RA 9520

PHILIPPINE COOPERATIVE CODE OF 2008

Objective: to foster the creation and growth of cooperatives to promote self-reliance and harness people power

Scope of Application: organization, and registration of cooperatives and its responsibilities, rights and privileges,
membership, administration, insolvency, audit, inquiry and member’s right to examine, capital, property and
funds, and allocation and distribution of net surplus

CHAPTER ONE: GENERAL CONCEPTS AND PRINCIPLES

 Cooperatives
 Cooperative
 An autonomous, 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:
 Voluntary and open membership
 Democratic member control
 Member economic participation
 Autonomy and independence
 Education, training and information
 Cooperation among cooperatives
 Concern for community
 Single-Line or Single-Purpose Cooperative
 Cooperative undertaking activities related to its main line of business or purpose
 Service Cooperatives
 Cooperatives providing any type of service to its members
 Subsidiary Cooperatives
 Any organization all or majority of whose membership or shareholders come from a
cooperative
 Organized for any other purpose different from that of the cooperative
 Receives technical, managerial and financial assistance from the cooperative
 Federation of Cooperatives
 Three or more primary cooperatives
 Similar line of business
 Organized in support of its member-cooperatives
 Registered similarly as that of a cooperative
 Functions (Art. 24):
 To carry on any cooperative enterprise that complements, augments or supplements
that of its members
 To carry on, encourage, and assist educational and advisory work relating to its
member cooperatives
  To render services to improve conduct of business of its members and facilitate its
systems and procedures
 To print publications in the interest of its members
 To facilitate and coordinate member activities
 To enter into joint ventures in the manufacture and sale in the Philippines and abroad
 Cooperative Unions (Art. 25)
 Represents the interest and welfare of all types of cooperatives at the provincial, city,
regional, and national levels
 Joined by registered cooperatives and federations
 Purposes:
 To represent its members
 To acquire, process and disseminate information relating to its members and to all
types of cooperatives within its area of operation
 To sponsor studies in the phases of cooperation and publish the results
 To promote knowledge of cooperative principles and practices
 To develop the cooperative movement
 To advise appropriate authorities on all questions regarding cooperatives
 To raise funds
 To do non-business activities necessary to attain the foregoing
 May assist the national and local governments in its development activities
 Components of a Cooperative
 Member
 Natural or juridical persons admitted as member who adheres to the cooperative’s
principles
 excludes corporations
 General Assembly (GA)
 Highest policy-making body of the cooperative
 Exercises the powers, rights, and obligations of the cooperative (Art. 9):
 To sue and be sued
 To succession
 To amendment of its articles
o Vote: 2/3 VM
 To adopt, amend, and repeal its by-laws
 To deal with real and personal property in lawful cooperative affairs
 To enter into division, merger, or consolidation
 To form subsidiary cooperatives and join federations or unions
 To loans, credit, grants, donations and assistance that will not undermine its
autonomy and to assistance in documentary requirements from the CDA upon written
request
 To preferential rights in the grant of franchises
 To organize and operate schools
 Composition
 All members entitled to vote
o General Rule: Full membership of the cooperative duly assembled
o Exception: Cooperatives with numerous and dispersed membership
where elected delegates may represent certain sectors, chapters or
districts
  Exclusive powers
 To determine and approve amendments to the Article and By-Laws
 To elect or appoint and remove for cause the Board members
o Exception: electric cooperatives, held in accordance with bylaws or
election guidelines
 To approve developmental plans of the cooperative
 Representative Assembly
 Full membership of a body of elected representatives
 Exercises the powers lawfully delegated by the General Assembly
 Lawful delegation requirements (Art. 33):
o Purpose: for prompt and intelligent decision-making
o Vote: ¾ VPQ
o Listed: by-laws
 Directors (Art. 39)
 Eligibility
 General Rule: member who has the right to vote
o Exception: appointee of a financial institution from which the
cooperative receives financial assistance from
 Need not be a member
 No power, right or responsibility
 Only provides technical assistance as required
 Admitted via a Board resolution
 possesses all the qualifications and no disqualifications
 shall not hold any other position directly involved in the day to day operation
and management of the cooperative
 Disqualified
 Person engaged in a similar business to that of the cooperative
 Anyone who has a conflict of interest with the cooperative
 Board of Directors
 In charge of the management of the cooperative affairs
 Strategic planning, direction-setting and policy-formulating (Art. 38)
 May be delegated powers by the General Assembly
 Removed by the General Assembly
 Composition and Term (Art. 37)
 5 to 15 directors
 Elected by the General Assembly
 Term does not exceed 2 years
o Holds office until:
 successors are duly elected and qualified; or
 duly removed for cause
 Vacancy (other than by expiration of term)
 If still constituting quorum: majority (50% + 1) vote of remaining directors
 If not: general assembly meeting
 Elected Board member only serves the remaining term
 Committee
  Body entrusted whose functions and responsibilities are listed under either:
 By-laws
 General Assembly resolution
 Board of Directors resolution
 Created by the by-laws:
 Executive committee
o Appointed by the Board
o Powers delegated by:
 By-laws
 Majority vote of Board members
 Audit and Election committees
o Elected by the General Assembly
o Audit Committee
 Accountable and responsible to the General Assembly
 Monitors the adequacy and effectiveness of cooperative’s
control system and audit the cooperative’s performance
 Other Committees
o Appointed by the Board
 Vacancy
 Board may elect or appoint a new person
 The elected or appointed serves only for the unexpired portion of the term
 Officers of the Cooperative (Art. 42)
 Eligibility (from where):
 Elected by the Board from among the Board:
o Chairperson
o Vice-Chairperson
 Elected by the Board from outside of the Board:
o Board members
o Committee members (created by the GA)
o General manager or CEO
o Secretary
o Treasurer
o Other members (under the by-laws)
 Disqualified:
 2 or more persons with relationships up to the 3rd civil degree of
consanguinity or affinity
 Persons engaged in similar business
 Persons having a conflict of interest
 Serve with good behavior
 Removed only upon valid grounds
 General Rule: Loss of confidence is not a valid ground
o Exception: evidenced by acts or omission causing such loss
 Others
 Cooperative Development Authority
 Government agency in charge of the registration and regulation of cooperatives
  Social Audit
 Assessment of the social impact and ethical performance of the cooperative to
evaluate its impact in the community and to be accountable for its decisions and
actions to its regular members
 Performance Audit
 Assessment of the efficiency and effectiveness of the cooperative to improve
performance and objectively inform the general membership of such performance

CHAPTER TWO: ORGANIZATION AND REGISTRATION

 Primary Objective of Cooperatives

 To help improve the quality of life of its members
 Cooperatives not in Restraint of Trade
 Cooperatives and their acts or methods that comply with the Code are not deemed to
conspire against and/or restraint trade by illegal monopoly, lessen competition or fix prices
 Organizing a Primary Cooperative
 Primary cooperative
 a cooperative whose members are natural persons
 Requirements
o 15 or more natural persons
 Filipino citizens
 Of legal age
 Exception: Laboratory Cooperatives
o organized by minors; affiliated with a registered
cooperative
o Common bond of interest
o Residing or working in intended area of operation
o Completion of a Pre-Membership Education Seminar (PMES)
 Primary/Single-Line to Multi-Purpose Cooperative or Creation of Subsidiaries
 Compliance with minimum requirements of a multi-purpose cooperative
 Operations have gone on for at least 2 years
 Liability
 Limited liability
 Term
 Initial Registration
 Maximum of 50 years from the date of registration
 Extension or Renewal
 Maximum of 50 years from end of expired term
 Amendment of term under the Articles
 Vote: 2/3 MV
 Made no sooner than 5 years prior to original or subsequent expiry date (earliest time)
 Exception: justifiable reasons as per the CDA
 General Statement and Economic Survey
 General Statement
  Describes the structure and purpose, including a staffing pattern and the necessary
personnel
 Includes a bookkeeper
 Economic Survey
 Indicates the area of operation and size of membership
 Articles and By-Laws
 Articles
 Filed with the CDA
 Signed and acknowledged by:
 If natural persons: all organizers themselves
 If juridical persons: chairperson or secretaries
 Notarized
 Components:
 Name (always include “Cooperative)
 Purpose and scope of business
 Term
 Area of operation and postal address of principal office
 Registrants (name, nationality and postal address)
 Common bond
 Directors (name)
 Share capital (amount, contributor, classification (PST)
 Attachments:
 By-laws
 Economic survey and general statement
 Bonds of the accountable officers (Art. 56)
o Covered by a surety bond determined by the Board
o Renewed annually
 Sworn statement of the treasurer
o 25% - 25% rule
o Minimum paid-up capital of P15,000
 Periodically assessed by CDA, cooperative sector and NEDA for
necessary increase every 5 years
 By-Laws
 Components:
 Membership (admission, maintenance, loss or termination of)
 Rights and liabilities of membership
 Permission of transfer or assignment of shares and interest
 Rules and procedures (meetings, quorum, requirements, voting system, etc.)
 General conduct of affairs (the GA, Board, committees and officers)
 Capital (how to raise, what for)
 Custody, investment and distribution of net surplus
 Loans and borrowing
 Adopting, amending, repealing and abrogating by-laws
 Amendment of Articles/By-Laws
 Vote: 2/3 VM
  without prejudice to right of dissenting members to withdraw their membership
 Proper indication of amendments
 Copies
 Certified, under oath, by secretary and majority of the Board that the same are
approved by the required 2/3 VM vote
 Submitted to the CDA
 Effectivity:
 Approval: upon approval by the CDA
 Inaction: after the 30-day period from the date of filing for a cause not
attributable to the cooperative
 Registration of a Cooperative
 Acquisition of Juridical Personality
 General Rule: Issuance of Certificate of Registration
 Certificate of Registration: conclusive evidence that the cooperative is duly
registered unless proven that the registration has been cancelled
 Exceptions:
 Inaction from the CDA
o Application is deemed approved if after 60 days from the filing, such
application was not disposed of by the CDA
 Exception: if the cause of the delay is attributable to the
applicant
 Inaction from the Office of the President
o Appeal is deemed approved if after 90 days from the receipt of
notice (of denial by the CDA), there is failure to act on such appeal
 Contracts executed prior registration
 Valid and binding as recognized transactions of the cooperative if such formal written
contracts were entered into under the name of the Cooperative
 Requirements in the Division, Merger, and Consolidation of Cooperatives
 Division
 Division into 2 or more cooperatives
 Approved resolution voted upon by ¾ VPQ
 Compliance of requirements set in the Code
 Shall not be created in fraud of creditors
 Legally established upon registration with the CDA
 Merger or consolidation
 Two or more cooperatives merge into a single cooperative wherein there shall be the
constituent cooperatives while one is the consolidated cooperative
 Requirements:
o ¾ VPQ vote
 Without prejudice to rights of dissenting members to withdraw
their membership
o Compliance with guidelines set by the CDA
o Legally established upon issuance of the Certificate of Merger or
Consolidation
 Merger: A+B = A / A+B = B
 Consolidation: A+B = C
  Effects:
o Constituent cooperatives shall become one
 Merger: surviving cooperative
 Consolidation: newly created consolidated cooperative
o Separate existence of constituent cooperatives ceases
o Surviving/Consolidated cooperative possesses and is subject to all
the rights, privileges, immunities, powers, assets, rights and
franchises and duties and liabilities, respectively
 Rights of creditors and liens are not impaired by the merger or
consolidation
 Types and Categories of Cooperatives
 Types
 To members only:
 Credit Cooperative – savings and lending services to provide financial
assistance
 Marketing Cooperative – supply of production inputs and marketing of
products
 Service Cooperative – medical and dental, hospitalization, transportation,
insurance, housing, labor, electric light and power, communication,
professional, etc.
 Cooperative Banks – financial services
 Electric Cooperative – power generation, acquisition and operation of sub
transmission or distribution to households
 Housing Cooperative – assist or provide access to housing for regular
members who actively participate in the savings program for housing
 Insurance Cooperative – insuring life and property
 Water Service Cooperative – own, operate and manage water systems for
provision and distribution of potable water
 Workers Cooperative – provide employment and business opportunities
 To members and non-members:
 Consumer Cooperative – procures and distributes commodities
 Producers Cooperative – undertakes joint production and processing of raw
materials or goods produced by its members to finished goods or processed
products for sale
o Deemed products of the cooperative: arising from the raw materials
produced by its members sold in the name of and for the account of the
cooperative
 Advocacy Cooperative – promotes and advocates cooperativism
 Agrarian Reform Cooperative – developing an appropriate system of land
management in areas covered by agrarian reform
 Dairy Cooperative – produces, processes, and markets fresh milk and dairy
products
 Education Cooperative – owning and operating licensing educational
institutions
  Financial Service Cooperative – savings and credit services and other financial
services
 Fishermen Cooperative – market fresh or processed products
 Health Services Cooperative – medical, dental and health services
 Transport Cooperative – land and sea transportation, limited to small vessels
 Multipurpose Cooperative
 Categories
 According to membership:
 Primary – natural persons
 Secondary – primaries
 Tertiary – secondary cooperatives
 According to territory: according to area of operations

CHAPTER THREE: MEMBERSHIP

 Kinds
o Regular Member
 Complied with all requirements
 Entitled to all rights and privileges
o Associate Member
 No right to vote and be voted upon
 Entitled to rights and privileges limited by the by-laws
 May become a regular member by:
 Meeting minimum requirements
 Patronizing the cooperative for 2 years
 Signifying intention to remain a member
 Liability of members for debts of the cooperative
o To the extent of his share capital contribution (limited)
 Government Officers and Employees
o As to cooperative membership
 eligible
 Allowed to use official time for attendance at the general assembly, meetings,
seminars, conferences, workshops, and training courses of the cooperative
 Exception: when adversely affects operations of the office
o As to positions in a cooperative
 General Rule: allowed
 Exceptions:
 CDA officers and employees
o Exception (eligible): when the cooperative is organized by such
officers and employees
 Elective government officials
o Exception (eligible): party list representative who is already an officer
of the cooperative he/she represents
 Application for Membership
 o When deemed member
 After approval by the Board
 After appeal is approved by the General Assembly
 Inaction of the Appeal and Grievance Committee beyond the 30-day period after
receipt of such appeal
 Appeal and Grievance Committee: members of which serve for 1 year
o When rights may be exercised
 After making payments in respect to membership or acquired interest
 Termination of Membership
o Withdrawal of a member
 Upon any valid reason
 60-day notice to the Board
 Entitles the member to a refund of his share capital contribution and interests
 Exception: if, upon such payment, the cooperative becomes insolvent (assets
< debts and liabilities), exclusive of his share capital contribution
 Paid either by the cooperative or the approved transferee (Art. 31)
o Death or insanity of a member / Insolvency or dissolution of a member cooperative
 May be considered grounds for termination
 For death or insanity of an agrarian reform-beneficiary member, next-of-kin may
assume duties and responsibilities
o Board majority (50% + 1) vote
 For any of the ff. causes:
 Not patronized for an unreasonable period of time
 Continuous failure to comply with obligations
 Violated by-laws and rules
 Any act or omission injurious or prejudicial to the cooperative
 Candidate be informed in writing and be given an opportunity to be heard
 Board decision, in writing, be communicated in person or by registered mail within 30
days from receipt thereof
 Appealable to the General assembly
o Decision shall be final
o Inaction after 30 days from the receipt of appeal deems the
termination cancelled
o While decision is pending, membership remains in force

CHAPTER FOUR: ADMINISTRATION

 Meetings of the General Assembly

o Regular meetings
 When called
 Annually
o Date fixed in by-laws
o Within 90 days from close of fiscal year
 Notice
  Written
 To all members of record
 May be waived by any member
o Special meetings
 Who calls
 Board of Directors
 When called
 Newly approved cooperative
o Within 90 days from approval
 Whenever necessary
o Upon majority (50% + 1) vote of the Board
o By-laws provide
o 1-week prior notice to all members entitled to vote
 Exception (limited to member who waived): when waived by
any member
 Request from members
o written
o at least from 10% of all members entitled to vote
o 1-month prior notice to all members entitled to vote
 Exception (limited to member who waived): when waived by
any member
 CDA calls
o For reporting results of examination or investigation of cooperative
affairs
o Failure of the Board to call
 Authority shall issue an order to the petitioners directing them to call a general
assembly meeting by giving proper notice, upon satisfying the ff.:
 Petition of at least 10% of members entitled to vote
 Good cause is shown
 Quorum
o At least 25% of members entitled to vote
 Exceptions:
 Cooperative Banks – (50% + 1) of voting shares of members in good standing
 Electric Cooperatives – 5% of all members entitled to vote
 Voting System
o Members of primary cooperatives
 1 vote
o Members of secondary or tertiary cooperatives
 As many as 5 votes
 1 basic vote
 4 incentive votes
 Votes of delegates are deemed votes of the members
o Voting by proxy
 Allowing a delegate to vote in behalf of another delegate of the same cooperative
 May be provided by the bylaws of a secondary or tertiary cooperative
 Meetings of the Board
o Regular meetings
 Primary cooperatives: at least once a month
o Special meeting
 Any time upon the call of:
 The chairperson
 Majority of the Board members
 Notice
 Written
 Given to all Board members
 At least 1 week before meeting
o What constitutes quorum
 Majority of the Board (50% + 1)
o Voting by proxy
 Disallowed
 Directors, Officers and Committee Members
o Compensation
 First year of Existence
 WITHOUT additional compensation
 WITH reasonable per diems
 Directors (absence of provision in by-laws)
 Compensation (regular)
o General Rule: WITHOUT
o Exception (with): majority VM vote
 Per diems
o General Rule: WITH
o Exception (without): Net loss or dividend rate < inflation rate in the
preceding year
 Officers (absence of provision in by-laws)
 Compensation (regular)
o WITH
 Per diems
o General Rule: WITH
o Exception (without): Net loss or dividend rate < inflation rate in the
preceding year
 Committee members and other employees (absence of provision in by-laws)
 Determined by the Board
o Functions, Responsibilities and Training requirements
 In accordance with CDA-issued rules and regulations
o Dealings with the Cooperative
 General Rule: voidable, at the option of the cooperative
 Exception: valid upon presence of the ff. conditions:
 In the case of directors:
o Presence unnecessary for quorum
o Vote unnecessary for approval of the contract
 o Contract is fair and reasonable
 In case either presence or vote requirement is not complied
with:
 contract may be ratified by ¾ VPQ
 adverse interest of the director, if any, is stated in
the meeting
 contract is fair and reasonable
 In the case of officers and committee members:
o Previous authorization from either the General Assembly or the
Board
o Liability
 Solidary liability for resulting damages or profits to the cooperative, members and
other persons when:
 Willfully and knowingly vote for or assent to patently unlawful acts
 Guilty of gross negligence or bad faith in directing cooperative affairs
 Acquire any personal or pecuniary interest in conflict with their duties
o when acquired interest or equity is adverse to the cooperative:
 liable for damages
 accountable for double the profits which would have
accrued to the cooperative
o Disloyalty of a Director
 By virtue of his office, a director acquires for himself an opportunity which should
belong to the cooperative, regardless if director used his own funds in the venture
 General Rule: Liability for damages and refund double the profits that would
have accrued to the cooperative
 Exception: Ratification by ¾ VPQ
o Illegal use of confidential information
 A director, officer or associate of whom, for his benefit, makes use of confidential
information, which, if generally known, might reasonably have an adverse effect on
the cooperative
 Liability:
o Liability equal to direct losses suffered
o Accountable for the direct benefit or advantage received or yet to
be received, resulting from the transaction
o Removal
 Process:
1. Complaints are filed with the Board of Directors
2. Investigation
o Majority Board vote may place officer under preventive suspension
while resolution is pending
3. Prima facie evidence of guilt is found
4. Board presents its recommendation for removal to the General Assembly
o ¾ VPQ vote
o Officer is given a chance to be heard
CHAPTER FIVE: RESPONSIBILITIES, RIGHTS AND PRIVILEGES OF COOPERATIVES

 Address
o Official postal address
 To which all notices and communications are sent
 Registered with the CDA
 Books to be kept open
o Must be readily accessible for inspection during reasonable office hours at its official address:
 Copy of the Code and relevant laws
 Copy of CDA regulations
 Copy of Articles and By-Laws
 Register of members
 Books of the minutes
 Share books, if any
 Financial statements
 Published annually and kept posted in a conspicuous place in the principal place of business
o Produced, maintained and safely kept by the accountant or the bookkeeper
o Continuously and periodically reviewed by the audit committee
o Disposition of documents, records or books more than 5 years old
 General rule: allowed
 Exception: transactions subject to civil, criminal and administrative proceedings
 Audited documents may be disposed after certification by the board secretary and
chairman of the audit committee and presentation to the Board
 Reports
o Regular reports of its program of activities must be made accessible to its members ad copies
be furnished to all members of record
o Files with the CDA within 120 days from the end of the calendar year
 Failure to do so:
 subjects the accountable officers to fines and penalties
 is a ground for revocation of authority to operate
 Failure to make, publish and file such records:
 Urges the Authority to send, within 15 days from expiration of prescribed 120-
day period, a written notice of non-compliance along with the fines and
penalties imposed until compliance
 Register of members
o Prima facie evidence of the dates when a member was admitted as or ceased to be a member
 Certified copies of entries
o Admissible as evidence of the existence of the entry
o Prima facie evidence of the matters and transactions recorded
o General rule: person or cooperative in possession of the books is not compelled to produce
such content in any legal proceeding
 Exception: cooperative is a party or by an order from a competent court
 Preference of Claims
o As to goods or services acquired and held through the proceeds of unpaid loans or credits
granted by the cooperative:
  CDA prior claim (on capital, deposits or interest of a member from debt)
 Cooperative
 Third party claims and liens
o Sales to third parties without permission of the cooperative are void. Lien shall continue to
exist despite such conveyance until duly extinguished by payment of debt or loan.
 A member may execute a written instrument authorizing his employer to deduct from
his salary the amount due and to remit the same to the cooperative
 The agreeing employer must then deduct and remit such amount to the
cooperative within 10 days from the end of the payroll month. The deduction
is made so long as the debt remains unpaid.
 Reasonable costs of deducting and remitting may be collected, in terms of
private employers
 Tax Treatment
o Not subject to any taxes and fees imposed
 Cooperatives which transact with members only
 Cooperatives which transact with both members and non-members on transactions
with members only
o TAX-EXEMPT
 Cooperatives with accumulated reserves and undivided net savings of up to
P10,000,000
 On national, city, provincial, municipal or barangay taxes
 On custom duties, advance sales or compensating taxes on importation of
machineries, equipment and spare parts
o Provided:
 used by them
 not available locally
 not sold nor transferred until after 5 years
 otherwise, subject to twice the amount of such tax or
duties
 Cooperatives with accumulated reserves and undivided net savings of more than
P10,000,000
 VAT-Exempt Transaction (Sec. 109 (L):
o Sales by agri-coops to their members and sales of the members’ produce,
whether in original or processed state (deemed products of the
cooperative), to non-members
o Exempt from compensating tax on importation of machineries, equipment
and spare parts provided such are used directly for the cooperative’s
operations
o At least 25% of the net income is returned to members as interest on share
capital or patronage refunds
 Regardless of amount of accumulated reserves and undivided net savings
 On local taxes
 Taxes on transactions with banks and insurance companies
o TAX-SUBJECT
 Cooperatives with accumulated reserves and undivided net savings of more than
P10,000,000
  Income tax: on interest on share capital
 VAT: on transactions with non-members
 Regardless of amount of accumulated reserves and undivided net savings
 On percentage taxes from sales or services rendered to non-members
o EXCEPT: producers, marketing or service cooperatives
o EXEMPT PRIVILEGES
 On notary service from the judge, in his ex officio capacity, in the:
 administration of oath
 acknowledgment of Articles
 loan instruments not exceeding P500,000
 On registration, with the register of deeds:
 of loan instruments not exceeding 250,000
 of documents drawn in connection with actions brought by the cooperative
 On payment of all court and sheriff’s fees payable
 On putting up a bond for bringing an appeal or for seeking to set aside third-party
claims
 Provided, certification from the CDA (that NA > required bond) serves as a
sufficient bond
 On securities issued by the cooperative
 Provided not speculative
o Donations may be tax-deductible
 Privileges
o Free deposit in the safes of government offices
o Preferential treatment in the allocation of agricultural inputs and implements and in rice
distribution
o Preferential and equitable treatment in the allocation or control of bottomries of commercial
shipping vessels
o Blanket loans or long-term wholesale loans for financing housing projects with interest rates
and terms equal to, or better than those for socialized housing projects, without need for
individual processing
o Free use of available space in their agency
 For cooperatives organized among government employees
o Secured franchise
 For cooperatives rendering special types of services and facilities
o Preferential right to supply government institutions and agencies
 Cooperatives concerned in the production of agricultural commodities
o Preferential rights in the management of public markets and/or lease of public market facilities,
stalls or spaces
 Cooperatives purposed for the production and/or marketing of products from
agriculture, fisheries and small entrepreneurial industries and federations
 Provided, not in an arrangement with a non-cooperative entity
 Provided, utilized exclusively by such cooperatives
o Entitlement to loans, credit lines and rediscounting of loan notes and other eligible papers with
other financial institutions except the BSP
 Cooperatives engaged in credit services
 o Entitlement to financing support for the acquisition and/or maintenance of land and sea
transport equipment, facilities and parts
 Public transport service cooperative
o Preferential right to management and operation of public terminals and ports where the
cooperative operates
 Public transport service cooperative
o Preferential right on securing a franchise for active or potential routes
 Public transport service cooperative
o Exemption from prequalification bidding requirements
 Cooperatives transacting business with the Government or GOCCs
o Privilege of being represented by the fiscal or Office of the Solicitor General free of charge
 EXCEPT when the adverse party is the Republic of the Philippines
o Preferential right in the management of the canteen and other services related to the
operation of the educational institution
 Cooperatives organized by faculty members and employees of educational
institutions
 Provided, operated within the premises of such institution

CHAPTER SIX: INSOLVENCY OF COOPERATIVES

 Insolvency proceedings
o When unable to fulfill obligations to creditors due to insolvency, apply for remedies under the
Insolvency Law
o Nothing precludes creditors from seeking protection

CHAPTER SEVEN: DISSOLUTION OF COOPERATIVES

 Voluntary Dissolution
o Where no creditors are affected, secure a Certificate of Dissolution from the CDA
1. Send out notices to the general public and to all members of record
 General public: publication of newspaper for 3 consecutive weeks, either in
the newspaper of the location of the principal office or of general circulation
 Members: letter of notice sent within 30 days prior the meeting, either by
registered mail or personal delivery
2. Hold the meeting and reach a Majority Board vote.
3. Issue a resolution effected by a ¾ VPQ vote.
4. Have a copy of the resolution certified to by majority of the Board and countersigned
by the Board Secretary.
5. CDA issues the certificate of Dissolution.
o Where creditors are affected, secure an Order of Dissolution from the CDA
1. File a petition for dissolution with the CDA.
 Signed by Board majority or managing officers
 Verified by the chairperson, board secretary or a director
  Sets forth all claims and demands against it
 Resolved by a ¾ VPQ vote
2. The CDA issues an order reciting the purpose of the petition and fixes a date
 Date must be within 30 to 60 days after the entry of the order
3. Copies of the order must be published in a local newspaper or one of general
circulation and posted in 3 public places within the cooperative office’s vicinity
 Newspaper: once a week for 3 weeks
 Poster: 3 consecutive weeks
4. Objections, if any, are filed
5. The CDA hears the petition and tries the objectives upon expiry of the 5-day notice to
file objections
6. The CDA issues the Order of Dissolution.
 Includes the ff.:
o cooperative assets and liabilities
o creditor claims
o number of members
o interests of members
 Involuntary Dissolution
o Dissolved by order of a competent court after due hearing on the ff. grounds:
 Violation of the law, regulations or by-laws
 Insolvency
o Dissolution by order of the CDA to revoke the certificate of registration of a cooperative after
due notice and hearing on the ff. grounds:
 Registration by fraud
 Illegal purpose
 Willful violation despite notice from the CDA
 Willful failure to operate on a cooperative basis
 Failure to meet minimum required members
 Dissolution by failure to organize and operate
o Failure to organize
 Within 2 years after issuance of certificate of registration
o Failure to operate
 For 2 consecutive years
 CDA sends formal notice to enable the cooperative to show cause for failure
to operate
o Failure to promptly provide justifiable cause warrants CDA to:
 Delete the cooperative’s name from the roster
 Deem the cooperative dissolved
 Liquidation
o Dissolved cooperatives retain such juridical personality for 3 years for the only purposes of:
 Prosecuting and defending suits
 Settlement and closure of affairs
 Disposition, conveyance and distribution of properties and assets
 May be conveyed to trustees of its members, creditors and other persons of
interest within such 3 years
 o Any asset distributable to unknown or unfound creditors, shareholders or members are given
to the affiliated federation or union of the cooperative
 Distribution of assets may be done only upon lawful dissolution and after payment of
all its debts and liabilities
 EXCEPTION (may also be done for): decrease in share capital as allowed

CHAPTER EIGHT: CAPITAL, PROPERTY, AND FUNDS

 Capitalization
o Sources
 Share capital of members
 Loans and borrowings
 Revolving capital
 Patronage refunds
 Interest on share capital
 Assistance from local or international, public or private institutions
 Forms part of the donated capital
o Upon dissolution, subject to escheat
 Never divided into individual share capital holdings
o Limitation on Share Capital Holdings
 Natural persons: 10% of share capital
o Entitlement to shares of deceased member to his/her heirs
 Requirements:
 Heir qualifies and is admitted a member
 Total share holding of heir does not exceed 10% of share capital
 If any of the requirements are not complied with and after cooperative pays to the
heir the value of such shares, the excess shares revert to the cooperative
o Assignment of share capital contribution or interest
 General rule: not allowed
 Exceptions: the ff. conditions are met:
 Assignor has held such SC contribution or interest for at least a year
 Assignee is the cooperative, a member of the cooperative or someone who
falls within the field of membership of the cooperative
 Board approval
o Capital Build-Up
 A program which allows the continuing growth of the members’ investment as their
own economic conditions improve
o Shares
 Units of capital in a primary cooperative
 Maximum par value of P1,000
o Share Capital
 Money paid or required for the operations of the cooperative
o Fines
 May be prescribed on unpaid subscribed SC if fair and reasonable
 o Investment of Capital
 shares or debentures or securities of another cooperative
 reputable local bank or another cooperative
 government securities
 real estate primarily for the cooperative or its members
 as per by-laws
o Revolving Capital
 Deferred payments of patronage refunds and interest on share capital
 Authorized deduction of a percentage from proceeds

CHAPTER NINE: AUDIT, INQUIRY AND RIGHT TO EXAMINE

 Annual Audit
o Financial performance audit: external auditor
 Submitted to the Board and the audit committee
 Further presented to the General Assembly
o Social audit: independent social auditor
o Reports shall be submitted to the Board
o Auditors are not liable or defamation if:
 In good faith
 In connection with matters he is authorized or required to do
 Right to Examine records kept open
o May demand a copy of such records without charge
 EXCEPT: costs of reproduction
o Refusal to allow members to examine and vote for pursuant resolution of such refusal
 General Rule: holds such officer liable for damages
 Exceptions:
 member improperly used such information
 acted in bad faith
 acted for an illegitimate purpose
 Safety of Reports
o Kept and preserved in its principal office

CHAPTER TEN: ALLOCATION AND DISTRIBUTION OF NET SURPLUS

 Net Surplus
o Not profit
o Components:
 Excess of payments made by members for the cooperative’s products and services
 Difference of rightful amounts due to members for products sold and services
rendered
 Other asset inflows from other operating activities deemed to be returned to
members if such were to be distributed
 Order of distribution
o Composition
 Reserve Fund
 PURPOSE: stability of the cooperative and to meet net losses
 ALLOCATION: at least 10% of net surplus
o May be decreased when the reserve fund exceeds the share capital
 May be for expansion projects upon GA resolution
o At least 50% of NS in the first 5 years of operation after registration
 DISTRIBUTION UPON DISSOLUTION via GA Resolution
o Usufructuary trust funds: for affiliated federations or unions
o Donate, contribute or distribute: for the community of the
cooperative
o Affiliated federations or unions
 Education and Training fund
 PURPOSE: training and development and growth of the cooperative
movement
 ALLOCATION: at most, 10% of net surplus
 UTILIZATION
o At least 50% for education and training purposes (mandatory)
o Other half remitted to affiliated federations or unions (optional)
 DISTRIBUTION UPON DISSOLUTION
o Cooperative education and training fund of chosen federation or
union
 Community Development fund
 PURPOSE: projects and activities beneficial to the community of the
cooperative
 ALLOCATION: at least 3% of net surplus
 Optional fund
 ALLOCATION: at most, 7% of net surplus
 Remaining NS
 Interest on share capital
o Not exceeding normal rate of return on investments
 Patronage refunds
o ALLOCATION: available at same rate for all patrons in proportion to
individual patronage
 Credited to reserve fund
o Patronage Refund allocation
 Member Patron with paid-up SC contribution
 Paid; or
 Credited as additional SC contribution
 Member Patron with unpaid SC contribution
 Credited until fully paid
 Non-member patron
 Set aside in a general fund for non-member patrons
 Allocated upon request and presentation of evidence
 o Credited toward payment of minimum capital contribution for
membership
 When a patron is deemed and becomes a member:
 Minimum SC contribution is reached within
specified period
 Patron agrees to or requests membership
 Complies with provisions
o Failure of subscriber to fully pay his subscribed SC or failure of non-member patron to
accumulate or to request or agree to membership or to comply
 Credits accumulated amount together with general fund for non-member patrons to
either the ff. at the option of the cooperative:
 Reserve fund
 Education and training fund