COOPERATIVE CODE OF THE PHILIPPINES

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 endeavor to create an atmosphere that is conducive
to growth and development of these cooperatives.

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 R.A.
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.

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.

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.
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.)

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 or a Firm . – As a 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.
c. 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.
d. Patronage on Obligation. – participants are normally obliged to fulfil an
agreement, which at times may lead to a liability for damages in the event of
a 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.
f. Patronage Dividend. – It is 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.
g. Capital of Cooperative. – Capital is not contributed for the purpose of
deriving anticipated profit but as a 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 profit as 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. In a 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.

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;
  Propagate cooperative practices and new ideas in business and management;
 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.

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;

i. 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;

l. 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. Fishermen 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;

q. Insurance Cooperative 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).

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 to all 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.

Cooerative 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 on a 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. – As an organization, cooperatives have to grow for
community service, since expansion is a 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 as a 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.

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.

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.

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

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 following:
 Certificate of Compliance for the preceding year;
 Oath 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 of a 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;
3. Presence of Operational Structure;
4. Submission of summary reports to the head office;
5. Presence of a Barangay Permit and a Mayor’s Permit that should be posted in the
office at all times;
6. Maintenance of Accountable Forms (e.g. Cash
Acknowledgment/Provisional/Official Receipts, vouchers, etc.);
7. Maintenance of record of daily transactions to be submitted to the
principal/main office;
8. Official Receipts showing payments of processing fees;
9. Availability of appropriate logistics
10. Presence of a 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