LAW 211 – BUSINESS LAWS AND REGULATIONS

PART XI
LEARNING OBJECTIVES

¡ Cooperatives – Definition, Objectives, Benefits

 COOPERATIVES

¡ RA 9520 – Philippine Cooperative Code of 2008

¡ 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.
 COOPERATIVES

¡ Primary objective – help improve the quality of life of its

members
 COOPERATIVES

¡ Goals
¡ 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
 COOPERATIVES

¡ Goals
¡ 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
 COOPERATIVES

¡ Goals
¡ 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 these goals
 COOPERATIVES
¡ Principles of Cooperativism
¡ Voluntary and open membership
¡ Democratic member control – active participation
¡ Member economic participation
¡ Autonomy and independence
¡ Cooperation among cooperatives
¡ Cooperative education
¡ Concern for community
 COOPERATIVES

¡ Types
¡ Credit - savings and lending services; generates a common pool of
funds to provide financial assistance and other related financial
services to its members for productive and provident purposes
¡ Consumer – procure and distribute commodities to its members
and non-members
¡ Producers – undertakes joint production whether agricultural or
industrial; production and processing of RM produced by members
into finished or processed products for sale
 COOPERATIVES

¡ Types
¡ Marketing – engages in the supply of production inputs to members
and markets their products
¡ Service – engages in medical and dental care, hospitalization,
transportation, insurance, housing, labor, electric light and power,
communication, professional, etc.
¡ Multi-Purpose – combines 2 or more business activities (after 2
years of operations)
 COOPERATIVES

¡ Types
¡ Advocacy – 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
¡ Agrarian Reform – develop an appropriate system of land tenure,
land development, land consolidation or land management
 COOPERATIVES

¡ Types
¡ Cooperative Bank – financial services
¡ Dairy Cooperative – production of fresh milk which may be
processed and/or marketed as dairy products
¡ Education – owning and operating licensed educational institutions
¡ Electric – power generation, utilizing renewable sources, acquisition
and operation of sub transmission or distribution to its household
members
 COOPERATIVES

¡ Types
¡ Financial Service – savings and credit services and other financial
services
¡ Fishermen
¡ Health Services – medical, dental, and other health services
¡ Housing – assist or provide access to housing for the benefit of
members
 COOPERATIVES

¡ Types
¡ Insurance – insuring life and property
¡ Transport – land and sea transportation, limited to small vessels
(Philippine maritime laws) e.g. fishing boats
¡ Water Service – own, operate and manage water systems
¡ Workers – provide employment and business opportunities to its
members and manage it in accordance with cooperative principles
¡ Others
 COOPERATIVES

¡ Categories
¡ In terms of membership
¡ Primary – members are natural persons
¡ Secondary – members are primaries
¡ Tertiary – members are secondary cooperatives
¡ In terms of territory
 COOPERATIVES

¡ Capital
¡ Minimum paid-up – Php15,000, subject to increase by CDA
¡ Par value of shares of a primary cooperative – not exceed Php1,000
¡ Limit on shares – 10%
 COOPERATIVES
¡ Membership
¡ Pre-membership education seminar
¡ Regular members – entitled to all the rights and privileges of
membership (including vote and be voted upon)
¡ Associate members – no right to vote nor be voted upon and shall
only be entitled to such rights and privileges provided in the by-
laws.
¡ Regular member if he has been a member for 2 continuous years,
patronizes the cooperative as its member and signifies intention of
 COOPERATIVES

¡ Tax Treatment
¡ Non-taxable – if transacts with members only
¡ Taxable – transactions with non-members, but may still be subject
to certain exemptions under Art. 61
 COOPERATIVES

¡ Differences between cooperatives and corporations:

¡ Policy-making – Corporation – BOD; Cooperative – General
Assembly (full membership)
¡ Control – Corporation – SH owning majority or most number of
shares; Cooperative – limit on share capital holdings – 10%
 COOPERATIVES

¡ Differences between cooperatives and corporations:

¡ Tax Benefits – Corporation – as a general rule, taxable;
Cooperatives – not subject to tax if it transacts only with members
¡ Term – Corporation – perpetual life, unless shortened;
Cooperatives – 50 years
¡ Minimum Capital – Corporation – None; Cooperatives – 15,000
¡ Organizers/Incorporators – Corporation – any person; one person
allowed; Cooperatives – 15 or more natural persons
 COOPERATIVES

¡ Differences between cooperatives and corporations:

¡ Liability of Shareholders/Members – Corporation – limited;
Cooperatives – limited
¡ Share Capital – Corporation – does not earn interest; Cooperatives
– earns interest
 COOPERATIVES

¡ Organizing a Primary Cooperative

¡ 15 or more natural persons
¡ Filipinos
¡ Common bond of interest
¡ Residing or working in the intended area of operation
 COOPERATIVES

¡ Organizing a Primary Cooperative

¡ Structure, purpose, actual staffing pattern
¡ Economic survey
 COOPERATIVES

¡ Liability – limited – to the extent of his contribution to the share

capital
¡ Term – 50 years, extendable to another 50 years
¡ Capital – Php15,000 – 25%, 25% rule
¡ Juridical Personality – issuance of a certificate of registration by
the CDA
 COOPERATIVES
¡ Articles of Cooperation
¡ Name of the cooperative, which shall include the word cooperative
¡ Purpose/s and scope of business
¡ Term of existence
¡ Area of operation and principal office
¡ Names, nationality and address of registrants
¡ Common bond of membership
¡ Directors who will manage
 COOPERATIVES

¡ Articles of Cooperation
¡ The amount of its share capital, the names and residences of its
contributors and a statement whether the cooperative is primary,
secondary or tertiary
¡ Other provisions not inconsistent with the law
 COOPERATIVES

¡ Bylaws
¡ Filed at the same time as the articles of cooperation (unlike in
corporations)
¡ Art. 15 of the Cooperative Code
 COOPERATIVES

¡ Dissenting Members
¡ Have a right to withdraw from the cooperative under Article 30 of
the Cooperative Code – similar to appraisal rights under the
Corporation Code.
¡ Dissent with respect to:
¡ Amendment of Articles of Cooperation – Art. 18
¡ Merger or consolidation – Art. 21
 COOPERATIVES

¡ Liability of Officers and Directors

¡ Art. 45
¡ Similar to Section 30 of the Revised Corporation Code
 COOPERATIVES
¡ Preference of Claims – Art. 57
¡ 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 or held, by such member through the proceeds of
the loan or credit granted by the cooperative for as long as the
same is not fully paid.
¡ Ex. If a member got a loan from the cooperative to buy raw
materials or land, then the cooperative has a lien or claim over
the raw materials or land
 COOPERATIVES

¡ Preference of Claims – Art. 57

¡ When there’s a lien – such property cannot be sold nor conveyed
to third parties without the prior permission of the cooperative
¡ Any sale or conveyance made without the consent of the
cooperative - VOID
 COOPERATIVES

¡ Assignment or Transfer of Share Capital – Art 74

¡ Must satisfy the following conditions:
¡ Greater than one year holding period
¡ Assignment is made to the cooperative or to a member of the cooperative
or to a person who falls within the field of the membership of the
cooperative
¡ BOD approved such assignment
 COOPERATIVES
¡ Allocation and Distribution of Net Surplus – Arts. 85-86
¡ Net surplus is different from profit
¡ Excess of payments made by the members for the loans borrowed, or
the goods and services availed by them from the cooperative
¡ Difference of the rightful amount due to the members for their
products sold or services rendered
¡ Other inflows of assets
¡ BOD approved such assignment