COOPERATIVES(summary)

GOVERNING LAW

→ 1990-2007
• RA No. 6938
• Cooperative Code of the Philippines

→ 2008-PRESENT
• RA No. 9520
• Philippine Cooperative Code of the Philippines
What is COOPERATIVE?

→ A cooperative is an autonomous and duly registered association of persons, with a common bond of interest, who
have voluntarily joined together to achieve their social, economic, and cultural needs and aspirations by making
equitable contributions to the capital required, patronizing their products and services and accepting a fair share of
the risks and benefits of the undertaking in accordance with universally accepted principles (Art. 3, RA 9520).
Cooperative Principles

1. Open and voluntary membership

2. Democratic member control

3. Member economic participation

4. Autonomy and independence

5. Cooperative education

6. Cooperation among cooperatives

7. Concern for community

Who is the implementing agency?

→ The Cooperative Development Authority (CDA), under the Office of the President created under RA No. 6839, is
the agency charged with the authority and responsibility for implementing the program of cooperatives development.

→ In Corporation, the implementing agency is the Securities and Exchange Commission (SEC) while in
Cooperative, the implementing agency is the Cooperative Development Authority (CDA).
Basic Requirements
NOTE:
• The par value of shares of a primary cooperative
shall not exceed PhP1, OOO.

• No member of primary cooperative other than

cooperative itself shall own or hold more than 10%
of the share capital of the cooperative.
Commencement of Juridical Personality
→ Issuance of Certificate of Registration by CDA.

NOTE: Such issuance of Certificate is the CONCLUSIVE evidence that a Cooperative is duly registered.

NOTE: The CDA shall periodically assess the
required paid-up share capital and may increase
it every five (5) years when necessary upon
consultation with the cooperative sector.
NOTE: If the application for registration
was not disposed or approved of by the
CDA within a period of 60 days from the
filing thereof, the consequence is that, such
application is deemed APPROVED.

→ Question: If there is a contract executed between private persons and cooperatives prior to the registration of the
cooperative, is it valid?
Ans: Yes. It is valid. (Art. 19 of the Cooperative Code)
Voting Requirements

Note: An elected officer of a cooperative may be

removed by 3/4 a vote of all members with voting
rights, present and constituting a quorum in a
meeting called for the purpose.
Categories of Cooperatives

1. PRIMARY – Members are natural persons.

2. SECONDARY – Members are primaries.

3. TERTIARY - Members are secondary cooperatives. It can be a federation which comprises of three or more
cooperatives doing the same line of business.

NOTE: In terms of Voting rights, under Art. 36 of the Cooperative Code each member of a PRIMARY cooperative shall
have only one (1) vote. In case of members of SECONDARY OR TERTIARY cooperatives, they shall have one (1) basic
vote and as many incentive votes as provided for in by-laws but not exceed five (5) votes.
Membership
Note: No member shall transfer his shares
or interest in the cooperative or any part
thereof unless he has held such share
capital contribution or interest for not less
than one (1) year.

KINDS OF MEMBERS

1. REGULAR MEMBERS – They are entitled to all the rights and privileges of membership.

2. ASSOCIATE MEMBERS - Entitled only to such rights conferred by the bylaws. No right to vote and be
voted.

NOTE: Associate Members may be regular members if he/she is:

 Member for 2 continuous years.
 Patronizing cooperative as a member.
 Signifies his intention to be a regular member.

* BOD can terminate membership.

Grounds for Termination

→ 1. Failure to comply with his obligation (Continuous)

→ 2. Violation of the by-laws/rules of coop.

→ 3. Act or omission injurious or prejudicial to the interest of the welfare of the cooperative

→ 4. Not patronizing the services of the cooperative for unreasonable period of time.
Quorum
Capitalization

→ Issuance of Preferred Share Capital

1. Shall be prescribed in the By-Laws

2. Shall not exceed 25% of the total authorized capital.

→ Subscription Agreement – additional subscription is allowed only when initial subscription is fully paid.

→ Share Agreement –shall be issued by the Cooperative at the end of every calendar year based on the number of
shares fully paid for the said period.
Prohibitions

→ Cannot issue multiple types of common shares with different par value share.

→ Par Value cannot be increased or decreased by way of amending it AOC and By-Laws.

LIMITATIONS ON SHARE CAPITAL HOLDINGS

→ No member of a primary cooperative other than the cooperative itself shall own or hold more than 10% of the share
capital of the cooperative.

DISQUALIFICATIONS OF GOV. EMPLOYEES

→ An officer of the CDA is disqualified to be appointed to any position in the cooperative.

→ An elective government official is disqualified to become officers and directors except to a partylist representative.
Board of Directors

→ What is the composition of the BOD in a Coop?

Ans: Minimum of 5 but not exceeding 15 persons.

→ What is the term of a BOD in a Coop?

Ans: 2 years
Types of Cooperatives
1. Credit Cooperative –promotes and undertakes savings and lending services among its members.

2. Consumers Cooperative –the primary purpose is to procure and distribute commodities.

3. Producers Cooperative –undertakes joint production whether agricultural or industrial.

4. Marketing Cooperative –engages in the supply of production inputs to members and markets their products

5. Service Cooperatives –engages in medical, dental care, insurance and other services.

6. Advocacy Cooperative –promotes and advocates cooperativism among its members and public through education
and training etc.

7. Multipurpose Cooperative –combines 2 or more of the business activities of these different types of cooperative.

Notes: A. No cooperative shall be registered as a multipurpose cooperative unless it has been in operation for at
least 2 years. B. Cooperatives with a minimum paid-up capital of 100k or as required in the feasibility study,
whichever is higher may be allowed to transform into a MP Cooperative except agriculture cooperatives and agrarian
reform cooperatives.
Types of Cooperatives
8. Agrarian Cooperatives –organized by marginal farmers majority of which are agrarian reform beneficiaries for the
purpose of developing an appropriate system of land tenure, development, consolidation or management in areas covered by
agrarian reform.

9. Dairy Cooperative –its members are engaged in the production of fresh milk which may be processed and/or marketed as
dairy products.

10. Education Cooperative –Organized for the primary purpose of owning and operating licensed educational institutions
notwithstanding the provisions of R.A. 9155(Governance of Basic Education Act of 2001).

11. Cooperative Bank –organized for the primary purpose of providing a wide range of financial services to cooperatives
and their members.

12. Electric Cooperative –organized for undertaking of power generations, utilizing renewable energy sources, including
hybrid systems, acquisition and operation of subtransmission or distribution to its household members.

 Minimum paid up capital : P15,000

 Energy Regulation Commission (ERC) shall within 45 days from the close of each fiscal year, issue a certificate to the
Types of Cooperatives
13. Credit Cooperative (Financial Service) – organized for the primary purpose of engaging in savings and credit services
and other financial services.

14. Fishermen Cooperative -organized by marginalized fishermen in localities whose products are marketed either as
fresh or processed products.

15. Health Services Cooperative -organized for the primary purpose of providing medical, dental and other health
services.

16. Housing Cooperative -organized to assist or provide access to housing for the benefit of its regular members who
actively participate in the savings program for housing. It is co-owned and controlled by its members.

17. Insurance Cooperative- Engaged in the business of insuring life and property of cooperatives and their members.

Failure to secure the Certificate of Authority from the Insurance Commission within two (2) years from the date of
its registration with CDA shall be a ground for the revocation/cancellation of the Certificate of Registration.
Types of Cooperatives
18. Transport Cooperative. Includes land and sea transportation, limited to small vessels, as defined or classified under
the Philippine maritime laws, organized under the provisions of this Code.

19. Water Service Cooperative. Organized to own, operate and manage waters systems for the provision and distribution
of potable water for its members and their households.

20. Labor Service Cooperative -engaged in providing a specific labor, job, or service to a principal under a contracting or
subcontracting arrangement.

21. Workers Cooperative -organized by workers, including the self-employed, who are at the same time members and
owners of the enterprise. The principal purpose is to provide employment and business opportunities to its worker
members and manage it in accordance with the cooperative principles.
22. Single purpose Cooperative - Include coop undertaking 23. Laboratory Cooperative - A cooperative
activities which are related to its main line of business or organized by minors.
purpose
• May transform into a multipurpose or may create
subsidiaries only after at least two (2) years of
operations. (RA 9520, Art. 10)
Meetings

→ REGULAR MEETING

Art 34 of the Cooperative Code provides that regular meeting must be held annually by the General Assembly 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.

→ SPECIAL MEETING

Special meeting may be called at any time by a majority vote of the BOD or as provided for in the bylaws, provided
that written notices shall be given to all members of the board at least one week before the said meeting.
Compensation

→ General Rule: The directors shall not receive any compensation except for reasonable per diems.

Exception: The Bylaws provides for their compensation

NOTE: No additional compensation other than per diems shall be paid to a director of a cooperative during First year of
existence of any cooperative.
Merger and Consolidation

→ Procedures:
Dissolution
1. Expiration of Charter

2. Voluntary Dissolution

3. Judicial Proceedings

4. Dissolved by Order of the Authority

Procedures:

a. Board of Liquidators/Trustees shall submit its Final Report.

b. Authority may cancel the cooperatives Certificate of Registration if it is proven that the cooperative has no assets, or its
whereabouts is unknown, despite diligent efforts to ascertain it. These facts shall be stated in the Order of Cancellation.
No winding up shall be observed.

Question: Upon dissolution of a cooperative, what happens to the capital donated to said cooperative?

Ans: It shall be subject to escheat.

Tax Treatment
Audit
→ Shall be conducted by:

 External Auditor

 Member(good standing) of the PICPA

 Accredited by BOA and CDA

TWO KINDS OF AUDIT

1. Social Audit -assessment of its social impact and ethical performance vis-à-vis its stated mission.

2. Performance Audit -efficiency and effectiveness of the cooperative as a whole and its management and officer.
END