Powers of the Board of Directors. – The board of directors shall be responsible for the
strategic planning, direction-setting and policy-formulation activities of the cooperatives.
 x. Directors (Qualifications of Directors in a Cooperative)

1. Any member of a cooperative who under the bylaws of the cooperative, has the
right to vote and who possesses all the qualifications and none of the
disqualifications provided in the laws or bylaws shall be eligible forelection as
director.
2. The cooperative may, by resolution of its board of directors, admit as directors,
or committee member one appointed by any financing institution from which the
cooperative received financial assistance solelyto provide technical knowledge not
available within its membership. Suchdirector or committee member not be a
member of the cooperative and shall have no powers, rights, nor responsibilities
except to provided technical assistance as required by the cooperative.
3. The members of the board of directors shall not hold any other position directly
involved in the day to day operation and management of the cooperative.
a. Note: The members of the board of directors may hold the position of
chairman and vice-chairman of the board but are not allowed to hold
other official positions which shall be given to persons outside the board.
4. Any person engaged in a business similar to that of the cooperative or who in any
way has a conflict of interest with it, is disqualified from election as a director of
said cooperative.

xi. Meeting of the Cooperative Board and Quorum Requirement

1. In the case of primary cooperatives, regular meetings of the board of directors

shall be held at least once a month.
2. Special meetings of the board of directors may be held at any time upon the call
of the chairperson or a majority of the members of the board: Provided, That
written notices of the meeting specifying theagenda of the special meeting shall
be given to all members of the boardat least one (1) week before the said meeting.
3. Directors cannot attend or vote by proxy at board meetings.

xii. Quorum in Board of Directors of Cooperative

1. Ordinary Cooperative - At least majority of the members of the Boardunless

the bylaws provide otherwise.
2. Cooperative Bank - One-half plus one of all the members of the board of
directors.

xiii. Vacancy in the Board of Directors. – Any vacancy in the board of directors, other than
by expiration of term, may be filled by the vote of at least a majority of the remaining
directors, if still constituting a quorum; otherwise, the vacancy must be filled by the
general assembly in a regular or special meeting called for the purpose. A director so
elected to fill a vacancy shall serve only the unexpired term of his predecessor in office.
xiv. Officers of the Cooperative. – The board of directors shall elect from among themselves
the chairperson and vice-chairperson, and elect or appoint other officers of the
cooperative from outside of the board in accordance with their bylaws. All officers shall
serve during good behavior and shall not be removed except for cause after due hearing.
Loss of confidence shall not be a validground for removal unless evidenced by acts or
omission causing loss of confidence in the honesty and integrity of such officer. No two
(2) or more persons with relationships up to the third civil degree of consanguinity or
affinity nor shall any person engaged in a business similar to that of the cooperative nor
who in any other manner has interests in conflict with the cooperative shall serveas an
appointive officer.

xv. Committees of Cooperatives

1. The bylaws may create an executive committee to be appointed by the board of

directors with such powers and duties as may be delegated to itin the bylaws or
by a majority vote of all the members of the board of directors.
2. The bylaws shall provide for the creation of an audit, election, mediation and
conciliation, ethics, and such other committees as may be necessary for the
 conduct of the affairs of the cooperative. The members of both the audit and
election committee shall be elected by the general assembly and the rest shall be
appointed by the board. The auditcommittee shall be directly accountable and
responsible to the general assembly. It shall have the power and duty to
continuously monitor the adequacy and effectiveness of the cooperative’s
management control system and audit the performance of the cooperative and its
various responsibility centers.
3. Unless otherwise provided in the bylaws, the board, in case of a vacancy in the
committees, may call an election to fill the vacancy or appoint a person to fill the
same subject to the provision that the person elected orappointed shall serve only
for the unexpired portion of the term.

xvi. Functions, Responsibilities and Training Requirements of Directors, Officers and

Committee Members. – the functions and responsibilities of directors, officers and
committee members, as well as their training requirements, shall be in accordance with
the rules and regulations issued by theAuthority.

xvii. Liability of Directors, Officers and Committee Members. – Directors, officers and
committee members, who are willfully and knowingly vote for or assent to patently
unlawful acts or who are guilty of gross negligence or bad faith in directing the affairs of
the cooperative or acquire any personal orpecuniary interest in conflict with their duty as
such directors, officers or committee members shall be liable jointly and severally for all
damages or profitsresulting therefrom to the cooperative, members, and other persons.
1. When a director, officer or committee member attempts to acquire or acquires,
in violation of his duty, any interest or equity adverse to the cooperative in respect
to any matter which has been reposed in him in confidence, he shall, as a trustee
for the cooperative, be liable for damages and shall be accountable for double the
profits which otherwisewould have accrued to the cooperative.
xviii. Compensation of Directors of Cooperative

1. In the absence of any provisions in the bylaws fixing their compensation, the
directors shall not receive any compensation except for reasonable per diems:
Provided however, That the directors and officers shall not be entitled to any per
diem when, in the preceding calendar year, the cooperative reported a net loss or
had a dividend rate less thanthe official inflation rate for the same year. Any
compensation otherthan per diems may be granted to directors by a majority vote
of the members with voting rights at a regular or special general assembly meeting
specifically called for the purpose: Provided, that no additional compensation
other than per diems shall be paid during the first year of existence of any
cooperative.
2. The compensation of officers of the cooperative as well as the members of the
committee as well as the members of the committees created pursuant to this
Code or its bylaws may be fixed in the bylaws.
3. Unless already fixed in the bylaws, the compensation of all other employee shall
be determined by the board of directors.

xix. Dealings of Directors, Officers, or Committee Members – A contract

entered into by the cooperative with one (1) or more of its directors, officers, and
committee members is voidable, at the option of the cooperative, unless all the
following conditions are present.
That the presence of such director in the board meeting wherein contract
was approved was not necessary to constitute a quorum for such meeting;
That the vote of such director was not necessary for the approval of the
contract;
That the contract is fair and reasonable under the circumstances; and
That in the case of an officer or committee member, the contract with
the officer or committee member has been previously authorized by the
general assembly or by the board of directors.
Where any of the first two conditions set forth in the preceding paragraph
is absent, in the case of a contract with a director, such contract may be
ratified by a three-fourths (3/4) vote of all the memberswith voting rights,
present and constituting a quorum in a meeting called for the purpose:
Provided, That full disclosure of the adverse interest of the directors
involved is made at such meeting, and that the contract is fair and
reasonable under the circumstances.
 xx. Disloyalty of a Director. – A director who, by virtue of his office, acquires for himself
an opportunity which should belong to the cooperative shall be liable for damages and
must account for double the profits that otherwise would have accrued to the cooperative
by refunding the same, unless his act has been ratified by a three-fourths (3/4) vote of
all the members with voting rights, present and constituting a quorum. This provision
shall be applicable, notwithstanding the fact that the director used his own funds in the
venture.

xxi. Illegal Use of Confidential Information. – A director or officer, or an associate of a

director or officer, who, for his benefit or advantage or that of an associate, makes use of
confidential information that, if generally known, might reasonably be expected to
adversely affect the operation and viability of the cooperative, shall be held:
1. Liable to compensate the cooperative for the direct losses suffered by the
cooperative as a result of the illegal use of information; and
2. Accountable to the cooperative for any direct benefit or advantagereceived or yet
to be received by him or his associate, as a result of the transaction.
3. The cooperative shall take the necessary steps to enforce the liabilities described
in subsection (a)
xxii. Removal of Elected Officer or Director. – All complaints for the removal of any
elected officer shall be filed with the board of directors. Such officer shall be given the
opportunity to be heard. Majority of the board of directors may place the officer
concerned under preventive suspension pending the resolution of the investigation. Upon
finding of a prima facie evidence of guilt, the board shall present its recommendation for
removal to the general assembly.
1. An elective officer may be removed by three fourths (3/4) votes of the regular
members present and constituting a quorum, in a regular or special general
assembly meeting called for the purpose. The officer concerned shall be given an
opportunity to be heard at said assembly.

v. Privileges of Cooperative from Taxes

i. Tax Treatment of Cooperative. - Duly registered cooperatives under this Code which
do not transact any business with non-members or the general public shall not be subject
to any taxes and fees imposed under the internal revenue laws and other tax laws.
Cooperatives not falling under this article shall be governed by the succeeding section.

ii. Tax and Other Exemptions. Cooperatives transacting business with bothmembers and
non-members shall not be subjected to tax on their transactions with members. In relation
to this, the transactions of members with the cooperative shall not be subject to any taxes
and fees, including not limited to final taxes on members’ deposits and documentary tax.
Notwithstanding the provisions of any law or regulation to the contrary, such
cooperatives dealingwith nonmembers shall enjoy the following tax exemptions:

1. Cooperatives with accumulated reserves and undivided net savings ofnot more
than Ten million pesos (P10,000,000.00) shall be exempt from all national, city,
provincial, municipal or barangay taxes of whatever name and nature. Such
cooperatives shall be exempt from customs duties, advance sales or compensating
taxes on their importation of machineries, equipment and spare parts used by
them and which are notavailable locally a certified by the department of trade
and industry(DTI). All tax free importations shall not be sold nor the beneficial
ownership thereof be transferred to any person until after five (5) years, otherwise,
the cooperative and the transferee or assignee shall be solidarily liable to pay twice
the amount of the imposed tax and / or duties.

2. Cooperatives with accumulated reserves and divided net savings of morethan Ten
million pesos (P10,000,000.00) shall pay the following taxes at the full rate:
 a. Income Tax - On the amount allocated for interest on capitals: Provided,
That the same tax is not consequently imposed on interest individually
received by members: Provided, further,That cooperatives regardless of
classification, are exempt incometax from the date of registration with the
Authority;

b. Value-Added Tax – On transactions with non- members:

Provided, however, That cooperatives duly registered with the Authority;
are exempt from the payment of value-addedtax; subject to Section 109,
sub-sections L, M and N of Republic Act No. 9337, the National Internal
Revenue Code, asamended: Provided, That the exempt transaction under
Section 109 (L) shall include sales made by cooperatives duly registered
with the Authority organized and operated by its member to undertake
the production and processing of raw materials or of goods produced by
its members into finished or process products for sale by the cooperative
to its members and non- members: Provided, further, That any processed
product or its derivative arising from the raw materials produced by its
members, sold in then name and for the account of the cooperative:
Provided , finally, That at least twenty-five per
centum (25%) of the net income of the cooperatives is returned to the
members in the form of interest and/or patronage refunds;
c. All other taxes unless otherwise provided herein; and
d. Donations to charitable, research and educational institutions and
reinvestment to socioeconomic projects within the area of operation of
the cooperative may be tax deductible.

3. All cooperatives, regardless of the amount of accumulated reserves and undivided

net savings shall be exempt from payment of local taxes and taxes on transactions
with banks and insurance companies: Provided, That all sales or services rendered
for non-members shall be subject to the applicable percentage taxes sales made
by producers, marketing or service cooperatives: Provided further, That nothing
in this article shall preclude the examination of the books of accounts or other
accounting records of the cooperative by duly authorized internal revenue
officersfor internal revenue tax purposes only, after previous authorization by
the Authority.

iii. Other Privileges of a Cooperative

1. In areas where there are no available notaries public, the judge, exercising his ex
officio capacity as notary public, shall render service, free of charge, to any person
or group of persons requiring the administration of oath or the acknowledgment
of articles of cooperation and instruments of loan from cooperatives not
exceeding Five Hundred Thousand Pesos (P500,000.00).
2. Any register of deeds shall accept for registration, free of charge, any instrument
relative to a loan made under this Code which does not exceed Two Hundred
Fifty Thousand Pesos (P250,000.00) or the deedsof title of any property acquired
by the cooperative or any paper or document drawn in connection with any action
brought by the cooperative or with any court judgment rendered in its favor or
any instrument relative to a bond of any accountable officer of a cooperative for
the faithful performance of his duties and obligations.
3. Cooperatives shall be exempt from the payment of all court and sheriff’s fees
payable to the Philippine Government for and in connection with all actions
brought under this Code, or where such actions is brought by theAuthority before
the court, to enforce the payment of obligations contracted in favor of the
cooperative.
4. All cooperatives shall be exempt from putting up a bond for bringing an appeal
against the decision of an inferior court or for seeking to set asideany third party
claim: Provided, That a certification of the Authority showing that the net assets
of the cooperative are in excess of the amount of the bond required by the court
in similar cases shall be accepted by the court as a sufficient bond.
5. Cooperatives shall enjoy the privilege of depositing their sealed cash boxes or
containers, documents or any valuable papers in the safes ofthe municipal or
city treasurers and other government offices free of charge, and the custodian of
such articles shall issue a receipt acknowledging the articles received duly
 witnessed by another person;
6. Cooperatives organized among government employees, notwithstandingany law
or regulation to the contrary, shall enjoy the free use of any available space in their
agency, whether owned or rented by the Government;
7. Cooperatives rendering special types of services and facilities such ascold
storage, ice plant, electricity, transportation, and similar servicesand facilities
shall secure a franchise therefore, and such cooperatives shall open their
membership to all persons qualified in their areas of operation;
8. In areas where appropriate cooperatives exist, the preferential right to supply
government institutions and agencies rice, corn and other grains, fish and other
marine products, meat, eggs, milk, vegetables, tobacco and other agricultural
commodities produced by their members shall be granted to the cooperatives
concerned;
9. Preferential treatment in the allocation of fertilizers, including seeds and other
agricultural inputs and implements, and in rice distribution shall be granted to
cooperatives by the appropriate government agencies;
10. Preferential and equitable treatment in the allocation or control of bottomries of
commercial shipping vessels in connection with the shipment of goods and
products of cooperatives;
11. Cooperatives and their federations, such as farm and fishery producers and
suppliers, market vendors and such other cooperatives, which have for their
primary purpose the production and/or the marketing of products from
agriculture, fisheries and small entrepreneurial industries and federations thereof,
shall have preferential rights in the management of public markets and/or lease
of public market facilities, stalls or spaces: Provided, That these rights shall only
be utilized exclusively by cooperatives: Provided, further, That no cooperative
forming a joint venture, partnership or any other similar arrangement with a non-
cooperative entity can utilize these rights;
12. Cooperatives engaged in credit services and/or federations shall be entitled to
loans credit lines, rediscounting of their loan notes, and other eligible papers with
the Development Bank of the Philippines, the Land Bank of the Philippines and
other financial institutions except the BangkoSentral ng Pilipinas (BSP);
13. The Philippine Deposit Insurance Corporation (PDIC) and other government
agencies, government-owned and controlled corporations and government
financial institutions shall provide technical assistance to registered national
federations and unions of cooperatives which have significant engagement in
savings and credit operations in order for these federations and unions to
establish and/or strengthen their own autonomous cooperative deposit insurance
systems;
14. A public transport service cooperative may be entitled to financing support for
the acquisition and/or maintenance of land and sea transportequipment, facilities
and parts through the program of the government financial institutions. It shall
have the preferential right to the management and operation of public terminals
and ports whether landor sea transport where the cooperative operates and on
securing a franchise for active or potential routes for the public transport;
15. Cooperatives transacting business with the Government of the Philippines or
any of its political subdivisions or any of its agencies or instrumentalities,
including government-owned and controlledcorporations shall be exempt from
prequalification bidding requirements notwithstanding the provisions of Republic
Act No.9184, otherwise known as, the Government Procurement Act;
16. Cooperative shall enjoy the privilege of being represented by the provincial or city
fiscal or the Office of the Solicitor General, free of charge, except when the
adverse party is the Republic of the Philippines;
17. Cooperatives organized by faculty members and employees of educational
institutions shall have the preferential right in the management of the canteen and
other services related to the operation of the educational institution where they
are employed: Provided, That such services are operated within the premises of
the said educational institution; and
18. The appropriate housing agencies and government financial institutions shall
create a special window for financing housing projects undertaken by
cooperatives, with interest rates and terms equal to, or better than those given for
socialized housing projects. This financing shall be in the form of blanket loans
or long-term wholesale loans to qualified cooperatives, without need for
 individual processing.
The Authority, in consultation with the appropriate government agencies and
19.
concerned cooperative sector, shall issue rules and regulations on all matters
concerning housing cooperatives.
w. Dissolution of a Cooperative

i. Voluntary Dissolution Where no Creditors are Affected. – If the dissolution of a

cooperative does not prejudice the rights of any creditor having aclaim against it, the
dissolution may be affected by a majority vote of the board of directors, and by a
resolution duly adopted by the affirmative vote of at least three-fourths (3/4) of all the
members with voting rights, present and constituting a quorum at a meeting to be
held upon call of the directors: Provided, That the notice of time, place and object of
the meeting shallbe published for three (3) consecutive weeks in a newspaper published
in the place where the principal office of said cooperative is located, or if no newspaperis
published in such place, in a newspaper of general circulation in the Philippines:
Provided, further, That the notice of such meeting is sent to each member of record either
by registered mail or by personal delivery at least thirty
(30) days prior to said meeting. A copy of the resolution authorizing the dissolution shall
be certified to by a majority of the board of directors and countersigned by the board
secretary. The Authority shall thereupon issue the certificate of dissolution.

ii. Voluntary Dissolution Where Creditors Are Affected. – Where the dissolution of a
cooperative may prejudice the rights of any creditor, the petition for dissolution shall be
filed with the CDA. The petition shall be signed by a majority of its board or directors or
other officers managing its affairs, verified byits chairperson or board secretary or one of
its directors and shall set forth all claims and demands against it and that its dissolution
was resolved upon by the affirmative vote of at least three-fourths (3/4) of all the
members with voting rights, present and constituting a quorum at a meeting called for
that purpose.

iii. Grounds for Involuntary Dissolution of a Cooperative by order of a

competent court after due hearing
1. Violation of any law, regulation or provisions of its bylaws; or
2. Insolvency.

iv. Grounds for suspension or revocation, after due notice and hearing, of certificate
of registration of a cooperative by Cooperative Development Authority
1. Having obtained its registration by fraud;
2. Existing for an illegal purpose;
3. Wilful violation, despite notice by the Authority, of the provisions of this Code
or its bylaws;
4. Wilful failure to operate on a cooperative basis; and
5. Failure to meet the required minimum number of members in the cooperative.

x. Liquidation of Cooperative
i. Every cooperative whose charter expires by its own limitation or whose existence is
terminated by voluntary dissolution or through an appropriate judicial proceeding shall
nevertheless continue to exist for three (3) years after the timeit is dissolved; not to
continue the business for which it was established but for the purpose of prosecuting and
defending suits by or against it; settlement and closure of its affairs; disposition,
conveyance and distribution of its propertiesand assets.
ii. At any time during the said three (3) years, the cooperative is authorized and empowered
to convey all of its properties to trustees for the benefit of its members, creditors and
other persons in interest. From and after any such conveyance, all interests which the
cooperative had in the properties are terminated.
iii. A cooperative shall only distribute its assets or properties upon lawful dissolution and
after payment of all its debts and liabilities, except in the case of decrease ofshare capital
of the cooperative and as otherwise allowed by Cooperative Code.
iv. Upon the winding up of the cooperative affairs, any asset distributable to any creditor,
shareholder or member who is unknown or cannot be found shall be given to the
federation or union to which the cooperative is affiliated with.
 v. Upon dissolution and liquidation, subsidies, donations, legacies, grants, aids and such
other assistance from any local or foreign institution whether public or private given to a
cooperative which form part of the donated capital or fund of the cooperative shall be
escheated in favor of the Republic of the Philippines.

y. Merger or Consolidation of Cooperatives and Division of Cooperative

i. Definition of Merger - shall refer to a union of two or more existing cooperatives

belonging to the same category whereby the surviving cooperative, retaining its identity,
absorbs one or more constituent cooperatives.

ii. Definition of Consolidation - shall refer to a union of two or more existing cooperatives
belonging to the same category to a form a new cooperative called the consolidated
cooperative.

iii. Procedures for Merger or Consolidation of Cooperatives

1. Two (2) or more cooperatives may merge or consolidate into a single cooperative
which shall either be one of the constituent cooperatives or the consolidated
cooperative.

iv. Required vote for merger of cooperatives - No merger or consolidation shallbe valid
unless approved by three-fourths (3/4) vote of all the members with voting rights, present
and constituting a quorum of each of the constituent cooperatives at separate general
assembly meetings. The dissenting members shall have the right to exercise their right to
withdraw their membership pursuant to Article 30.

v. Effects of merger of cooperatives

1. The constituent cooperatives shall become a single cooperative which, in case of

merger, shall be the surviving cooperative, and, in case of consolidation, shall be
the consolidated cooperative;
2. The separate existence of the constituent cooperatives shall cease, except that of
the surviving or the consolidated cooperative;
3. The surviving or the consolidated cooperative shall possess al the assets,rights,
privileges, immunities and franchises of each of the constituent cooperatives;
4. The surviving or the consolidated cooperative shall possess all the assets, rights,
privileges, immunities and franchises of each of the constituent cooperatives; and
5. The surviving or the consolidated cooperative shall be responsible for all the
liabilities and obligation of each of the constituent cooperatives in the same
manner as if such surviving or consolidated cooperative had itself incurred such
liabilities or obligations. Any claim, action or proceeding pending by or against
any such constituent cooperatives may be prosecuted by or against the surviving
or consolidated cooperative, asthe case may be. Neither the rights of creditors
nor any lien upon the property of any such constituent cooperatives shall be
impaired by such merger or consolidation.

vi. Division of Cooperatives - Any registered cooperative may, by a resolution approved

by a vote of three-fourths (3/4) of all the members with voting rights, present and
constituting a quorum, resolve to divide itself into the two (2) or more cooperatives. The
procedure for such division shall be prescribed in the regulations of the Authority:
Provided, That all the requirements set forth in this Code have been complied with by
the new cooperatives: Provided, further, That no division of a cooperative in fraud of
creditors shall be valid.
z. Capital, Property, and Funds of Cooperative
i. Sources of Capital of Cooperative
1. Member’s share capital;
a. Common Share Capital shall be issued only to regular members. Its
holders shall be entitled to vote and be voted under the principle of one-
man, one vote principle, and shall receive interest, the rate which should
not exceeded the normal rate on investment.
b. Preferred Share Capital may be issued to regular and associate
members. Issuance and limitation on Preferred Share Capital shall be
 prescribed in the By-laws of the cooperative. However, associate
Members shall not be eligible tovote nor be voted on account of such
shareholdings but shall be entitled to, among others the following:
i. Preference in the payment of interest as provided for in the
Bylaws of the cooperative; and
ii. In case of liquidation, priority in the distribution on Preferred
Share Capital shall be prescribed in the By- laws of the
cooperative.
2. Loans and barrowings including deposits;
3. Revolving capital which consists of the deferred payment of patronage refunds,
or interest on share capital. Revolving Capital - shall refer to the amount
available out of the deferred payment of the patronage refund and interest on
share capital of the members or by authorized deduction of a percentage from the
product sold or per unit of product handled by the cooperative. The Board of
Director shall issue revolving capital certificates with serial number, name,
amount, and rate of interest to be paid and shall distinctly set forth the time of
retirement of such certificates and the amounts to be returned.; and
4. Subsidies, donations, legacies, grants, aids and such other assistance from any
local or foreign institution whether public or private: Provided, That capital
coming from such subsides, donations, legacies, grants, aidsand other assistance
shall not be divided into individual share capital holdings at any time but shall
instead form part of the donated capital or fund of the cooperative. Upon
dissolution, such donated capital shall be subject to escheat or forfeiture in favor
of the government of theRepublic of the Philippines.

ii. Maximum limitation on Share on Share Capital Holdings of a member - No

member of primary cooperative other than cooperative itself shall own orhold more
than ten per centum (10%) of the share capital of the cooperative. . The share capital
contribution of the members shall be considered as equity. Provided, that it shall not be
withdrawn and should not be used in offsetting obligations whether past due or current
while the membership subsists.

iii. Maximum limit on the amount of “par value” of share of a cooperative

1. The term "share" refers to a unit of capital in a primary cooperative the par value
of which may be fixed to any figure not more than One thousand pesos
(P1,000.00).

iv. Interest on Share Capital. Interest on Share Capital shall not exceed the Rateof Return
on Investment. Unless otherwise provided for in the By-laws of the cooperative, share
capital shall earn interest; the Rate of Interest shall be computed as follows:
Rate of Interest = X (Net Surplus less Statutory Reserves)/Total Average Share Month
Where: X shall be a percentage to be determined by the Board of Directors allocated for
interest on share capital.
1. Required vote for allocation of interest on share capital - No
allocation of interest on share capital shall be made without the approval
of the Board of Directors which may increase or decrease any or both.
The required vote for allocation of interest on share capital is at least
majority of all members of the board of directors present and constituting
a quorum.
2. Requirement vote for deferment of payment of interest on share
capital - Payment of interest, unless otherwise provided for in the By-
laws, must be made on such date as may be determined by the Board of
Directors. The General/Representative Assembly may defer the payment
of such interest including Patronage Refund to raise Revolving Capital.
No cumulative interest shall be allowed for any kind or class of share
issued by the cooperative. Share Capital shall receive a strictly limited Rate
of Interest. The required vote for determent of payment of interest on
share capital is at least majority of all members of General Assembly
present and constituting a quorum but only upon the recommendation of
the Board of Directors with a required vote of at least majority of all
members of the board of directors present and constituting a quorum.
 v. Fines on unpaid subscribed share capital in a cooperative - The bylaws of a
cooperative may prescribe a fine on unpaid subscribed share capital. Provided, that such
fine is fair and reasonable under the circumstances.

vi. Assignment of Share Capital Contribution or Interest in a cooperative - Subject to

the provisions of Cooperative Code, no member shall transfer his shares or interest in the
cooperative or any part thereof unless: (Essential requisites before a member may
assign his share capital or interest in acooperative to another person)
1. He has held such share capital contribution or interest for not less than one (1)
year.
2. The assignment is made to the cooperative or to a member of the cooperative or
to a person who falls within the field of the membershipof the cooperative; and
3. The board of directors has approved such assignment.

vii. Capital Build-up of a cooperative - The by-laws of every cooperative shall provide for
a reasonable and realistic member capital build-up program to allow the continuing
growth of the members’ investment in their cooperative as their economic conditions
continue to improve.

viii. Revolving Capital of a cooperative - The general assembly of any cooperative may
authorize the board of directors to raise a revolving capital to strengthen its capital
structure by deferring the payment of patronage refunds and interest on share capital or
by the authorized deduction of a percentagefrom the proceeds of products sold or
services rendered, or per unit of productor services handled. The board of directors shall
issue revolving capital certificates with serial number, name, amount, and rate of
interest to be paidand shall distinctly set forth the time of retirement of such certificates
and the amounts to be returned.

ix. Investment of Capital by a Cooperative - A cooperative may invest itscapital in

any of the following:
1. In shares or debentures or securities of any other cooperative;
2. In any reputable bank in the locality, or any cooperative;
3. In securities issued or guaranteed by the Government;
4. In real state primarily for the use of the cooperative or its members; or
5. In any other manner authorized in the bylaws.
x. Annual Audit. – Cooperatives registered under this Code shall be subject to an annual
financial, performance and social audit.
1. The financial audit shall be conducted by an external auditor who satisfies all the
following qualifications:
a. He is independent of the cooperative or any of its subsidiary that he is
auditing; and
b. He is a member in good standing of the Philippine Institute of Certified
Public Accountants (PICPA) and is accredited by both the Board and
Accountancy and the Authority.
2. The social audit shall be conducted by an independent social auditor accredited
by the Authority.
3. Performance and social audit reports which contain the findings and
recommendations of the auditor shall be submitted to the board of directors.
4. Audit Report. – The auditor shall submit to the board of directors and to the audit
committee the financial audit report which shall be in accordance with the
generally accepted auditing standards for cooperatives as jointly promulgated by
the Philippine Institute of Certified Public Accountants (PICPA) and the
Authority. "Thereafter, the board of directors shall present the complete audit
report to the general assembly in its next meeting.

xi. Member’s Right to Examine - A member shall have the right to examine the records
required to be kept by the cooperative under Article 52 of this Code during reasonable
hours on business days and he may demand, in writing, for a copy of excerpts from said
records without charge except the cost of production. Any officer of the cooperative who
shall refuse to allow any member of the cooperative to examine and copy excerpts from
its records shall be liable to such member for damages and shall be guilty of an offense
which shall be punishable under Article 140 of this Code: Provided, That if such refusal
 is pursuant to a resolution or order of the board of directors, the liability under this
article shallbe imposed upon the directors who voted for such refusal: Provided, further,
That it shall be a defense to any action under this article that the member demanding to
examine and copy excerpts from the cooperative records has improperly used any
information secured through any prior examination of the records of such cooperative or
was not acting in good faith or for a legitimate purpose in making his demand.

aa. Capital, Property, and Funds of Cooperative

i. Net Surplus. – Notwithstanding the provisions of existing laws, the net surplus of
cooperatives shall be determined in accordance with its bylaws. Every cooperative shall
determine its net surplus at the close of every fiscal year and atsuch other times as may be
prescribed by the bylaws. Any provision of law to thecontrary notwithstanding, the net
surplus shall not be construed as profit but as an excess of payments made by the
members for the loans borrowed, or the goods and services availed by them from the
cooperative or the difference of therightful amount due to the members for their products
sold or services rendered to the cooperative including other inflows of assets resulting
from its other operating activities and which shall be deemed to have been returned to
them if the same is distributed as prescribed herein.

ii. Order of Distribution. – The net surplus of every cooperative shall be distributed as
follows:

1. An amount for the reserve fund which shall be at least ten per centum (10%)
of net surplus: Provided, That, in the first five (5) years of operation after
registration, this amount shall not be less than fifty per centum (50%) of the net
surplus:
a. The reserve fund shall be used for the stability of the cooperative and to
meet net losses in its operations. The generalassembly may decrease the
amount allocated to the reservefund when the reserve fund already
exceeds the share capital.
Any sum recovered on items previously charged to the reserve fund shall
be credited to such fund.
b. The reserve fund shall not be utilized for investment, other than those
allowed in this Code. Such sum of the reserve fund in excess of the share
capital may be used at anytime for any project that would expand the
operations of the cooperative upon the resolution of the general
assembly.
c. Upon the dissolution of the cooperative, the reserve fund shall not be
distributed among the members. The general assembly may resolves:
i. To establish a usufructuary trust fund for the benefit of any
federation or union to which the cooperative isaffiliated; and
ii. To donate, contribute, or otherwise dispose of the amount for the
benefit of the community where the cooperative operates. If the
members cannot decideupon the disposal of the reserve fund, the
same shall go to the federation or union to which the cooperative
is affiliated.

2. An amount for the education and training fund, shall not be more than ten per
centum (10%) of the net surplus. The bylaws may provide that certain fees or a
portion thereof be credited to such fund. The fund shall provide for the training,
development and similar other cooperative activities geared towards the growth
of the cooperative movement:
a. Half of the amounts transferred to the education and training fund
annually under this subsection shall be spent by the cooperative for
education and training purposes; while the other half may be remitted to
a union or federation chosen by the cooperative or of which it is a
member. The said union orfederation shall submit to the Authority and
to its contributing cooperatives the following schedules:
i. List of cooperatives which have remitted their respective
Cooperative Education and Training Funds (CETF);
ii. Business consultancy assistance to include the natureand cost;
 and
Other training activities undertaken specifying thereinthe nature,
iii.
participants and cost of each activity.
b. Upon the dissolution of the cooperative, the unexpended balanceof the
education and training fund appertaining to the cooperative shall be
credited to the cooperative education and training fund of the chosen
union or federation.

3. An amount for the community development fund, which shall not be less than
three per centum(3%) of the net surplus. The community development fund shall
be used for projects or activities that will benefit the community where the
cooperative operates.

4. An optional fund, a land and building, and any other necessary fundthe total
of which shall not exceed seven per centum (7%).

5. The remaining net surplus shall be made available to the members in theform of
interest on share capital not to exceed the normal rate of return our
investments and patronage refunds: Provided, That any amount remaining
after the allowable interest and the patronage refund have been deducted shall be
credited to the reserve fund."The sum allocated for patronage refunds shall be
made available at the same rate to all patrons of the cooperative in proportion to
their individual patronage: Provided, That:
a. In the case of a member patron with paid-up share capital contribution,
his proportionate amount of patronage refund shall be paid to him unless
he agrees to credit the amount to his account as additional share capital
contribution;
b. In the case of a member patron with unpaid share capital contribution,
his proportionate amount of patronage refund shall be credited to his
account until his account until his share capital contribution has been fully
paid;

c. In the case of a non-member patron, his proportionate amount of

patronage refund shall be set aside in a general fund for such patrons and
shall be allocated to individual non-member patrons only upon request
and presentation of evidence of the amount of his patronage. The
amount so allocated shall be credited to such patron toward payment of
the minimum capital contributionfor membership. When a sum equal to
this amount has accumulated at any time within a period specified in the
bylaws, such patron shall be deemed and become a member of the
cooperative if he so agrees or requests and complies with the provisions
of the bylaws for admission to membership; and

d. If within any period of time specified in the bylaws, any subscriber who
has not fully paid his subscribed share capital or any non-member patron
who has accumulated the sum necessary for membership but who does
not request nor agreeto become a member or fails to comply with the
provisions ofthe bylaws for admission to membership, the amount so
accumulated or credited to their account together with any part of the
general fund for nonmember patrons shall be credited to the reserve fund
or to the education and training fund of the cooperative, at the option of
the cooperative."

bb. Responsibilities of a Cooperative

i. Address - Every cooperative shall have an official postal address to which all notices and
communications shall be sent. Such address and every changethereof shall be registered
with the Cooperative Development Authority.

ii. Cooperative Books

 1. Every cooperative shall have the following documents ready and accessible to its
members and representatives of the Authority for inspection during reasonable
office hours at its official address:
a. A copy of this Code and all other laws pertaining tocooperatives;
b. A copy of the regulations of the Authority;
c. A copy of the articles of cooperation and bylaws of the cooperative;
d. A register of members;
e. The books of the minutes of the meetings of the generalassembly,
board of directors and committee;
f. Share books, where applicable;
g. Financial statement; and

h. Such other documents as may be prescribed by laws or thebylaws.

2. The accountant or the bookkeeper of the cooperative shall be responsible for

the maintenance of the cooperative in accordance with generally accepted
accounting practices. He shall also be responsible for the production of the same
at the time of audit or inspection.

3. The audit committee shall be responsible for the continuous and periodicreview
of the books and records of account to ensure that these are in accordance with
generally accepted accounting practices. He shall also be responsible for the
production of the same at the time of audit or inspection.
4. Each cooperative shall maintain records of accounts such that the true and correct
condition and the results of the operation of the cooperative may be ascertained
therefrom at any time. The financial statements, audited according to generally
accepted auditing standards, principles and practices, shall be published annually
and shall be kept posted in a conspicuous place in the principal office of the
cooperative.

5. Subject to the pertinent provisions of the National Internal Revenue Code and
other laws, a cooperative may dispose by way of burning or other method of
complete destruction any document, record or book pertaining to its financial and
nonfinancial operations which are already more than five (5) years old except
those relating to transactions which are the subject of civil, criminal and
administrative proceedings. An inventory of the audited documents, records and
books to be disposed ofshall be drawn up and certified to by the board secretary
and the chairman of the audit committee and presented to the board of directors
which may thereupon approve the disposition of said records.

iii. Reports of Cooperative

1. Every cooperative shall draw up regular reports of its program of activities,

including those in pursuance of their socio-civic undertakings, showing their
progress and achievements at the end of every fiscal year. The reports shall be
made accessible to its members, and copies thereof shall be furnished to all its
members or record. These reports shall be filed with the Cooperative
Development Authority within one hundred twenty (120) days from the end of
the calendar year. The form and contents of the reports shall be as prescribed by
the rules of the Cooperative Development Authority. Failure to file the required
reports shall subject the accountable officer/s to fines and penalties as may be
prescribed by the Cooperative Development Authority, and shall be a ground for
the revocation of authority of the cooperative to operate as such. The fiscal year
of every cooperative shall be the calendar year except as may be otherwise
provided in the bylaws.

2. If a cooperative fails to make, publish and file the reports required herein, or fails
to include therein any matter required by the Cooperative Code, the Cooperative
Development Authority shall, within fifteen (15) days from the expiration of the
prescribed period, send such cooperative a written notice, stating its non-
compliance and the commensurate fines and penalties that will be imposed until
such time that the cooperative has complied with the requirements.
iv. Register of Member as Prima Facie Evidence - Any register or list of members shares
kept by any registered cooperative shall be prima facie evidence of the following
particulars entered therein:
1. The date on which the name of any person was entered in such register or list of
member; and
2. The date on which any such person ceased to be a member.

v. Probative Value of Certified Copies of Entries

1. A copy of any entry in any book, register or list regularly kept in the course of
business in the possession of a cooperative shall, if duly certified in accordance
with the rules of evidence, be admissible as evidence of the existence of entry and
prima facie evidence of the matters and transactions therein recorded.
2. No person or a cooperative is possession of the books of such cooperative shall,
in any legal proceedings to which the cooperative isnot a party, be compelled
to produce any of the books of the cooperative, the contents of which can be
proved and the matters, transactions and accounts therein recorded, unless by
order of a competent court.
vi. Bonding of Accountable Officers

1. Every director, officer, and employee handling funds, securities or property on

behalf of any cooperative shall be covered by a surety bond to be issued for a duly
registered insurance or bonding company for the faithful performance of their
respective duties and obligations. The board of directors shall determine the
adequacy of such bonds.
2. Upon the filing of the application for registration of a cooperative, the bonds of
the accountable officers shall be required by the Cooperative Development
Authority. Such bonds shall be renewed manually and the Cooperative
Development Authority shall accordingly be informed of suchrenewal.

vii. Preference of Claims

1. Notwithstanding the provisions of existing laws, rules and regulations to the

contrary, but subject to the prior claim of the Cooperative Development
Authority, any debt due to the cooperative from the member shall constitute a
first lien upon any raw materials, production, inputs, and products produced; or
any land, building, facilities, equipment, goods or services acquired and held, by
such member through the proceeds of the loan or credit granted by the
cooperative to him for as long as the same is not fully paid.
2. No property or interest on property which is subject to a lien under paragraph (1)
shall be sold nor conveyed to third parties without theprior permission of the
cooperative. The lien upon the property orinterest shall continue to exit even
after the sale or conveyance thereof until such lien has been duly extinguished.
3. Notwithstanding the provisions of any law to the contrary, any sale or conveyance
made in contravention of paragraph (2) hereof shall be void.

viii. Instrument for Salary or Wage Deduction

1. A member of a cooperative may, notwithstanding the provisions ofexisting laws
to the contrary, execute an instrument in favor of the cooperative authorizing his
employer to deduct from his/her salary or wages, commutation of leave credits
and any other monetary benefits payable to him by the employer and remit such
amount as maybe specified in satisfaction of a debt or other demand due from
the memberto the cooperative.
2. Upon the execution of such instrument and as may be required by the cooperative
contained in a written request, the employer shall make the deduction in
accordance with the agreement and deduction inaccordance with the agreement
and remit forthwith the amount sodeducted within ten (10) days after the end of
the payroll month to the cooperative. The employer shall make the deduction for
as long as such debt or other demand remains unpaid by the employee.
3. The term "employer" as used in this article shall include all private firms and the
national and local governments and government-owned or controlled
 corporations who have under their employer a member of a cooperative and have
agreed to carry out the terms of the instrument mentioned in paragraphs (1) and
(2) of this article.
4. The provisions of this article shall apply to all similar agreements referredto in
paragraph (1) and were enforced prior to the approval of the Cooperative Code.
5. Notwithstanding the provisions of existing laws to the contrary, the
responsibilities of the employer as stated in paragraphs (1) and (2) ofthis articles
shall be mandatory: Provided, That in the case of private employer, the actual and
reasonable cost deducting and remitting maybecollected.

ix. Primary Lien of a Cooperative - Notwithstanding the provision of any lawwith the
contrary, a cooperative shall have primary lien upon the capital, deposits or interest of a
member for any debt due to the cooperative from such amember.

cc. Insolvency of a Cooperative

i. Proceedings Upon Insolvency of a Cooperative - In case a cooperative is unable to
fulfill its obligations to creditors due to insolvency, such cooperative may apply for such
remedies as it may deem fit under the provisions of Act No. 1956, as amended, otherwise
known as the Insolvency Law or under FRIA 2010. Nothing in this Article, however,
precludes creditors from seeking protection fromsaid insolvency law or FRIA 2010.

SUMMARY OF VOTING REQUIREMENTS IN

A COOPERATIVE
Cooperative Act Voting by Board of Directors Voting by Members Presence
(Regular Members – of
Members with Voting Appraisal
Rights) Right or
Right to
Withdraw
Merger or Consolidation of Not Required ¾ of all members with Yes
Cooperatives
voting rights, present and
constituting a quorum
Amendment of articles of Not Required 2/3 all members votin Yes
cooperation with g
of
rights
Amendment of by-laws Not Required 2/3 all members votin Yes
with g
of
rights
Division of Cooperatives into Not Required ¾ of all members with No
two or more Cooperatives voting rights, present and
constituting a quorum
Voluntary dissolution of Majority of all members ¾ of all members with No
cooperative where creditors are (Mere submission of board voting rights, present and
not affected resolution together with constituting a quorum
ratification by General
Assembly)
Voluntary dissolution of Majority of all members (Filing ¾ of all members with No
cooperative where creditors are of Formal Petition with notice voting rights, present and
affected and hearing) constituting a quorum
Filing up of vacancy in the Not Allowed Majority of all members No
board of directors if vacancy is with voting rights, present
due to expiration of term and constituting a quorum
Filing up of vacancy in the Majority of the Remaining Majority of all members No
board of directors if vacancy is Directors if they still constitute with voting rights, present
not due to expiration of term a quorum; or and constituting a quorum
(death, removal or resignation)
Allocation of interest on share Majority of all members Not Required No
capital
present and constituting a
quorum
Deferment of payment of Upon recommendation by Approval by Majority of all No
interest on share capital Majority of all members present members with voting
and constituting a quorum rights, present and
 constituting a quorum
Removal of a member of Majority of all members Not Required No
cooperative for valid cause
Delegation of power of board Majority of all members Not Required No
of directors to an executive
committee
Placing an elected cooperative Majority of all members Not Required No
officer under preventive
suspension pending resolution
by the investigating committee
over his removal
Filling up of vacancy in the Majority of all members Not Required No
executive committees present and constituting a
quorum
Recommending to the General Majority of all members Not Required (But approval No
Assembly the removal of present and constituting a of General Assembly is
elected officer of the quorum necessary for the decision
cooperative regarding the removal)
Delegation of the delegable Not Required ¾ of all members with No
powers of General Assembly to voting rights, present and
the Board of Directors constituting a quorum
Ratification of contracts with Not Required ¾ of all members with No
self- dealing directors, officers voting rights, present and
or executive committee constituting a quorum
members of the cooperative
Ratification of disloyalty of a Not Required ¾ of all members with No
director of a cooperative voting rights, present and
constituting a quorum
Removal of an elected officer Not Required (But ¾ of all members with No
upon recommendation of the recommendation by the board voting rights, present and
Board of Directors is necessary prior to the voting constituting a quorum
for the removal)