LAW ON COOPERATIVES

08.23.22 TUESDAY 6:30-8:30

WILLIE B. SANTIAGO, LAWYER & CERTIFIED PUBLIC ACCOUNTANT
MCLE LECTURER
• BASIC
APPRECIATION
• PRACTICAL
APPLICATION
A. WHAT’S NEW

R.A. 11364 CDA CHARTER OF 2019

 B. HIGHLIGHTS OF
CDA CHARTER OF 2019

• Repealed RA 6939 to revise CDA charter

• New composition of CDA

• CDA to be an attached agency toDTI for

policy & program coordination for COOP
• New Board will act as

on
cases brought to CDA
C. PH COOPERATIVE CODE OF 2008
IN A NUTSHELL
[SIGNED FEBRUARY 17, 2009] [PUBLISHED MARCH 7, 2009]
 GENERAL CONCEPTS OF COOP
ARTICLE 3 CHAPTER 1

• autonomous & duly registered

association of persons
– with common bond of interest
– who have voluntarily joined together
– to achieve their social, economic & cultural needs &
aspirations
– by making equitable contributions to capital required
– patronizing their products & services &
– accepting fair share of risks & benefits of undertaking
in accordance with universally accepted coop
principles
 PRINCIPLES
ARTICLE 4 CHAPTER 1

voluntary & democrative member

open member economic
membership control participation

cooperation
autonomy & education,
among
independence training & info
members

concern for
community
 DEFINITION OF TERMS
ARTICLE 4 CHAPTER 1

-natural or juridical
– who adheres to principles of COOP Law & Articles
of Cooperative
– admitted by COOP as member
• General assembly
• Board of Directors
• Committee
 DEFINITION OF TERMS
ARTICLE 4 CHAPTER 1

• Articles of Cooperation
• By-laws
• Registration
• CDA
• Universally Accepted
Principles-body of COOP principles
adhered to worldwide by COOP
 DEFINITION OF TERMS
ARTICLE 4 CHAPTER 1

• Representative Assembly
– full membership of a body of representatives
–elected by each of the sectors
–chapter or district of cooperative
duly assembled
– for the purpose of exercising such powers lawfully
delegated unto them by general assembly
• Officers of the Cooperative
 DEFINITION OF TERMS
ARTICLE 4 CHAPTER 1

• Social Audit-coop assesses its social

impact & ethical performance
– vis-à-vis its stated mission, vision, goals & code of
social responsibility for coops
– to develop a process to account for its social
performance & evaluate its impact in the
community & be accountable for its decisions &
actions to its regular members
• Performance Audit-efficiency &
effectiveness of coop as a whole
 DEFINITION OF TERMS
ARTICLE 4 CHAPTER 1

• Single-Line or Single-Purpose Coop

– coop undertaking activities which are related to its
main line of business or purpose
• Service Coop provide any type of service
– transport, info & communication, insurance,
housing, electric, health services, education,
banking & savings & credit
• Subsidiary Coop 3 or more primary coop
– doing the same line of business
– organized to undertake business activities in
support of its member-coop
ORGANIZATION & REGISTRATION
ARTICLES 6-25 CHAPTER II
 PRIMARY COOP
ARTICLES 10 CHAPTER II

• 15 or more natural persons who are Filipino citizens

1 • Of legal age

• having common bond of interest & are actually

2 residing or working in the intended area of operation

• completed Pre-Membership Educ Seminar (PMES)

3
CONVERSION OF PRIMARY & SINGLE-PURPOSE
TO MULTI-PURPOSE COOP
ARTICLE 10 CHAPTER II

• after compliance with minimum

requirements to be set by CDA
• single-purpose coop may transform into
a multi-purpose or create subsidiaries

– only after at least of operations

 ECONOMIC SURVEY
ARTICLE 11 CHAPTER II

• Submission to CDA of
– area of operation
– membership &
– staffing pattern to include
LIMITED LIABILITY & 50 YR TERM
ARTICLES 12 & 13 CHAPTER II
ARTICLES OF COOPERATION
ARTICLE 14 CHAPTER II

25% subscription on authorized share capital

25% payment on subscription

Php 15K minimum paid-up share capital subject

to change every 5 yrs
 REGISTRATION
ARTICLE 16 CHAPTER II

90 days
appeal to
Deemed Office of
approved the
60 days President
AMENDMENT OF ARTICLES & BY-LAWS
ARTICLE 18 CHAPTER II

2/3 votes of all members with voting

rights

Dissenting members may exercise

right to withdraw membership

60 day notice in writing

 DIVISION, MERGER, CONSOLIDATION
ARTICLES 20 & 21 CHAPTER II

¾ all members present &

affirmative with voting constituting
votes rights quorum
 TYPES & CATEGORIES
ARTICLE 23 CHAPTER II

1
•Credit, consumer

2
•Producer, marketing

3
•Service, multi-purpose
 TYPES & CATEGORIES
ARTICLE 23 CHAPTER II

4
•Advocacy, agrarian reform

5
•coop bank, dairy

6
•Education, electric
 TYPES & CATEGORIES
ARTICLE 23 CHAPTER II

7
•Financial service, fishermen

8
•Health services, housing

9
•Insurance, transport
 TYPES & CATEGORIES
ARTICLE 23 CHAPTER II

10
•Water service

11
•Workers coop

12
•Others as CDA identify
CATEGORIES
ARTICLE 23 CHAPTER II

Primary

Secondary

tertiary
 FEDERATION OF COOPS
ARTICLE 24 CHAPTER II

• Registered coops may organize a

federation

• according to the

• engaged in by the coops

 COOPERATIVE UNIONS
ARTICLE 25 CHAPTER II

• Registered coops & federations

• may organize or join coops unions

– to represent the

of all types of coops

– at the provincial, city, regional & national levels

MEMBERSHIP
ARTICLES 26-31 CHAPTER III
 KINDS OF MEMBERSHIP
ARTICLE 26 CHAPTER III

Regular
[entitled to all rights &
privileges] [associate
who patronize coop for 2
yrs]
Associate
[no right to vote & be
voted with rights limited
under by-laws] [can be
regular]
 INELIGIBLE TO BE OFFICERS OF COOP
ARTICLE 27 CHAPTER III

• All elective officials

• Except

• Being an officer of coop he represents

 APPLICATION FOR MEMBERSHIP
ARTICLE 28 CHAPTER III

Appeal for General

Approval
refusal assembly
TERMINATION OF MEMBERSHIP
ARTICLE 30 CHAPTER III

60 days

refund

Capital
&
interest
 GROUNDS FOR TERMINATION
ARTICLE 30 CHAPTER III

• Death or insanity
1 • Insolvency/dissolution for secondary/primary

• Non-patronage for reasonable period of time

2 • Act or omission prejudicial to COOP

• Failure to comply with obligations

3 • Acting in violation of by-laws
 ADMINISTRATION
ARTICLES 32-50 CHAPTER IV

• composition of general assembly, powers,

1 meetings, quorum, voting system

• composition & term of BOD, powers, meeting,

2 quorum, vacancy

• officers, committees, functions &

3 responsibilities & training requirement

• liability, compensation, dealings, disloyalty,

4 illegal use of confidential info, removal
COMPOSITION OF GENERAL ASSEMBLY
AS HIGHEST POLICY-MAKING BODY
ARTICLE 32 CHAPTER IV

1 •members

2 •entitled to vote
POWERS OF GENERAL ASSEMBLY
ARTICLE 33 CHAPTER IV

Determine & approve amendments

Elect, appoint, remove BOD

Approve development plans

Delegation power to smaller body-3/4 vote of

all members with voting rights
 MEETINGS
ARTICLE 34 CHAPTER IV

Annual regular meeting

Date fixed in by-laws/any date

within 90 days from year-end
 SPECIAL MEETINGS
ARTICLE 34 CHAPTER IV

BOD majority vote or 10% of

total members entitled to vote

1 week prior notice & waivable

expressly or impliedly
 QUORUM
ARTICLE 35 CHAPTER IV

of all members entitled to

vote
– cooperative banks-Article 99

– electric coop-By-laws or of members

entitled to vote
VOTING SYSTEM
ARTICLE 36 CHAPTER IV

1 basic
vote +
1 vote
incentives
votes > 5

Secondary
Primary
tertiary
 COMPOSITION & TERM OF BOD
ARTICLE 37 CHAPTER IV

• Elected in GA
• 2 yrs until successors are elected or until
duly remove for cause
 BOD
ARTICLES 38-39 CHAPTER IV

Planning, directing, policy-formation

Prohibition to hold any other position

engaged in day-to-day operation

Disqualification if engaged in similar business

 MEETING OF BOD & QUORUM
ARTICLE 40 CHAPTER IV

• Once a month regular meeting

• Special meetings-any time upon
chairperson’s call or majority of members
– written notice + specifying agenda + 1 week
before meeting
• Prohibition to vote by proxy
• majority BOD members
– quorum
– unless by-laws proved otherwise
 VACANCY
ARTICLE 41 CHAPTER IV

expiration

Vote of
remaining
BOD if there
is quorum General
assembly,
to serve on
unexpired
term
 COMMITTEES & OFFICERS
ARTICLE 43 CHAPTER IV

• executive committee
– appointed by BOD
• Committee on audit, election, mediation
& conciliation, ethics
– members of audit & election committee-elected
by GA
– the rest BOD appointed
• audit committee shall be directly
accountable & responsible to GA
 LIABILITY OF DIRECTORS & OFFICERS
ARTICLE 45 CHAPTER IV

• willfully & knowingly vote for or assent to

patently unlawful acts
• guilty of gross negligence or bad
faith in directing the affairs
• acquire any personal or pecuniary
interest in conflict with their duty
– liable jointly & severally for all damages or

double the profits resulting therefrom

COMPENSATION OF BOD
ARTICLE 46 CHAPTER IV

per
diem
No
compensation
Net loss
no per diem
 VOIDABLE DEALINGS OF BOD, OFFICERS
& COMMITTEES TO ANYONE OF THEM
ARTICLE 47 CHAPTER IV

• presence of such director in BOD meeting

– wherein contract was approved was not necessary
to constitute quorum for such meeting
• vote of such director was not necessary
for the approval of the contract
• contract is fair & reasonable
• for officer or committee member
– contract is previously authorized by GA or BOD
 DISLOYALTY OF BOD
ARTICLE 48 CHAPTER IV

Ratification of
damages Double profit
¾ members
 ILLEGAL USE OF CONFIDENTIAL INFO
ARTICLE 49 CHAPTER IV

• Liable to compensate coop for

• Accountable to coop for any direct benefit or

advantage
– received or yet to be received by him or his
associate
– as a result of the transaction
 REMOVAL OF BOD
ARTICLE 50 CHAPTER IV

complaint
Opportunity to be heard
BOD
Removal
Preventive
suspension Upon
recommendation in
GA
Elective officer may
be removed by ¾
members
RESPONSIBILITIES, RIGHTS &
PRIVILEGES
ARTICLES 51-62 CHAPTER V
 BOOKS TO BE KEPT OPEN
ARTICLE 52 CHAPTER V

• Accountant’s or bookkeeper’s
responsibility
• Audit committee periodic review
• AFS in conspicuous place
• 5-yr retention
 ANNUAL REPORTS
ARTICLE 53 CHAPTER V

• filing within 120 days from closing

1

• regular activities including

2 • Socio civic undertakings

• progress & achievements

3 • liability for non-submission
 PROOF OF REGISTERED MEMBER
ARTICLES 54 & 55 CHAPTER V

• Entry in register or list of members shares

– date entered &
– date ceased to be a member

of certified copies of entries

– non-divulgence/production unless ordered by
Court
BONDING OF ACCOUNTABLE OFFICER
ARTICLES 56 CHAPTER V
 PREFERENCE OF CLAIMS
ARTICLES 57 & 59 CHAPTER V

• any debt due to coop from member

– shall constitute first lien
– upon any raw materials, production, inputs &
products produced or any land, building, facilities,
equipment, goods or services acquired & held by
such member through loan proceeds or credit
granted by coop to him
• prior permission of coop required
– in case of subsequent sale or disposition of
property with lien otherwise void
– Primary lien on capital + deposit + interest art. 59
INSTRUMENT FOR SALARY OR WAGE
DEDUCTION
ARTICLE 58 CHAPTER V
 TAX TREATMENT
ARTICLE 60 CHAPTER IV

• Duly registered coop

– which do not transact any business with

non-members or
the general public
– shall not be subject to any taxes & fees imposed
under NIRC & other tax laws
 KNOW THE EXTENT OF
YOUR TAX EXEMPTIONS!
• Pursuant to Constitutional mandate
• RA 6938/Cooperative Code of PH was enacted
& approved on March 10, 1990 &
• was further amended by RA 9520/Philippine
COOP Code of 2008 on February 17,
2009
• tax base for all COOPs liable to income tax
• shall be the net surplus
• arising from business transactions with
non-members
• after deducting the amounts for the
statutory reserve funds as
provided for in the COOP law &
TAX & OTHER EXEMPTIONS
ARTICLES 61 & 62 CHAPTER IV

Cooperatives which transact

with both members & non-
members

Cooperatives Cooperatives
with with
accumulated accumulated
reserves and reserves and
undivided net undivided net
savings of not savings of more
more than 10M than 10M
 COOPERATIVE
Income from unrelated
operations
- Subject to appropriate taxes as per Tax Code

Regardless if cooperative has an exemption:

- Transacting only to members
- Transacting to both members & non-members but
ARUNS is 10M
REVALIDATE YOUR CERTIFICATE OF
TAX EXEMPTION!
• All COOPs previously registered by CDA under
RA 6938 & 6939 are deemed registered under
RA 9520 &
• New COR shall be issued
• It is only after COOP has secured a new COR
that it becomes eligible to apply for a
Certificate of Tax Exemption with BIR
• Shall be valid for the period of 5 yrs from date
of issue & renewed at least 2 months prior to
the date of expiration
INSOLVENCY
ARTICLE 63 CHAPTER VI
 DISSOLUTION
ARTICLES 64-70 CHAPTER VII

• voluntary where no creditors are affected

1 • where creditors are affected

• involuntary
• by order of authority
2 • by failure to organize & operate

• liquidation
3
NO CREDITORS AFFECTED-RESOLUTION
ARTICLE 64 CHAPTER VII

MAJORITY BOD VOTE

MEMBERS 3/4

PUBLICATION & 30-

3 WEEKS DAY NOTICE TO
MEMBERS
CREDITORS ARE AFFECTED-PETITION
ARTICLE 65 CHAPTER VII

MAJORITY BOD VOTE

MEMBERS 3/4

PUBLICATION OF ORDER &

POSTING IN PUBLIC PLACE +
3 WEEKS 5-DAY NOTICE TO FILE
OBJECTION + HEARING
 INVOLUNTARY
ARTICLE 66 CHAPTER VII

• by order of court
• after due hearing on the grounds of:
– Violation of any law, regulation or provisions of its
by-laws
– Insolvency
 DISSOLUTION BY ORDER OF CDA
ARTICLE 67 CHAPTER VII

• having obtained registration by fraud

• existing for an illegal purpose
• willful violation
– despite notice by CDA
• willful failure to operate on a coop basis
• failure to meet the required minimum number
of members in coop
BY FAILURE TO ORGANIZE OR OPERATE
ARTICLE 68 CHAPTER VII

COR/CONTINUE
LIQUIDATION
ARTICLE 69 CHAPTER VII
CAPITAL, PROPERTY & FUNDS
ARTICLES 71-84 CHAPTER VIII
 CAPITAL SOURCES
ARTICLE 72 CHAPTER VIII

• Member’s share capital

• Loans & barrowings including deposits
• Revolving capital
– deferred payment of patronage refunds, or
interest on share capital
• Subsidies, donations, legacies, grants, aids &
such other assistance from local or foreign
institution whether public or private:
– not be divided into individual share capital
holdings at any time but to form part of donated
capital or fund of the coop
LIMITATION ON SHARE OF CAPITAL
HOLDINGS BY 1 MEMBER
ARTICLE 73 CHAPTER VIII
ASSIGNMENT OF SHARE CAPITAL
CONTRIBUTION OR INTEREST
ARTICLE 74 CHAPTER VIII

Holding period of not less than 1 yr

Assignment to coop or its member or to

anyone under field of membership

BOD approval
 CAPITAL BUILD-UP
ARTICLE 75 CHAPTER VIII

member capital
build-up program
• to be provided by by-laws
 SHARES
ARTICLE 76 CHAPTER VIII

• unit of capital in a primary coop

– par value may be fixed to any figure not more

than

• share of capital of a coop

– money paid for the operation of coop
• method for issuance of share certificates shall
prescribed in bylaws
FINES ON UNPAID SUBSCRIPTION
ARTICLE 77 CHAPTER VIII
INVESTMENT OF CAPITAL
ARTICLE 78 CHAPTER VIII
 REVOLVING CAPITAL
ARTICLE 79 CHAPTER VIII

• GA may authorize BOD to raise

• to strengthen its capital structure
– by deferring payment of patronage refunds &
interest on share capital or
– by authorized deduction of % from proceeds of
products sold or services rendered or per unit of
product or services handled.
– BOD to issue revolving capital certificates with
serial number, name, amount & rate of interest to
be paid & shall set time of retirement of such
certificates & amounts to be returned
 AUDIT
ARTICLES 80-84 CHAPTER VIII

Non-liability
Audit report for
defamation

Right to Safety of
examine records
 ALLOCATION & DISTRIBUTION OF NET
SURPLUS
ARTICLES 85-86 CHAPTER IX

• Net surplus to be determined in accordance

with
 KNOW YOUR CONTINUING
STATUTORY COMPLIANCE!
• Article 86 mandates to allot
• 10% of Net Surplus to the Reserve Fund
• Not more than 10% for Education &
Training Fund &
• 3% for Community Development
Fund
• to improve their lives and build better
communities
• Remaining Net Surplus shall be made available
to the members in the form of

–interest on share capital

&

–patronage refunds
– not as realized income
– but rather as
– savings obtained by members in

of services of COOPs