PHILIPPINE COOPERATIVE CODE OF 2008

- by Atty. Narciso G. Reyes, Jr., A.B., J.D., L.L.M.

The law which governs cooperatives, prior to the recent enactment of Republic
Act No. 9520 (“Philippine Cooperative Code of 2008“), is Republic Act No. 6938
(“Cooperative Code of the Philippines”). Here’s a basic discussion on the new law
(a more extensive primer will subsequently be released, initially made available to
clients).

Definition

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
with universally accepted cooperative principles.
Organization and Registration of Cooperatives
Registration
- A written approval or recommendation from the concerned government agency,
if applicable, shall be filed with the Cooperative Development Authority.

Representative Assembly
- Number of the members of the cooperative shall be at least One Thousand
(1,000).
- Apply to cooperatives with numerous and dispersed membership.
- Quorum shall be at least twenty-five per centum (25%) of the members entitled to
vote in each sector, chapter, or district.

Administration

New members may only be admitted to the cooperative after undergoing Pre-
Membership Education Seminar. There are two kinds of members:

 1. Regular members. Entitled to all the rights and privileges of membership,

including the right to vote and be voted upon.

 2. Associate members. Has no right to vote nor be voted upon and shall be
entitled only to such rights and privileges as the bylaws may provide.
However, an associate member shall be considered a regular member if: (a)
 he has been a member for 2 continuous years; (b) he patronizes the
cooperative as its member; and (c) he signifies his intention of becoming a
regular member.

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

Capital, Property of Funds

- The minimum paid-up share capital is now PhP15,000 (the minimum under the
old law is only PhP2,000), subject to increase by the CDA upon consultation with
the cooperative sector and the NEDA.
- The par value of shares of a primary cooperative shall not exceed PhP1,000.
- No member of primary cooperative other than cooperative itself shall own or hold
more than 10% of the share capital of the cooperative.

Capitalization
- Issuance of Preferred Share Capital shall be prescribed in the By-laws and it shall
not exceed twenty-five (25%) of the total authorized capital of the cooperative.
- Subscription Agreement shall be executed upon the admission of a member and
whenever additional subscription shall be made after the member has fully paid his
initial subscription.
- Share Certificates shall be issued by the Cooperative at the end of every calendar
year based on the number of shares fully paid for the said period.

Par Value of Shares

- Primary Cooperative, it may be fixed at any amount which should not be less
than Php100.00 nor more than Php1,000.00.

Prohibitions
- Cooperatives cannot issue multiple types of Common Shares with different par
value per share.
- Par Value of the shares cannot be increased or decreased by way of amending its
Articles of Cooperation and By-laws.

Limitation on Share Capital Holdings.

- No member of a primary cooperative other than a cooperative itself shall own or
hold more than ten per centum (10%) of the share capital of the cooperative.

2
Types and Categories of Cooperatives

 Credit Cooperative. 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.

 Consumers Cooperative. The primary purpose is to procure and distribute

commodities to members and non-members.

 Producers Cooperative. 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.

 Marketing Cooperative. Engages in the supply of production inputs to

members and markets their products.

 Service Cooperative. Engages in medical and dental care, hospitalization,

transportation, insurance, housing, labor, electric light and power,
communication, professional and other services.

 Multipurpose Cooperative. Combines two or more of the business activities

of these different types of cooperatives.

- No cooperative shall be registered as a multipurpose cooperative

unless it has been in operation for at least two (2) years.

- Cooperatives with a minimum paid-up capital of One Hundred

Thousand Pesos (P100,000.00) or as required in the feasibility study,
whichever is higher, may be allowed to transform into a multipurpose
cooperative. Except agriculture cooperatives and agrarian reform
cooperatives.

3
  Advocacy Cooperative. 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.

 Agrarian Reform Cooperative. 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.

 Cooperative Bank. Organized for the primary purpose of providing a wide

range of financial services to cooperatives and their members.

 Dairy Cooperative. One whose members are engaged in the production of

fresh milk which may be processed and/or marketed as dairy products.

 Education Cooperative. 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.

 Electric Cooperative. 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.

- minimum paid up capitalization of Fifteen Thousand Pesos

(P15,000.00) for an EC to be registered with the Authority.
- The Energy Regulatory Commission (ERC) shall, within forty-five
(45) days from the close of each fiscal year, issue a certificate to the
EC concerned on the total amount collected for capital contributions.

 Financial Service Cooperative. One organized for the primary purpose of

engaging in savings and credit services and other financial services.

 Fishermen Cooperative. Organized by marginalized fishermen in localities

whose products are marketed either as fresh or processed products;

4
  Health Services Cooperative. Organized for the primary purpose of
providing medical, dental and other health services.

 Housing Cooperative. 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.

 Insurance Cooperative. Engaged in the business of insuring life and poverty

of cooperatives and their members.

- Failure to secure the Certificate of Authority from the Insurance

Commission within two (2) years from the date of its registration with
CDA shall be a ground for the revocation/cancellation of the
Certificate of Registration.

 Transport Cooperative. 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;

For purposes of registration with the Authority, Transportation Service

Cooperatives shall have a minimum paid up capitalization of Fifteen
Thousand Pesos (P15,000.00).

 Water Service Cooperative. Organized to own, operate and manage waters

systems for the provision and distribution of potable water for its members
and their households.

 Labor Service Cooperative

- Cooperatives engaged in providing a specific labor, job, or service to

a principal under a contracting or subcontracting arrangement.

 Workers Cooperative.

- Cooperatives organized by workers, including the self-employed, who

are at the same time members and owners of the enterprise. The
principal purpose is to provide employment and business
opportunities to its worker members and manage it in accordance with
the cooperative principles.

5
 - “Cabo” a prohibited activity where a person /group of persons or a
labor group, in the guise of cooperative, supplies individual members
or workers to an employer, with or without any monetary or other
consideration, whether in the capacity of an agent of the employer or
as an ostensible independent contractor.

Categories

On the other hand, cooperatives are categorized according to membership and

territorial considerations:

In terms of membership  –

1. Primary – Members are natural persons.

2. Secondary – Members are primaries.
3. Tertiary – Members are secondary cooperatives.

Merger and Consolidation of Cooperatives

- Duly approved board resolution of each constituent cooperatives to enter into

merger or consolidation.
- Memorandum of Understanding to Merge or Consolidate, stating the creation of a
joint committee to formulate the plan and proposal to merge or consolidate.
- General/Representative Assembly’s approval of the Proposal and Plan of Merger
or Consolidation of each constituent cooperative and the Amendment / New
Articles of Cooperation and By-laws.

Dissolution of Cooperatives

1. Charter expired by its own limitation.

2. Voluntary dissolution.
3. Judicial proceedings.
4. Dissolved by Order of the Authority.

Board of Liquidators/Trustees shall submit its Final Report. Failure to submit, they
shall not be released from their duties and functions, and the Authority will not
issue a clearance for each of the members.

Authority may cancel the cooperatives Certificate of Registration if it is proven

that the cooperative has no assets, or its whereabouts is unknown, despite diligent

6
efforts to ascertain it. These facts shall be stated in the Order of Cancellation. No
winding up shall be observed.

Tax Treatment

Cooperatives 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 transacting business with both members and
non-members shall be subject to another set of rules, but transactions with
members shall remain to be non-taxable.

Audit

Audit shall be conducted by an external auditor, who must be a member of good

standing of the Philippine Institute of Certified Public Accountants, accredited by
the CDA and the Board of Accountancy.