PHILIPPINE COOPERATIVES Unit XVII: General Concept, Principles and Practices Introduction B Unit Learning By the end of this unit you should “Cooperation is not a sentiment - it is an economic necessity.” be able to, + Charles Steinmetz This unit introduces you to a type of business association Describe the nature, bases, and types of that lends primacy to an aggrupation of persons who share cooperatives in a ‘True or a. common bond of interest, under the principle of self-help Seaport by pooling resources together to achieve social, economic and cultural needs and aspirations, through patronage of their products and services and takes judicious responsibility in the fair outcome of the undertaking, guided by the universally accepted cooperative principles espoused by the co-operators of Rochdale, England. © Demonstrate learning of ‘cooperative principles and practices through a Multiple Choice item In modern day Philippines, the governing law is Republic Act No. 9520 otherwise known as the “The Philippine Cooperative Code of 2008,” Article 2 of the said law states that it is “the declared policy of the State to foster the creation and growth of cooperatives as a practical vehicle for promoting self-reliance and harnessing people power towards the attainment of economic development and social justice. The State, in fact, encourages the private sector to undertake the actual formation and organization to cooperatives and endeavour to create an atmosphere that is conducive to growth and development of these cooperatives. © ess ‘The unit will run for one and a half days only. You can devote three hours per day on the subject. Don't worry, the content is simplified, which means it only include the most salient points you need to know relative to our module learning outcome. Since this is the last week of Block 3, stay focused and persevere so you can smoothly sail through the course. even Up! Before you proceed to the actual cognitive feat, try this brain teaser so you can get those neurons working! © Instructions: The goal is to find all the hidden words in the puzzle’. To find the hidden words, search up, down, forward, backward, and diagonally. To make the game more interesting, try to solve the puzzle in the shortest time possible. You may also choose to compete against another player to finish the puzzle first. Once you have finished, you may check with the answers provided at the end of the module. veerHow to score: Within the time frame of § minutes 15 outof 15 : Outstanding 12-14: Excellent 7-11: Good 6 and below : Average BUSINESS LAW TERMS NTH TATE [D[c [TIN |[R [REA [AH [PIM ofc [Nn {i [zfzfi [ole fe fe [c [yn [mM lo i fa ltt. [tr [po fo fu fi [s [Mw [wn fe [Pe Te [rt Tle |e [rR [z |e [eB [rt lr |i [oe [ny [n [x [w A [rR felt [i [re fj [afi fs [1 [tr fa fz iv x [se [rt [rf[y /e fe [c |r [s Ts [vu fv fe [n e {1 [nN [a l[c]r{cfo]u [i [s [c [wn Jo ly p [xk [a [ep [nw [rin [vy [rt fo fa [wli [i [tr 1[s [rR [ep fe |v ja fe fi [n [rt [rt [ei fafa s [qa [a Je [v [x [t [R Jo [k [a [nh [1 [F [bd n[s [u [a [tz [se [pe [1 [n [v [er [ep [rR [x [1 o {[s [c [tz fo [c fe [v Jo [er [wt [re [r [et c [pe [ep |p [s [wie [win [eB [mM [v Te fa [a A[c [s [ep [n /F [c [a [n [tb [wiv [7 [aq |v o [ep [re {[r{i [rR {a ly |t fe [rR [vu [s [mM [tr *WORD SEARCH 2019 edition for WS PACIFIC PUBLICATION, ING, Manila, Philippines 1. OFFER 6. ACCEPTANCE 11. NOVATION 2. REMISSION 7. BREACH 12. RESTITUTION 3. GUARANTEE 8. SURETY 13. INSOLVENCY 4. VALIDITY 9. REVOCATION 14. CONSIDERATION 5. AGENT 10. APPEAL 15. ASSIGNEE © Getting Started! ‘This Act shall be known as the “Philippine Cooperative Code of 2008.” (Art. 1, R.A. No. 9520), in answer to world-wide clamour for a people-organization who take the course of their lives into their own hands, and provide for themselves the essentials of quality living by their pooled resources and industry. With least interference from the State, but with set rules and regulations to only guide co-operators conduct activities within the bounds of legality as well as equity, and as an assurance of government's treatment of it as a viable solution to economicand social ills. 17.1 Declaration of Policy of the State (Art. 2) ‘The State has great belief in the power of voluntary association of people to achieve a common end through formation of a democratically controlled organization to provide for themselves under a plan that eliminates entrepreneur profit, and in the course of which provide for substantial equality in ownership and control. As such, this kind of beneficial association deserves support, hence the following policy declarations enshrined under RA. 9520 as amended was signed on February 17, 2009, thus:1. To foster the creation and growth of cooperatives as a practical vehicle for promoting self- reliance and harnessing people power towards the attainment of economic development and social justice. 2. The State shall encourage the private sector to undertake the actual formation and organization of cooperatives and shall create an atmosphere that is conducive to the growth and development of these cooperatives. 3. The Government and all its branches, subdivisions, instrumentalities and agencies shall ensure the provision of technical guidance, financial assistance and other services to enable said cooperatives to develop into viable and responsive economic enterprises and thereby bring about a strong cooperative movement that is free from any conditions that might infringe upon the autonomy or organizational integrity of cooperatives. 4. The State recognizes the principle of subsidiarity under which the cooperative sector will initiate and regulate within its own ranks the promotion and organization, training and research, audit and support services relative to cooperatives with government assistance where necessary. 17.2 The COOPERATIVE DEVELOPMENT AUTHORITY (CDA) ‘The government agency tasked to carry out the provision of the Cooperative Code of the Philippines is the Cooperative Development Authority created by Republic Act No. 6939. It was created to promote the validity and growth of cooperatives as instruments of equity, social justice and economic development, defining its powers, functions and responsibilities, rationalizing government policies and agencies with cooperative functions, supporting cooperative development, transferring the registration and regulation functions of existing government agencies on cooperatives and consolidating the same with the Authority, appropriating funds therefor, and for other purposes. Tip: RA 6939 is a consolidation of House Bill No. 10787 and Senate Bill No. 485 passed by the House of Representatives and the Senate on February 22, 1990 and March 2, 1990, respectively. It was approved by President Corazon C. Aquino on March 10, 1990 and took effect jon April 1, 1990. 17.3 What is a Cooperative? (Art. 3, PCC) Cooperative is defined as 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. oO Tip: Cooperative as a system which seeks to harness the limited resources of people of small means and opportunities for more produced economic and social needs was first introduced in the Philippines in the late 1800's by Dr. Jose Rizal who is said to have been inspired by the cooperative idea during his travels in Europe, thus organized in 1898 a marketing cooperative among the farmers of Dapitan during his exile. (Cooperatives in the Philippines: History, Organization and Management by Abasolo, Ruiz and Bertol (1996) Manila: GIC ENTERPRISES & CO, INC)Oo Note: While cooperative members derive several benefits from the operation of their cooperative, the main benefit is economic, since members get a share of the cooperative’s net surplus by patronizing its services. A certain percentage of the cooperative's net surplus is rreturned to the members after a period of one year usually during their annual general assembly. Itis called a patronage refund. 17.4. Theoretical Bases of Cooperative Enterprise Cooperative as a business organization is founded on certain bases which makes it unique and distinct from other types of business organization. a. Cooperative Organization is a Business Enterprise ar a Firm, - Asa firm, cooperative is a decision-making unit. The agreement to form a cooperative involves commitment on the part of the participants to submit certain activities to group decisions although each participant remains as individual producer or separate economic unit. b. Cooperative is a risk-bearing unit. - a new risk-bearing unit emerges as cooperative is formed since risk-bearing is a consequence of decision-making. ¢. Cooperative is a Non-Profit (Loss) Organization, - this is so because cooperative represents an extension of the entrepreneurial activity of the participants. It is a non- profit (loss) organization when it refunds to patron the net surplus of operation and collects from members the deficits of operation. 4. Patronage on Obligation. - participants are normally obliged to fulfillan agreement, which at times may lead to a liability for damages in the event ofa breach of agreement. e. Service At Cost. - members may “earn” or "save" in the conduct of business on what they would otherwise have to pay someone else to perform the service to them. £. Patronage Dividend, - Itis not dividend in the sense that it represents a distribution of profit rather it represents an overcharge of expenses in a full settlement of sales. But when used as a profit sharing device such as to attract patronage then it becomes a method of distributing profit. . Capital of Cooperative. - Capital is not contributed for the purpose of deriving anticipated profit but asa condition of receiving cooperative services. h. Interest or Dividend on Capital. ~ Contributors of capital in a cooperative is not entitled to return on capital in the nature of profitas a reward for assuming risks because participant in a true cooperative assume responsibility for costs and risks on a patronage basis. In effect, those who contribute capital in excess of their proportionate share loan out capital to those who contributed less, and the interest on capital takes the form of payment of interest and not a form of distribution of residual income. i. Basis of Control. - In the economic point of view, control is apportioned according to risk assumed, Ina corporation, control is identified with capital contribution because it is capital that bears the major risk. In a cooperative, control is based on patronage and not on capital, because it is the patronage that shoulders the risk. Control in cooperative stems from the idea that cooperative is an association of persons and not of impersonal organization of capital. 17.5 Objectives and Goals of Cooperatives (Art. 7, PCC) The primary objective of every cooperative is to help improve the quality of life of its members, towards this end, the cooperative shall aim to: «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; + Provide optimum social and economic benefits to its members; ‘+ Teach them efficient ways of doing things in a cooperative manner; ee Be+ Allow the lower income and less privileged groups to increase their ownership in the wealth of the nation; + Cooperate with the government, other cooperatives and people-oriented organizations to further the attainment of any of the foregoing objectives. 17.6 Categories of Cooperatives Cooperatives are categorized according to membership and territorial consideration. In terms of membership, cooperatives shall be categorized into: * Primary - the members of which are natural persons of legal age. «Secondary - the members of which are primaries. * Tertiary - the members are secondaries upward to one (1) or more apex organizations. a? Note: Those with cooperative memberships are considered federations or unions as the ‘ase may be. Thus, in terms of territory, cooperatives shall be categorized according to areas of operation which may or may not coincide with the political subdivisions of the country but, those organized by minors shall be considered a laboratory cooperative and must be affiliated with a registered cooperative. It is governed by special guidelines promulgated by the CDA. 17.7 TYPES OF COOPERATIVES: > These are the types of cooperatives under Republic Act 9520: a. Credit Cooperative is one that promotes and undertakes savings and lending services among members. It generates a common pool of funds in order to provide financial assistance and other related financial services to its members for productive and provident purposes; b, Consumer Cooperative is one of the primary purpose of which is to procure and distribute commodities to members and non-members; c. 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 of and for the account of the cooperative and its members; d. Marketing Cooperative is one which engages in the supply of production inputs to members and markets their products; e. Service Cooperative is one which engages in medical and dental care, hospitalization, transportation, insurance, housing, labor, electric light and power, communication, professional and other services; f Multi-Purpose Cooperative combines two (2) or more of the business activities of these different types of cooperatives; g 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;h. 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 the agrarian reform; 1. Cooperative Bank is one organized for the primary purpose of providing a wide range of financial services to cooperatives and their members. j. Dairy Cooperative is one whose members are engaged in the production of fresh milk which may be processed and/or marketed as dairy products; k. 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; |. Electric Cooperative is one organized for the primary purpose of undertaking power generation, utilizing renewable sources, including hybrid systems, acquisition and operation of sub transmission or distribution to its household members; m. Financial Service Cooperative is one organized for the primary purpose of engaging in savings and credit services and other financial services; n, Elshermen Cooperative is one organized by marginalized fishermen in localities whose products are marketed either as fresh or processed products; o. Health Services Cooperative is one organized for the primary purpose of providing medical, dental, and other health services; p. 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; 4. Insurance Conperative is one engaged in the business of insuring life and property of cooperatives and their members; r. Transport Cooperative is one which includes land and sea transportation, limited to small vessels, as defined or classified under the Philippines maritime laws, organized under the provisions of RA 9520; s. Water Service Cooperative is one organized to own, operate and manage water systems for the provision and distribution of potable water for its members and their households; t Workers Cooperative is one organized by workers, including the self-employed, who are at the 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; and u. Other types of Cooperatives as may be determined by the Authority (CDA), 17.8 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 not limited to the following:1. Voluntary and Open Membership - cooperatives are voluntary organizations that are open toall persons who are able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, cultural, political or religious discrimination. 2. Democratic Member Control - Cooperatives are democratic organizations that are controlled by their members who actively participate in settling their policies and making decisions. Men and women serving as elected representatives, directors or officers who are accountable to the membership. In primary cooperatives, members have equal voting rights of ‘one-member, one- vote. 3. Member Economic Participation ~ Members contribute equitably to, and democratically control, the capital of their cooperatives. It is said that 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; * Benefiting members in proportion to their patronage of the cooperative's business; and * Supporting other activities approved by the membership 4. 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. 5. 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. 6. Cooperation Among Cooperatives - Cooperative serve their members most effectively and strengthen the cooperative movement by working together through local, regional, national and international structures. Universally Accepted Principles* means that body of cooperative principles adhered to worldwide by cooperatives. 17.9 Cooperative Practices Cooperatives follow certain operational guidelines which are practical response to local needs, all these are intended at perfecting cooperative operations. They are: 1. Capital Formation. - best source of additional funds other than from equity is from the members in the form of membership fee or purchase of stock; agreement to withhold portion of net earnings profits; by assessment based on units of products sold or purchased. 2. Cash Trading. - this is business done ona cash and carry basis. It promotes equality since anybody with cash can enjoy the service patronage, and can thus, train members to observe the habit of balanced spending. 3. Selling at market price. - Cooperatives offer goods and services at prevailing market prices and this promotes stability. 4. Cooperative can avoid destructive competition. - Fostering constructive competition will safeguard the interest of consumers since they cooperate to get a better deal from manufacturers and suppliers. 5. Constant expansion. - Asan organization, cooperatives have to grow for community service. Since expansion isa must.6. Quality standardized goods. - Cooperatives are intended to develop communities through the production of high quality goods and provision of better services. 7. Cooperative wholesale business or interlending. - Cooperative can be organized with enough people and capital. They can respond to the needs of the community. Needs arise when there are people, and the expansion of membership may result in wholesale business. 8. The benefits from the wholesale are considerable. - Members can market and acquire the goods and services at the right price and quality. They can even lower and raise savings. They can also influence the production of badly needed goods and services. 9. Minimize expenditures. - A significant factor favoring the growth of cooperative is its being a community project. It is allowed exemption from government; officers do not receive remuneration, if they do it is only in a form of allowance, per diems, or honoraria; laws may allow exemption from income and sales taxes. Minimizing expenses should not be taken asa dole-out but a motivation to make the movement stand on its own and attain its objectives. Once this is done, the movement can take its rightful place in the development of the country. 17.10 PRINCIPAL/MAIN OFFICE It refers to the registered head office as indicated in the articles of cooperation and bylaws of the cooperative where the business and cooperative activities are conducted and central records and main books of accounts are kept. It is also the place where the officers and key management staff of the cooperative direct, control, coordinate and manage its entire operation. As such, every cooperative is mandated to establish an office where it is expected to carry out the main activities anent the purpose for which it is created. 17.10.1 BRANCH OFFICE It refers to a business office outside the principal office where cooperative activities and business operation are undertaken as per approved cooperative development plan. A cooperative applying for a branch when approved by the Cooperative Development Authority (“Authority” for brevity) upon compliance with all the documentary requirements and payment of processing fee, shall be issued an official document termed as Certificate of Authority, authorizing the establishment and operation of a cooperative branch. | Rone Forte purpose of the definition given on what a branch olfice is, cooperative Aelivities shall refer to, but not limited to: acceptance and processing of membership, conduct of Pre-Membership Education Seminar (PMES) and other trainings. While business operation means conduct of business activities as stated in the objective and purposes of the cooperative. 4} Note: In relation to paragraph 1 of the State’s policy declaration, all cooperatives can set lup branch office and cooperative satellite office. 17.10.2 Pre-qualification Requirements > Prior to the Authority's approval, a cooperative may establish a branch subject to the following pre-qualification requirements, to wit: 1. That the proposed establishment of a branch in another place but within the area of operation of the applicant cooperatives is necessitated by the existence of members in the said place desiring to avail of the services of the cooperative within their reach. Provided,that the number of members to be served by the branch office will be enough for its viable operation as shown in the business plan. 2. The principal office must have a minimum paid-up capital, as provided for in the Articles of Cooperation, to wit: Paid-up Capital Category of Cooperative Php 10 Million Primary. Php 15 Million Secondary Php 20 Million Tertiary 3. Each branch must have an available operating capital as provided for in the Business Plan, to wit: Operating Capital [ Category of Cooperative Php 5 Million Primary Php 10 Million Secondary Php 15 Million Tertiary 4. The cooperative did not incur net loss for the last three consecutive years and its net worth is progressive for the last three years from the date of application. 5. Documentary Requirements includes: ‘+ Letter request for authority to establish a cooperative branch signed by Chairman of the cooperative or General Manager as authorized by the Board + Business Plan - refers to a business study showing the marketability of the products/services, and also the financial, technical, legal and organizational aspects of the proposed business establishment, including projections for the first three years of operations showing sustained viability. Due consideration shall be given to allocation of resources to the proposed branch. * General Assembly resolution authorizing the establishment of such branch and commitment of investment or allocation of resources in its operation © Certification by the Chairman/General Manager of the following: a. Presence of a Manual of Operations for Branch; b. Address of the proposed branch c. Audited Financial Statement for the last 3 years 17.10.3 SATELLITE OFFICE It refers to an office established by a cooperative outside of its principal/main office but within its area of operation to provide limited services to its members but which does not however maintain books of accounts as it is done by the principal/main office. The term shall include an extension office or other terms of similar import. An applicant cooperative when authorized to establish and operate a satellite office, shall be issued an official document called a Letter of Authority by the CDA. ¥ Documentary Requirements for the application for a Letter of Authority to establish a cooperative satellite office are the followin; © Certificate of Compliance for the preceding year; * Cath of Undertaking signed by the Chairperson of the cooperative for the specific services activities to be undertaken by the proposed satellite office; © Certification as to available space and manpower to manage the office; and * Official Receipt showing payment of the processing fee. > Conditions for Cooperative Satellite Office Operations 1. Presence ofa signage as a cooperative satellite office;2. List of specific transactions that may only be undertaken as approved by the cooperative's Board of Directors; Presence of Operational Structure; Submission of summary reports to the head office; Presence of a Barangay Permit and a Mayor's Permit that should be posted in the office at all times; Maintenance of Accountable Forms (eg. Cash Acknowledgment/Provisional/Official Receipts, vouchers, etc); Maintenance of record of daily transactions to be submitted to the principal /main office; Official Receipts showing payments of processing fees; Availability of appropriate logistics 0.Presence ofa minimum number of personnel as determined by the principal/main office to effectively discharge the functions of the satellite office; 11. Turn-over or deposit of all collections within the day to the account of the principal/main office or imprest system of handling cash; and 12. Other conditions as may be determined by the Authority | [easier] vee 2 geen + The State affirms the impact created by Cooperatives in the lives of people via enactment of RA 9520 otherwise known as the “Philippine Cooperative Code of 2008”, thus strengthening the cooperative movement in the country. Cooperative way of life is an effective means to improve quality of living, by not depending on government dole-outs but by peoples concerted effort through voluntary act of making equitable contributions to the capital required, patronizing their products and services and accepting a fair share of risks and benefits. + In support of varying felt need of the people, different types of cooperatives are allowed to be formed depending on the intended objective, thus, a credit cooperative, consumer cooperative, utilities cooperative, even a multi-purpose one. What is important is the willingness to form an organization with persons who have a shared bond of interest to pull together towards a common desired end - optimum social and economic benefits to its members. + Philippine cooperatives adhere to the universally accepted cooperative principles of: © Open and voluntary membership Democratic Member Control Member Economic Participation Autonomy and Independence Education, Training and Information Cooperation among Cooperatives Concern for Community + Cooperatives follow certain operational guidelines as a practical response to local needs. These cooperative practices are its way of perfecting cooperative operations. * To have wider coverage of operation, and to allow more membership recruitment to further the ends of its primary objectives, cooperatives other than the mandate to maintain aPrincipal or main office, are allowed to establish either a branch office or a satellite office by complying with the documentary requirements in order to secure a Certificate of Authority or a Letter of Authority, as the case maybe.Unit XVIII: Organization and Registration BAD ietcoiucion “If each individual uses his imagination in search for Unit Learning Objective By the end of this unit you should be improvements, we will draw on vast resources that will able to: bring fresh water to the well of progress.” - JFK ‘+ Recognize the power of CDA in the observance of legal Essential to any person, natural or juridical is the formalities to constitute a acquisition of a legal personality upon which rests the type of cooperative through capacity to exercise certain rights and privileges preparation of the Articles of granted by law. Cooperatives, while recognized by the Cooperation sufficient in form State as a vehicle for social justice and economic and substance required by development cannot be allowed to simply mushroom Philippine Cooperative Code without having to go through the rudiments of formal organization and registration. After all, the law only protects organizations and associations that have received full blessing from the government through the issuance of an authority to operate based upon compliance of statutory requirements. For this purpose, cooperatives are not exempt. The unit tackles the how of organizing and registering a cooperative under RA 9520. Soran The unit will run for two days only. You can devote 3 hours per day on the subject. Don’t worry, the content is simplified, which means it only include the most salient points you need to know relative to our module learning outcome. Since this is the last week of Block 3 stay focused and persevere so you can sail smoothly through the course. The Articles of Cooperation as a deliverable should be done a day before the end of the week. Bien Up! Before you proceed to the actual cognitive feat, try this brain teaser so you can get those neurons working! © Police hire a detective to find an escaped prisoner. The detective narrows his search to one of three different houses. After taking a closer look at an aerial photo of the three houses, the detective instantly knew which house the prisoner was in. Do you already know the answer? WHERE IS THE PRISONER HIDING?© Getting Started! 18.1 Power to Register Cooperatives Earlier, it was cited that Republic Act No. 6939, created the Cooperative Development Authority tasked to promote the viability and growth of cooperatives as instruments of equity, social justice and economic development. The registration and regulation functions of existing government agencies on cooperatives was transferred to the Cooperative Development Authority. As such, the power to register cooperatives is now vested solely in the CDA. It is the only government agency mandated to register all types of cooperatives. To facilitate the flow of its services, extension offices had been set up. These are located in (a) Dagupan City; (b) Tuguegarao, Cagayan; (c) Baguio City: (d) San Fernando, Pampanga; (e) NCR-Quezon City; (f) Calamba, Laguna; (g) Naga City; (h) Hoilo City; (i) Cebu City; () Kidapawan, Cotabato; (k) Tacloban City; (1) Davao City; (m) Zamboanga City; (n) Butuan City. CDA Memorandum Circular No. 02-03, Series of 2002 thereby amending Memorandum Circular No. 92-004, Series of 1992 provides the schedule of fees as follows: ‘TYPES OF COOPERATIVES PAID-UP CAPITAL FEES * Laboratory Cooperative No registration fees © Primary Cooperatives P2,000.00-P500,000 —_ P500.00**1/10 of 1% P500,001.00-up of the paid-up share capital ‘© Secondary Cooperatives P2,000.00-P500,000 —P1,000.00**1/10 of 1% of P500,001.00-up —_of the paid-up share capital ‘Tertiary Cooperatives 3,000 18.2 Purposes of Organizing a Cooperative (Art. 6, PCC) A cooperative may be organized and registered by at least fifteen (15) persons for any or all of the following purposes: 1) To encourage thrift and savings mobilization among members; 2) To generate funds and extend credit to the members for productive and provident Purposes. 3) To encourage among members systematic production and marketing; 4.) To provide goods and services and other requirements to the members; 5.) To develop expertise and skills among its members; 6) To acquire land and provide housing benefits for the members; 7) To insure against losses of the members; 8.) To promote and advance the economic, social and educational status of the members; 9.) To establish, own, lease or operate a cooperative banks, cooperative wholesale and retail complexes, insurance and agricultural industrial processing enterprises, and public markets; 10.) To coordinate and facilitate the activities of cooperatives; 11} To advocate for the cause of the cooperative movements; 12.) To ensure the viability of the cooperatives through the utilization of new technologies; 13.) To encourage and promote self-help or self-employment as engine for economic growth and poverty alleviation; and 14.) To undertake any andall other activities for the effective and efficient Seed cs ocean Bade Fee eeiie Fake,a pore Cooperatives Not in Restraintof Trade No cooperative or method or act thereof which complies with the Philippine Cooperative Code shall be deemed a conspiracy or combination in restraint of trade or an illegal monopoly, or an attempt to lessen competition or fx prices arbitrarily in violation of any laws of the Philippines. 18.3 General Steps in Forming a Cooperative 1. Get organized. At least 15 members is required. At once determine the common problems to be solved and the basic needs to be provided for by the cooperative such as increasing production, marketing produce, credit assistance, power generation, banking or insurance and other similar needs. Determining the problems and needs will facilitate in classification of cooperative to be organized. 2. Prepare a general statement called an economic survey. An economic survey is a general statement describing the structure, purpose, economic feasibility of the proposed cooperative, area of operation, size of membership and other pertinent data. In short, itis a feasibility study. 3. Draft the Bylaws of the cooperative. It is the set of rules that defines and determines how a cooperative is to be run without confusion. In general, bylaws should be consistent with the provisions of the Philippine Cooperative Code of 2008. 4. Draft the articles of coaperation. It isa duly notarized document that legally binds all the signatories in the formation of a cooperative. 5. Register the cooperative with CDA. Submit four (4) copies of the Economic Survey, Bylaws, and Articles of Cooperation to CDA. 18.3.1 Organizing a Primary Cooperative. Among the frequently formed category of cooperatives are the so-called primary cooperatives. It cannot be gainsaid that the reason for its popularity stems from its membership, that it is composed of natural persons who, by felt need are bound by a common bond of interest. Often, it is also from this classification that other cooperatives that are composed of juridical persons may arise. ‘The following are the requisites of organizing a primary cooperative: 1. Fifteen (15) or more natural persons who are Filipino citizens; 2. Of legalage; 3. Having a common bond of interest*; and 4. Residing or working in the intended area of operation* Bond of Membership* - refers to the condition where members associate themselves to attain their common goals and objectives which may either be residential, occupational, associational, and institutional. Area of Operation* - refers to the area where the cooperative members come from as provided for in the articles of cooperation and by-laws. Inter-regional* - it refers to the cooperative's area of operation covering two or more adjacent regions. BA} Note: A prospective member of a primary cooperative must have completed a Pre- Membership Education Seminar (PMES)l BS Note: Any newly organized primary cooperative may be registered as a Multipurpose cooperative only after compliance with the minimum requirements for multipurpose |cooperatives. A single purpose cooperative may transform into a multipurpose or may create |subsidiaries only after at least two (2) years of operations. (Art. 10, PCC) 18.4 What is REGISTRATION? Itrefers to the operative act of the Cooperative Development Authority granting judicial personality to a proposed cooperative and is evidence by a certificate of registration. A cooperative formed and organized under the Philippine Cooperative Code acquires juridical personality from the date the Authority issues a certificate of registration under its official seal. 2 Note: A certificate of registration issued by the Cooperative Development Authority 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. 18.4.1 Re .d Guidelines for the Registration of Primary Cooperative. (MC2011-15) Under the aforesaid guidelines the following documents shall be submitted to the Authority in four (4) copies except for item (1) below: 1.) Cooperative Name Reservation Notice (CNRN); 2.) Economic Survey 3.) Articles of Cooperation and the approved Bylaws a. Alloriginal; b. The Articles of Cooperation shall be signed by all the cooperators on each and every page; c. The By-laws shall be signed by all the members on the adoption page. a Note 1: The Articles of Cooperation should be signed by each ofthe organizers, and acknowledged by them if natural persons, and by the chairpersons or secretaries, if juridical persons, before a notary public, which must be accompanied by the following: (a) Bonds of the accountable officers. BOD determines the amount required based on the initial net worth which shall include the paid-up capital, membership fees and other assets of the cooperative at the time of registration; (b) Sworn statement of the treasurer duly elected by the subscribers, duly notarized showing that at least 25% of the authorized capital has been subscribed and at least 25% of the total subscription has been paid. (This requirement shall apply to a common share only) ¥ All primary cooperatives shall be organized with share capital. The authorized share capital of a cooperative shall be provided for in its Articles of Cooperation v The paid-up capital must notbe less than P15,000 Y No member may own more than 10% of the total subscribed share capital and that each share must not be less than P1,000. ¥ Should preferred share capital be provided in their by-laws, it shall not exceed 25% of the total authorized share capital of the cooperative. Y For both common anéd preferred share capital, no fractional share shall be issued.Zh Note 2: Commonand Preferred Share™: Rules on Capital Requirement 1. The share capital of a cooperative may consist of common share and preferred share capital if the latter is provided for under the cooperatives AOC and by laws. Should the cooperative wish to have common and preferred shares, statements to that effect should appear in the AOC specifying the amount of shares to be offered for common shares and for preferred shares. However, itis recommended that only the common share be offered. 2. Should preferred share capital be offered, the rights and privileges of their holders shall be provided for in the By-laws of the cooperative. 3. Preferred share capital shall not exceed twenty-five-percent (25%) or one-fourth (1/4) of the total authorized share capital of the cooperative. 4. The paid up and subscription of the common share capital contribution should strictly adhere to the twenty-five-percent (25%) requirement based on the authorized capital share. 5. No member shall own more than ten percent (10%) of the subscribed share capital of the cooperative. A Note taen ‘cooperative to be registered under the Philippine Cooperative Code shall adopt bylaws not inconsistent with its provisions. The By-laws shall be filed at the same time as the articles of cooperation. A) Treasurer's Affidavit*; 5.) Surety Bonds of accountable officers; 6) Certificate of Pre-Membership Seminar (PMES) signed by the cooperative Interim Chairman, as validated by the Cooperative Development Authority; 7.) Undertaking to change name: &) Undertaking to comply with the auditing and accounting standards prescribed by CDA; 9.) Undertaking to comply with other requirements prescribed by other regulatory agency, when applicable; 10.) Favorable endorsement/written verification/authority/pre-feasibility study, if applicable; and 11) Registration fee. (See CDA Memorandum Circular No. 02-03, Series of 2002 above) Share* - It refers to a unit of capital in primary cooperative the par value of which is fixed at any figure not more than One Thousand Pesos (P1,000.00) and should be divisible by one peso may be divided into common share capital and preferred share capital. Treasurer's Affidavit* — a duly notarized document attached to the Articles of Cooperation stating the total amount received from the members share capital contribution, membership fee, donations or subsidies. , A ar cooperative duly registered under the Philippine Cooperative Code shall favea limited liability. (Art. 12) A cooperative shall exist for a period not exceeding fifty (50) years from the date of registration unless sooner dissolve or unless the period is extended. The cooperative term, originally stated in the articles of cooperation, may be extended for periods not exceeding fifty (50) years in a single instance by an amendment of the AOC. However, no extension can be made earlier than five (5) years prior to the original or subsequent expiry date unless there are justifiable reasons for an earlier extension as may be determined by the Authority. (art.13)18.4.2 Contents of the Articles of Cooperation The articles of cooperation shall set forth: (a) The name of the cooperative which shall include the word cooperative; (b) The purpose or purposes and scope of business for which the cooperative is to be Registered; (©) The term of existence of the cooperative; (d) The area of operation and the postal addresses of its principal office; (e) The names, nationality, and the postal addresses of the registrants; (£) The common bond of membership; (g) The list of names of directors who shall manage the cooperative; (h) 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 Art. 23 of the Philippine Cooperative Code. Note: The AOC may also contain any other provisions not inconsistent with the PCC or any related laws a Note: Cooperative Name and Prohibition ‘The word “Cooperative” “Kooperatiba” or “Cooperativa” shall be included in the name of the cooperative, which name shall likewise specify the type of cooperative. ¥ No cooperative name shall be allowed if the proposed name is identical or deceptively or confusingly similar to that of any existing cooperative, contrary to public policy, moral and existing law. Y Use of the words “development” and “integrated” in the cooperative name shall be discouraged. v Use of “Incorporated”, “Corporation”, “Company”, “Incorporation”, “Partnership” or other similar connotation and abbreviation shall not be allowed. ¥ Use of the word “Federation” and “Union” in the name of a proposed primary cooperative is prohibited, as a rule. ¥ Name shall not be written in all capital letters except if it is an acronym. Acronym shall be written after the full name of the cooperative. 18.4.3 Contents of the Cooperative Bylaws The bylaws of each cooperative shall provide: (a) The qualifications for admission to membership and the payment to be made or interest to be acquired as a condition for the exercise of the right of membership; (b) The rights and liabilities of membership; (©) The circumstances under which membership is acquired, maintained and lost; (d) The procedures to be followed in cases of termination of membership; (e) The conditions under which the transfer of a share or interest of the member shall be permitted; (0 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; (g) The general conduct of the affairs of the cooperative, including the power and duties of the general assembly, the board of directors, committees and the officers, and their qualifications and disqualifications; (h) The manner in which the capital, may be raised and the purposes for which it can be utilized; ( The mode of custody and of investment of net surplus; () The accounting and auditing systems; (k) The manner of loaning and borrowing including the limitations thereof; DY When cient of dictethe, chee oF pnt opeee dese(m) The manner of adopting, amending, repealing and abrogating bylaws; (n) A conciliation or mediation mechanism for the amicable settlement of disputes among members, directors, officers and other committee members of the cooperative; (0) Other matters incident to the purposes and activities of the cooperative. 18.5 Cooperative Powers and Capacities. (Art.9) Once a cooperative is registered under the PCC it shall possess the following powers, rights and capacities which it can continuously exercise until expiration of its term, or unless sooner dissolved or its term extended upon the approval of CDA: 1) To the exclusive use ofits registered name, to sue and be sued; 2) Of succession; 3.) To amend its articles of cooperation in accordance with the provisions of the Philippine Cooperative Code; 4.) To adopt bylaws not contrary to law, morals or public policy, and to amend and repeal the same in accordance with the Philippine Cooperative Code; 5) To purchase, receive, take of grant, hold, convey, sell, lease, pledge, mortgage, and otherwise deal with such real and personal property as the transaction of the lawful affairs of the cooperative may reasonably and necessarily require, subject to the limitations prescribed by law and the Constitution; 6.) To enter into division, merger or consolidation, as provided in the PCC; 7) To form subsidiary cooperatives and join federations or unions, as provided in the PCC; 8.) To avail of loans, be entitled to credit and to accept and receive grants, donations and assistance from foreign and domestic sources, subject to the conditions of said loans, credits, grants, donations or assistance that will not undermine the autonomy of the cooperative. The Authority, upon written request, shall provide necessary assistance in the documentary requirements for the loans, credit, grants, donations and other financial support; 9) To avail of preferential rights granted to cooperatives under RA No. 7160, otherwise known as the Local Government Code, and other laws, particularly those in the grant of franchises to establish, construct, operate and maintain ferries, wharves, markets or slaughterhouses and to lease public utilities, including access to extension and on-site research services and facilities related to agriculture and fishery activities 10.) To organize and operate schools in accordance with Republic Act No. 9155, Governance of Basic Education Act of 2001 and other pertinent laws; and 11.) To exercise such other powers granted by the Philippine Cooperative Code or necessary to carry out its purpose or purposes as stated in its Articles of Cooperation. + Cooperatives, regardless of type, can only acquire juridical personality by strictly following the legal formalities prescribed under RA No. 9520, otherwise known as the Philippine Cooperative Code of 2008”, the lead implementing government agency of which is the Cooperative Development Authority created by RA No. 6939. + The power to register cooperatives is now vested solely in the CDA. It is the only government agency mandated to register all types of cooperatives. ‘ The Legal formalities that must be strictly observed by an applicant primary cooperative includes the following: a. Organizationv v v v v 15 or more natural persons who are Filipino citizens; All of legal ages; Having a common bond of interest; and Residing or working in the intended area of operation. Prepare an Economic Survey, draft the Articles of Cooperation and By-Laws b, Registration (submit in 4 copies) v Cooperative Name Reservation Notice; Economic Survey; Articles of Cooperation and the approved By-Laws; Treasurer's Affidavit; Surety bond of accountable officers; Certificates of Pre-Membership Seminars as validated; the undertakings to change name, to comply with audit and accounting standards prescribed by PCC, to comply with other regulatory agency; Favourable endorsement, written verification/pre-feasibility study, if applicable; and Registration fee. © Once registered, the cooperative acquires a judicial personality for a term of 50 years or as provided in its AOC unless sooner dissolved or extended, and are entitled to certain powers, rights and capacities prescribed by law.Unit XIX: Responsibilities, Rights & Privileges wa Introduction Unit Learning Objectives “No man was ever endowed with a right without being at the same time saddled with responsibility.” By the end of this unit you should be able to: The unit discusses the responsibilities which the law | — imposes upon a duly registered cooperative as well as + Determine the Responsibilities the rights and privileges it can enjoy. Since the grant of imposed upon and the an authority to operate and conduct legitimate business privileges enjoyed by duly to cooperative members it wishes to serve, as well as the registered Cooperatives community where it is situated, is but a privilege, hence, through Identification cooperatives must stand ready at all times to act in a Questions manner that is expected by the Authority in order to continue enjoying its powers, rights and privileges, instead of being disenfranchise. © sin The unit will run for one day only. You can devote 3 hours of your day on the subject. Don't worry, the content is simplified, which means it only include the most salient points you need to know relative to our module learning outcome. Since this is the last week of Block 3 stay focused and persevere so you can sail smoothly through the course. -— Warm Up! Before you proceed to the actual cognitive feat, try this brain teaser so you can get those neurons working! © Did you get it? Not yet? It’s alright, take your time. You can always ask earoctnacooee era. help from your siblings. the other will be its opposite. Example: 1OUNT = IN x OUT Ibet you can do it on your own. Just 1. Golyrbi & Igresec keep thinking. 2 Gendylov —_7. Ydignhat Just be patient, you can bea Word- Master soon enough! © Soneeionueese Who is the Word-master? © ceeting states ‘The Philippine Cooperative Code provides the responsibilities, rights and privileges of duly registered cooperatives.19.1 Cooperative Responsibilities (Art. 51, PCC) The following are the responsibilities imposed on cooperatives which must be strictly adhered to: 1. Address. Every cooperative shall have an official postal address to which all notices and communications shall be sent. Such address and every change thereto must be registered with the Authority. Anent this requirement, a registered cooperative must put up and maintain a signage at the entrance of the principal and all branch or satellite office, which must be visible, legible and shall contain the following: a. Name of the Cooperative; b. Address b.1 Address of the principal office, ifit is a principal office: b.2 Address of the branch office, if it is a branch office; and/or b.3 Address of the satellite office, if itis a satellite office. c. Registration Number of the Cooperative; d. Tax Identification Number (TIN) of the Cooperative: e. The words "Principal, Satellite and/or Branch Office’, if applicable; and £, The phrase “Registered with Cooperative Development Authority - Extension Office”. (Note: where the principal office is registered) Additional Information for Branches and Satellites: g. Certificate of Authority No. - if branch h. Letter of Authority No. - if satellite (MC 2017-03) 2. Books to be Kept Open. 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 the Philippine Cooperative Code and all other laws pertaining to cooperatives; A.copy of the regulations of the Authority; A.copy of the articles of cooperation and bylaws of the cooperative; Aregister of members; ‘The books of the minutes of the meetings of the general assembly, board of directors and committees; Share books, where applicable; Financial statements; and Such other documents as may be prescribed by laws or the bylaws. paos rem - ‘The accountant or the bookkeeper of the cooperative shall be responsible for the maintenance and safekeeping of the books and records of account 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. The audit committee shall be responsible for the continuous and periodic review of the books and records of account to ensure that these are in accordance with the cooperative principles and generally accepted accounting practices. To ascertain as well that the records of account reflects the true and correct condition and the results of cooperative operations can be easily determined 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. 3. Registry of Members. It refers to the directory of membership of a cooperative, containing basic information pertaining to members. The register or list of members or shares kept by any registered cooperative shall be prima facie evidence of the following particulars entered therein: the date on which the name of any person was entered in such registry or list as member; and the date which any such person ceased to be a member. Entries in the member's registry shall be updated regularly in accordance with the policy as promulgated by the Board of Directors. Note: Member. It refers to a person either natural or juridical who, adhering to the Principles set forth in the Philippine Cooperative Code of 2008 and in the articles of cooperation, has been admitted by the cooperative as member. Setting-up, maintenance and up-keep of the registry of members shall entail the gathering of basic information pertaining to the members of the cooperative. For this purpose, all cooperatives are required to incorporate in their registry the following information: a. Name of Member b. Membership Number c. TIN (Tax Identification Number} Information on Membership: a. Date Accepted b. BOD Resolution number c. Type/Kind of Membership d. Initial capital subscription ‘Termination of Membership: a. BOD resolution number b. Date 4. Reports. Every cooperative shall draw up regular reports of its program of activities, including those in pursuance of their socio-civic undertaking, showing their progress and achievements at the end of every fiscal year, which reports must be made accessible to its members, and copies shall be furnished to all its members of record. These reports shall be filed with the Authority within one hundred twenty (120) days from the end of the calendar year following the forms and content as prescribed by the rules of the Authority. Failure to submit such reports subjects the accountable officer to fines and penalties, and shall be a ground for the revocation of authority of the cooperative to operate. The fiscal year of every cooperative shall be the calendar year except as may otherwise be provided in the bylaws. 4.1. Required Reports for Primary Cooperatives. Cooperative Annual Progress Report (CAPR) with the following attachments: 1. Social Audit Report including its program of activities pursuant to its socio- civicgoals of the cooperative; 2. Performance Audit Report, including copies of the semi-annual Report on Mediation and conciliation as received by the Authority pursuant to EO 97; Audited Financial Statements; List of Officers and Trainings Undertaken/Completed.Note: Effect of Partial Compliance of Required Reports Partial compliance shall be considered non-compliance and the cooperative shall be in delay until such time that the filing of the required reports had been fully complied with. Delay shall commence on the day following the last day prescribed for the filing of the reports. However, should the last day of filing fall on a Saturday or non-working holiday, the last day for filing shall be the next working day. If the delay is due to fortuitous event, or a declared national emergency or public disorder including strikes and lockouts, the period for such delay may be excused provided due notice is given to the Authority within fifteen (15) days from cessation of the cause of the delay. Thereafter, the cooperative shall be given another thirty (30) days to file the required report, the lapse of which shall consider the cooperative in delay. 5. Bonding of Accountable Officers. Every director, officer, and employee handling funds, securities or properties 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. Recall that upon the filing of the application for registration of a cooperative, the bonds of the accountable officers shall be required by the Authority. Such bonds shall be renewed annually and the Authority shall accordingly be informed of such renewal. a j Note: Surety Bond. It is a promise to pay one party (obligee) a certain amount if a second party (the principal) fails to meet some obligations, such as fulfilling the terms of the contract. The surety bond protects the oblige against losses resulting from the principal's failure to meet the obligation. It is a contract at least among three parties: 1. The obligee - the party who is the recipient of an obligation; 2. The principal - the primary party who will be performing the contractual obligations; and 3. The surety ~ who assures the oblige that the principal can perform the task. Itis a guarantee insurance. (MC 2011-13) 19.2 Rights of Cooperatives (Art. 57, PCC) Following are the rights enjoyed by a duly registered cooperative: 1. Preference of Claims. @. Subject to the prior claim of the 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 foras longas the same is not fully paid, notwithstanding the provisions of existing laws, rules and regulations to the contrary. b. No property or interest on property which is subject to a lien under the preceding paragraph shall be sold nor conveyed to third parties without the prior permission of the cooperative. The lien on the property or interest shall continue to exist even after the sale or conveyance until such lien has been duly extinguished. c. Any sale or conveyance made in contravention of the second paragraph hereof shall be void, notwithstanding the provisions of any law to the contrary. 2. Instrument for Salary or Wage Deduction. A member of a cooperative may, notwithstanding the provisions of existing 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 may be specified in satisfaction of a debt or other demand due from the member to the cooperative. Upon receipt of such written request from the cooperative, the employer shall make the deduction in accordance with the agreement and remit forthwith the amount deducted withinten (10) days after the end of the payroll month to the cooperative. The employer shall make such deduction for as long as such debt or other demand remains unpaid by the employee. 4 Note: “Employer” as used herein shall include all private firms and the national and /1ocal Zovernment-owned and controlled corporations who have under their employ a member of Ja cooperative and have agreed to carry out the terms of the instrument mentioned in the provision. @ | Wate: The responsibilities of the employer herein mentioned shall be mandatory, pfovided that in the case of a private employer, the actual and reasonable cost of deducting and remitting may be collected. 3. Primary Lien. A cooperative shall have a primary lien upon the capital, deposits or interest of a member for any debt due to the cooperative from such a member, notwithstanding the provision of any law to the contrary. 4. Tax Treatment of Cooperatives. Duly registered cooperative under the 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. 5. Tax and Other Exemptions. Cooperatives transacting business with both members 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 but not limited to final taxes on member's deposits and documentary tax. 19.3 Privileges of Cooperatives (Art. 62, PCC) Cooperatives under the Code, notwithstanding the provisions of any law to the contrary, be also accorded the following privileges: 1. Enjoy the privilege of depositing sealed cash boxes or containers, documents or any valuable papers in the safes of municipal or city treasurer and other government offices free of charge; 2. Cooperatives organized among government employees, shall enjoy the free use of any available space in their agency, whether owned or rented by the Government; 3. Cooperatives that render special types of services and facilities such as cold storage, ice plant, electricity, transportation and similar services and facilities shall secure a franchise, and such cooperative shall open their membership to all persons qualified in their area of operation; 4. In areas where appropriate cooperative exists, 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 cooperatives concerned. 5. Preferential treatment in the allocation of fertilizers, including seeds and other agricultural inputsand implements, and in rice distribution shall be granted to cooperatives by the appropriate government agencies; 6. 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; 7. Cooperative 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 for the marketing of products from agricultural, 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; 8. Cooperatives engaged in credit services and /or federations shall be entitled to loan 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 Bangko Sentral ng Pilipinas (BSP); 9. A public transport cooperative may be entitled to financing support for the acquisition and/or maintenance of land and sea transport equipment, 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 land or sea transport where the cooperative operates and in securing a franchise for active or potential routes for the public transport; 10. 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 controlled corporation shall be exempt from pre-qualification bidding requirements notwithstanding provisions of R.A. 9184, otherwise known as the Government Procurement Act; 11. Cooperative shall enjoy the privilege of being represented by the provincial, cityfiscal or the Office of the Solicitor General, free of charge, except when the adverse party is the Republic of the Philippines; 12. Cooperatives organized by faculty 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 said educational institution; and 13. 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. 19.4 Certificate of Good Standing It is a certificate issued by the Cooperative Development Authority to the operating cooperatives that have complied with the mandatory requirements as provided in RA. 9520, IRR and other administrative issuances which entitle cooperatives to avail incentives and privileges accorded to them. | 4 Note: Operating Cooperative. Refers to cooperative that has been performing cooperative activities with business operations whether realizing gains or losses in the conduct of business. The business requirement can be waived only to the newly registered existing for not more than one (1) year from the date of its registration. Cooperative Acti undertaking of the cooperative. ies. It refers to the membership, governance, and institutional Note: Business Operation. It refers to the economic undertaking of providing product and services to members in accord with the cooperative registered objectives. 19.4.1 Purpose of Issuing a Certificate of Good Standing (CGS) now termed Certificate of Compliance The following are the two (2) purposes for issuance of a CGS 1. Regular Purpose - when the application for CGS is for compliance with the mandatory requirements as prescribed by RA 9520 and to avail the incentives and privileges under CDA-BIR Joint Rules and Regulations Implementing Articles 60 and 61 of RA. 9520 inrelation to R.A. 8424 and the requirements of Local Government Units (LGUs) permits and licenses. 2. Special Purpose - application is for other legitimate purposes, such as, but not limited to application for financial assistance from other financial institutions, importation of machineries, equipment and spare parts, or rice importation program or accreditation as training provided regardless of type or category. 19.4.2 Cooperatives Qualified to Avail of CGS A CGS may be issued to operating cooperatives. In case of importation purposes, application shall be subject to further evaluation by the CDA to determine the capability of the cooperative to avail the privileges granted to cooperatives. Note: Certificate of Good Standing (CGS) issued for regular purpose shall be valid and effective until April 30 of the succeeding year. However, CGS issued for Special Purpose shall be valid for six (6) months only from date of issuance. In consideration of the foregoing limitations, no CGS with retroactivity effectivity shall be issued to a cooperative. 19.4.3 Grounds for Non-Issuance of Certificate of Good Standing (CGS) Notwithstanding with the provisions of this guidelines set forth by CDA, any of the following conditions shall warrant the non-issuance of the CGS: 1. Non-submission of statutory reports for two (2) or more consecutive years; 2. Delayed submission of the Statutory Reports for more than six (6) months for at least two (2) consecutive years; 3. Non-compliance with CDA guidelines (violation of laws, guidelines, circulars and their by- laws; and 4, The existence of the question on legitimacy of leadership. ‘ The Code imposes certain responsibilities upon a duly registered cooperative, the consequence of such failure to comply puts the cooperative in a condition of delay, for which an extended period of compliance may be given. Despite the extended period, and where the cooperative through its accountable officers totally fail to perform such responsibilities it can result in either be meted with fines and penalties or the gravest of which is an order for dissolution from the Authority. + Rights and Privileges accorded to registered cooperatives allow it to perform its responsibilities to the benefit and advantage of its members and the community it serves. To forestall abuse, these are to be exercised under the watchful eye of the Cooperative Development Authority. ‘ For a cooperative to be able to operate as such, it must be issued a Certificate of Good Standing (CGS) as a stamp by CDA that the operating cooperative have complied with the mandatory requirements provided in R.A. 9520.Unit XX: Membership and Administration “A Introduction 2 Unit Learning Objectives “What you are today is the result of what you have By the end of this unit you should be thought up to this moment. What you will be ableto: tomorrow : depends upon the thoughts you think from now on.” ee Cooperatives is one effective means to improve the Boverains CoOncreute) income and productivity of people, to generate membership through! employment, to attain equitable distribution of Matching Type item wealth, and help the Philippine Government attain © Discuss the rules followed its economic goals. However, as a socio-economic in the administration of instrument of change, cooperatives should be cooperatives by Essay primarily concerned with human betterment and Questions advancement of people and not just concerned with dividends and related economic and financial returns. The role then played by cooperatives will depend largely on the proper understanding and management of what cooperatives are organized for. As is required of all well-managed organizations, the right external and internal environment with the right people in it is required for a cooperative organization to accomplish its objectives. This unit helps you appreciate the importance of committed membership in a cooperative and the quality of administration it must establish and maintain. © snnne ‘The unit will run for one day only. You can devote 3 hours of your day on the subject. Don't worty, the content is simplified, which means it only include the most salient points you need to know relative to our module learning outcome. Since this is the last week of Block 3 stay focused and persevere so you can sail smoothly through the course. ee... Up! Before you proceed to the actual cognitive feat, try this brain teaser so you can get those neurons working! © _ S$? Did you get it? Not yet? It’s alright, Ca an y yo u Si 0 Iv ¢. t h Is take your time. You can always ask John is two years ‘ldar'than help from your siblings. Tom whois twice as old as Tet you can do it on your own. Just Anthony. If the total of the keep thinking. ages of dohn, Tom and Justbe patient, you can bea Math Anthony be 27, then how old Wizard soon enough! © = are John, Tom and Anthony? Share itif'you could solve it!!© Getting Started! 20.1 What is Membership? Membership is the body of members of an organization or group. These are actually the people who consists an organization, therefore, it is important in a cooperative. 20.2 Who may be members of a Cooperative? Any natural person who is a citizen of the Philippines, cooperative, or non-profit organization with juridical personality shall be eligible for membership in a cooperative if the applicant meets the qualifications prescribed in the by-laws; Provided, that only natural persons may be admitted as members of a primary cooperative. 20.3 What are the qualifications of a Member? For primary cooperatives: Y Natural persons who are Filipino citizens Y Of legal age may qualify for membership If minors organize a cooperative, it is considered as a “laboratory cooperative”*, an experimental one and must be affiliated with a registered cooperative. It shall be governed by special guidelines to be promulgated by the Cooperative Development Authority. Anon-profit organization which has a juridical personality may qualify for membership if it meets the qualification prescribed in the by-laws. Laboratory Cooperative* - it refers to a cooperative duly recognized by the Cooperative Development Authority formed and managed primarily by minors’, and is affiliated* with another registered cooperative which is called the Guardian Cooperative*. (MC 2015-03) Guardian Cooperative* - it refers to a duly registered cooperative to which a Laboratory Cooperative is affiliated with. Minor* - it refers to an individual below eighteen (18) years of age. Affiliation’ - it refers to the act of being formally connected or joined by a Laboratory Cooperative to a Guardian Cooperative. Note: A cooperative may assist in the organization of a laboratory cooperative of |hfteen (15) or more individuals who are minors, who may be students or out of school minors, Filipino citizens and are actually studying or residing within the nearest area of operation of the lintended guardian cooperative. 20.4 What are the kinds of Membership? A cooperative may have two (2) kinds of members: a. Regular members - it is one who has complied with all the membership requirements and entitled to all the rights and privileges of membership as stated in the Cooperative Code and the cooperative's by-laws; b. Associate members - it is one who has no right to vote nor be voted upon and shall 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.| 4 Note: Government Officers and Employees: Rules to observe 1) Any officer or employee of the Authority shall be disqualified to be elected or appointed to any position in a cooperative: Provided, That the disqualification does not extend to cooperative organized by officer and employees of the Cooperative Development Authority. 2) All elective officials" of the Government shall be ineligible to become officers and directors of cooperatives; Provided, That the disqualification does not extend to a party representative being an officer of a cooperative he or she represents. 3) Any government employee or official may, in the discharge of his duties as member in the cooperative, be allowed by the head of office concerned to use official time for attendance at the general assembly, board and committee meetings of cooperatives as well as cooperative seminars, conferences, workshops, technical meetings, and training courses locally or abroad; Provided, That the operation of the office concerned are not adversely affected. (Art.27, PCC) Elective officials* for this purpose includes the National, Local and Barangay elective officials except party list representatives being an officer of a cooperative he or she represents. 20.5 Application for Membership (Art. 28, PCC) An applicant for membership shall be deemed a member after approval of his membership by the board of directors and shall exercise the rights of member after having made such payments to the cooperative in respect to membership or acquired interest in the cooperative as may be prescribed in the bylaws. In case membership is denied or refused by the BOD, an appeal may be made to the general assembly and the latter’s decision shall be final. For this purpose, the general assembly may opt to create an appeal and grievance committee, the members of which, shall serve for a period of one (1) year and shall decide appeals on membership application within thirty (30) days upon receipt thereof. If the committee fails to decide within the prescribed period, the appeal is deemed approved in favor of the applicant. (Art. 28, PCC) 20.6 Liability of Members (Art. 29, PCC) A member shall be liable for the debts of the cooperative to the extent of his contribution to the share capital of the cooperative. 20.7 Termination of Membership (Art. 30, PCC) 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 cooperative bylaws, the withdrawing member shall be entitled to a refund of his share capital contribution and all other interests in the cooperative. However, such refund shall not be made if upon such payment of the value the assets of the cooperative would be less than the aggregate amount of its debts and liabilities exclusive of his share capital contribution. 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 be considered valid grounds for termination of membership. A member may be terminated by a vote of the majority of all the members of the Board of Directors for any of the following causes: * When a member has not patronized the services of the cooperative for an unreasonable period of time as may be fixed by the Board of Directors; ‘| When a member has continuously failed to comply with his obligations;When a member has acted in violation of the bylaws and rules of the cooperative; For any act or omission injurious or prejudicial to the interest or the welfare of the cooperative. Note: Refund Interests These are all sums computed in accordance with the bylaws to be due from a cooperative to a former member, and shall be paid to him either by the cooperative or by the approved transferee as the case may be, in accordance with the Philippine Cooperative Code. 20.8 Administration and Management of Cooperatives. ‘An important factor in the success of a cooperative is the presence of capable and dedicated leaders these are the people who are expected to provide guidance and support to the cooperative. Leaders are the people who promote more active membership participation The management of cooperatives must be made the responsibility of qualified, competent, honest and dedicated officers and members of its Board of Directors, Committees, and Management Staff. However, at the helm of cooperatives is its General Assembly, which shall be composed of such members who are entitled to vote under the articles of cooperation and bylaws of the cooperative. 20.8.1 Powers of the General Assembly (Art. 33, PCC) The general assembly shall be the highest policy-making body of the cooperative and exercise such powers as stated in the Code, in the articles of cooperation and in the bylaws of the cooperative. It has exclusive powers which cannot be delegated which includes: 1. To determine and approve amendments to the articles of cooperation and bylaws; 2. To elect or appoint the members of the BOD, and to remove them for cause; 3. To approve developmental plans of the cooperative. Note: Subject to such other provisions of the Code and only for purposes of prompt and intelligent decision-making the general assembly may by a three-fourths (3/4) vote of its members with voting rights, present and constituting a quorum, delegate some of its powers to a ‘smaller body of the cooperative, which are enumerated in the cooperative's bylaws. 20.8.2 Meetings, Quorum and Voting System Meetings of the general assembly could either be regular or special. When held annually on a date fixed in the bylaws, or if not so fixed, on any date within ninety (90) days after the close of each fiscal year, it is a regular meeting, which requires sending out of a notice in writing, by posting or publication, or through other electronic means to all members of record. On the other hand, whenever necessary, a special meeting of the general assembly may be called at any time by a majority vote of the BOD or as provided for in the bylaws. Requisite notice in writing sent out at least one (1) week prior to the meeting to all members entitled to vote. The BOD may likewise call a special meeting by complying with the required notice within one (1) month after receipt ofa request in writing from at least 10% of the total members who are entitled to vote to transact specific business covered by the call. In any type of meetings in a cooperative, a quorum is necessary to validate the proceedings. A quorum shall consist of at least twenty-five per centum (25%) of all the members entitled to vote. Each member of a primary cooperative shall have only one (1) vote. In the case of nnas provided for in the bylaws but not to exceed five (5) votes. The vote cast by the delegates shall be deemed as votes cast by the members thereof However, the bylaws of a cooperative other than a primary may provide for voting by proxy, which means allowing a delegate of a cooperative to represent or vote in behalf of another delegate of the same cooperative. 20.9 Composition and Term of the Board of Directors (Art. 37, PCC) ‘The direction and management of the affairs of a cooperative is 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 and qualified, or until duly removed for cause. 20.9.1 Powers of the Board of Directors (Art. 38, PCC) The board of directors shall be responsible for the strategic planning, direction-setting and policy-formulation activities of the cooperatives. 20.9.2 Qualifications of Directors (Art. 39, PCC) ‘The following are the rules pertaining to the directors of a cooperative: 1. Any member of a cooperative who under the bylaws of the cooperative, has the right to vote and possesses all the qualifications and none of the disqualifications provided in the laws or bylaws shall be eligible for election as director. 2. 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. 3. 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 asa director of said cooperative 20.9.3 Meeting of the Board and Quorum Requirement (Art. 40, PCC) 1. In the case of primary cooperatives, regular meetings of the BOD shall be held at least once amonth. 2. Special meetings of the BOD may be held at any time upon the call of the chairperson or a majority of the members of the board. Written notices specifying the agenda shall be given to all members of the board of directors at least one (1) week before the said meeting. 3. A majority of the members of the board of directors shall constitute a quorum for the conduct of business, unless the bylaws provide otherwise. 4. Directors cannot attend or vote by proxy at board meetings. 20.9.4 Vacancy in the Board of Directors (Art. 40, PCC) 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 elected to fill a vacancy shall serve only the unexpired term of his predecessor in office. 20.10 Officers of the Cooperative (Art. 42, PCC) ‘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 valid ground for removal unless evidenced by acts or omissions 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 manner has interests in conflict with the cooperative shall serve as an appointive officer. In like manner, no two (2) or more persons with relationship up to third civil degree of consanguinity or affinity shall serve as an appointive officer. 20.11 Committees of Cooperatives (Art. 43, PCC) ‘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 it in the bylaws or by a majority vote of all the members of the board of directors. 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 audit committee 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 management control system and audit the performance of the cooperative and its various responsibility center. 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 or appointed shall serve only for the unexpired portion of the term. 20.12 Functions and Responsibilities of Directors, Officers and Committee Members The functions and responsibilities of directors, officers and committee members shall be those prescribed in the bylaws of the cooperative. 20.13 Liability of Directors, Officers and Committee Members (Art. 45, PCC) Directors, officers and committee member who 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 or pecuniary interest in conflict with their duty as such directors, officers or committee members shall be liable jointly and severally for all damages or profits resulting therefrom to the cooperative, members, and other persons. | # Note: Self dealing Directors, Officers, or Committee Members A contract entered into by the cooperative with one (1) or more of its directors, officers, and committee member is voidable, unless the conditions set forth by law are present: a) presence of such director in the board meeting wherein the contract was approved was not necessary to constitute a quorum; b) 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 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.L a Note: 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. Provision applies notwithstanding the fact that the director used his own funds in the venture. 20.14 Removal of any Elected Officer (Art. 50, PCC) 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. An elective officer may be removed by three-fourth (3/4) votes of the regular members present and constituting a quorum, in a regular or special meeting general assembly meeting called for the purpose. The officer concerned shall be given an opportunity to be heard at such assembly. ‘ Membership in a cooperative refer to that body of persons that comprises an organization. For a cooperative, this constitute its very existence. However, only those that possess the qualifications can be admitted as member subject to the approval of the board of directors. © In our jurisdiction, members of cooperatives can be natural persons who must be Filipino citizens and of legal age; cooperatives; and non-profit organizations provided they possess juridical personality. As members, they acquire rights and at the same time responsibilities and liabilities which are prescribed by the Code and of related laws. ‘The highest policy-making body of the cooperative is the General Assembly, which is composed of such members who are entitled to vote under the articles of cooperation and bylaws of the cooperative. It exercises exclusive powers which cannot be delegated. Since the administration and management of the affairs of the cooperative cannot be done by the general assembly due to its sheer size, hence, these functions are delegated to a Board of Directors, Officers and Committee Members, each of whom have respective responsibilities and task to perform, which is expected to be carried out for the best interest of the cooperative and its members. In violation of which, directors, officers and committee members can be held liable for damages, jointly and severally, and ground enough for their removal from office.Unit XXI: Capital, Property, Funds and Members’ Right to examine cooperative books wi Introduction Bz Unit Learning Objective By the end of this unit you should be able to: “How you spend your time is far more important than how you spend your money. With money mistakes can be corrected but time is gone forever.” © Determine the rules governing Fundamental to the survival of any organization is its cooperative's capital sourcing, ability to mobilize necessary resources to forward its manner of auditing, and member's own purposes. Cooperatives, like any organization right to examine records through requires capital to finance its operational and ‘Matching of Legal Terms organizational needs in order to pursue and realize the goals it had set. The challenge lies in how it can maintain a volume of transaction within its ability to source funds. This unit discusses the sources from where cooperative capital is derived, the impact of members’ patronage to capital-build up efforts of the cooperative, the extent to which a member may own in terms of the allowable share capital holdings in a cooperative, and the breadth of cooperative’s use of its capital in external investments. Included in the unit, are the provisions that serve as a safety net and protection to the capital contributions of members and other sums collected, received and disbursed, by assuring transparency through appropriate audit, inquiry and member's right to examine cooperative books and records. — The unit will run for one day only. You can devote 3 hours of your day on the subject. Don't worry, the content is simplified, which means it only include the most salient points you need to know relative to our module learning outcome. Since this is the last week of Block 3 stay focused and persevere so you can sail smoothly through the course. Geen up: Before you proceed to the actual cognitive feat, try this brain teaser so you can get those neurons working! © Did you getit? Not yet? It’s alright, take your time. You can always ask help from your siblings. Tet you can do it on your own, Just keep thinking.Oeesine Started! People join cooperatives primarily for economic benefits - services and increased income. Most people want to be shown the advantages of cooperative membership. If those benefits are not evident, few prospects wil join and even if they do, they probably will not regularly patronize the cooperative. Membership responsibilities start with the conception of the cooperative and remain throughoutits life to assure successful organization, sound management, and operation. When members are involved and informed about the cooperative, they measure their needs in terms of pesos and are more willing to invest in and patronize the cooperative. Cooperative members must be intimately familiar with it and assume a positive, broad role in its management and direction, understand its purpose, objectives, benefits, limitations, operations, finances, and long term plans, read and understand the articles of cooperation and bylaws, know what laws limit their rights or powers and those of their board of directors. Understand that bylaws or policies of the elected directors further limit their operations by establishing member obligations, regulations and quality controls exceeding those prescribed by legal statutes and provide equity /risk for the cooperative business. Most cooperatives have small beginnings and find it necessary to borrow. Later, as it become established and business services expand, they generally find it neither necessary nor wise to rely only on member capital to meet all financial needs. The member or equity capital is used as a base to apply fora loan. In sum, member's participation in the affairs of the cooperative increases their feeling of ownership and responsibility for its success. 21.1 What is Capital? For cooperatives, as well as in the case of any typical business organization, it is the amount of and source of money to start and to operate a cooperative. In its strict sense, it is the capitalization required to allow the cooperative to organize itself into a viable economic driver and get the nod of the Authority to register and commence operation for the purpose which it has been establish. Recommendations for planning capitalization may include: 1) To determine whether the capital structure is to be stock or nonstock; 2) Toestimate the amount of member investment (risk capital); and 3) To estimate the amount and source of borrowed money needed (debt capital) a Note: Stock or Nonstock Capital Structure ‘A new cooperative may choose either Stock or Nonstock method for |structuring risk capital. In a stock cooperative, members are issued stock certificates as levidence of their membership and capital investment. While in nonstock cooperatives, a |capital or membership certificate is issued which is the equivalent of preferred stock issued by a stock corporation, sold in various denominations, may bear interest, may not Ihave a due date, and have no voting privileges and may be owned by nonmembers. 21.2 Sources of Cooperative Capital (Art.72, PCC) Starting a new cooperative and sustaining it can create a need for substantial capital. A problem may develop when trying to operate with limited membership equity capital and sizable total capital requirements. Therefore, additional sources for funds are needed