COOPERATIVES

COOPERATIVES
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
t o t h e c a p i t a l r e q u i r e d , p a t ro n i z i n g t h e i r
p ro d u c t s a n d s e r v i c e s a n d a c c e p t i n g a f a i r
s h a r e o f t h e r i s k s a n d b e n e fi t s o f t h e
undertaking in accordance with universally
accepted cooperative principles.
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COOPERATIVE principles
 Vo l u n t a r y a n d O p e n M e m b e r s h i p
 D e m o c r a t i c M e m b e r C o n t ro l
 M e m b e r E c o n o m i c Pa r t i c i p a t i o n
 Autonomy and Independence
 Education, Tr a i n i n g and
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Information
 Cooperation Among Cooperatives
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 Concern for Community
 Definition of terms
MEMBE Person either natural or juridical who has been admitted by the cooperative as
member

R
GENERAL Full membership of the cooperative duly assembled for the
purpose of exercising all the rights and performing all the
obligations pertaining to cooperatives
ASSEMBLY
B o a rd o f d i re c t o r s Body entrusted with the management of the affairs of the
cooperative under its articles of cooperation and bylaws

Committee Any body entrusted with specific functions and responsibilities under the
bylaws or resolution of the general assembly or the board of directors

Articles of cooperation Articles of Cooperation registered under the

Cooperative Code and includes a registered
amendment thereof
BY L AW S Bylaws registered under this Code and includes any registered amendment thereof
 Definition of terms
registration Operative act granting juridical personality to a proposed cooperative
and is evidenced by a certificate of registration

Cooperative Government agency in charge of the registration and

authority regulation of cooperatives as such hereinafter referred to
development as the Authority

Universally Body of cooperative principles adhered to worldwide by

principles cooperatives
Accepted

R E P R E S E N TAT I V E Full membership of a body of representatives elected by each of the

A S S E M B LY sectors, chapter or district of the cooperative duly assemble

Members of the board of directors, members of the different committee

OFFICERS OF created by the general assembly, general manager or chief executive
C O O P E RAT I V E officer, secretary, treasurer and members holding other positions as
THE may be provided for in their bylaws
 Definition of terms

Social audit It enables the cooperative to develop a process whereby it can

account for its social performance and evaluate its impact in the
community and be accountable for its decisions and actions to its
regular members.

PERFORMANCE
AUDIT Audit on the efficiency and effectiveness of the cooperative as a
whole;

SINGLE-LINE Cooperative undertaking activities which are related to its main line of
C O O P E RAT I V E business or purpose
 Definition of terms

SERVICE Those which provide any type of service to its members, including but
COOPERATIV not limited to, transport, information and communication, insurance,
housing, electric, health services, education, banking, and savings and
credit
ES
SUBSIDIARY Refers to three or more primary cooperatives, doing the same line of
COOPERATIV business, organized at the municipal, provincial, city, special
metropolitan political subdivision, or economic zones created by law,
registered with the Authority to undertake business activities in
ES support of its member-cooperatives
 Purposes of cooperatives
> Encourage thrift and savings mobilization;
>
> Generate funds and extend credit;
>
> Encourage systematic production and marketing;
>
> Provide goods and services and other requirements;
>
> Develop expertise and skills among members;
>
> Acquire land and provide housing benefits

>
> Insure against losses of members;

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 Purposes of cooperatives

> Establish, own, lease or operate cooperative banks, wholesale and retail complexes,
insurance and agricultural/ industrial processing enterprises and public markets;
> Coordinate and facilitate activities of cooperatives;
>
> Advocate for the cause of the cooperative movement;

> Ensure viability of cooperatives through utilization of new technologies;

> Encourage and promote self-help or self-employment as an engine for economic
growth and poverty alleviation; and

> Undertake
provisions.
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any and all activities for the efficient and effective implementation of the

>
 Objectives and goals of cooperatives

> Provide goods and services to its members;

>
> 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; and

> Cooperate y
with the government, other cooperatives and people-oriented organizations
to further the attainment of any of the foregoing objectives.

>
 Powers and capacities
> Establish, exclusive use of registered names, to sue and be sued;
>
> Of succession;
>
> To amend its articles;
>
> To adopt its bylaws not contrary to law, morals or public policy

>
> otherwise deal with such real and personal property
To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage, and

> Enter into division, merger or consolidation;

>
> Form subsidiary cooperatives and join federations and unions;
>
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Avail of loans, credits, grants, donations from domestic and foreign sources;
>
> Avail of preferential rights under RA 7160 or the Local Government Code;
>
> Basic Education Act of 2001.
Organize and operate schools in accordance with RA 9155 or the Government of the

>
 Requirements for registration

1. Pre-Membership Education Seminar (PME)

2. Newly organized primary cooperative may be registered as
Multi-Purpose Cooperative (MPC) after compliance with
requirements set by CDA; Single-Purpose Cooperative may
transform into an MPC or create subsidiaries after two (2)
years of operations
3. Economic Survey including staffing pattern which includes at
least a bookkeeper
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4. Articles of Cooperation
• At least 15 members
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• Minimum Capitalization of PhP 15,000; reviewed every 5
years
5. By-Laws
6. Bonds of Accountable Officers
 Requirements for registration
Liabilit
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A cooperative duly registered under this Code shall have limited
liability.
term
A cooperative shall exist for a period not exceeding fifty (50) years from the
date of registration unless sooner dissolve or unless said period is extended.
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Certifi cate of registration y
The Certificate of Registration shall be a conclusive evidence that the
cooperative therein mentioned is duly registered unless it is proved that the
registration thereof has been cancelled.
 Articles of cooperation

> The name of the cooperative which shall include the word cooperative;
>
> registered;
The purpose or purposes and scope of business for which the cooperative is to be

> The term of existence of the cooperative;

>
> The area of operation and the postal addresses of its principal office;
>
> The names, nationality, and the postal addresses of the registrants;
>
> The common bond of membership; y
>
> The list of names of the directors who shall manage the cooperative; and
>
> statement of whether the cooperative is primary, secondary or tertiary
The amount of its share capital, the names and residences of its contributors and a

>
 BY-LAWS

> The qualifications for admission to membership and the payment to be made or
interest to be acquired as a conditions for the exercise of the right of membership;
> The rights and liabilities of membership;
>
> The circumstances under which membership is acquired, maintained and lost;

>
> The procedure to be followed in cases of termination of membership;
> The conditions under which the transfer of a share or interest of the members shall be
permitted;

>
> conducting y
The rules and procedures on the agenda, time, place and manner of calling, convening,
meetings, quorum requirements, voting systems, and other matters relative
to the business affairs of the general assembly, board of directors, and committees;
>
> The general conduct of the affairs of the cooperative, including the powers and duties
of the general assembly, the board of directors, committees and the officers, and their
qualifications and disqualifications;
>
 BY-LAWS

> 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;

>
> The manner of loaning and borrowing including the limitations thereo
> The method of distribution of net surplus;
>  The manner of adopting, amending, repealing, and abrogating bylaws;y
> Amembers,
conciliation or mediation mechanism for the amicable settlement of disputes among
directors, officers and committee members of the cooperative; and

> Other matters incident to the purposes and activities of the cooperative.
 amendments

Amendments need 2/3 vote of members with voting rights

Merger, consolidation and division of cooperatives

require 3/4 of all members with voting rights present
and constituting a quorum
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 TYPES OF COOPERATIVES

credit promotes and undertakes savings and lending services among its
members. It generates a common pool of funds in order to provide
financial assistance to its members for productive and provident
purposes;

consum primary purpose of which is to procure and distribute commodities

to members and non-members;

er
p ro d u c e r undertakes joint production whether agricultural or industrial

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m a r ke t i n engages in the supply of production inputs to members and markets
their products;

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 TYPES OF COOPERATIVES

service engages in medical and dental care, hospitalization, transportation,

insurance, housing, labor, electric light and power, communication,
professional and other services;

Multi- one which combines two (2) or more of the business activities of
purpose these different types of cooperatives;

primary cooperative which promotes and advocates cooperativism

advocacy 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;
one organized by marginal farmers majority of which are agrarian
agrarian reform beneficiaries for the purpose of developing an appropriate
re f o rm system of land tenure, land development, land consolidation or land
management in areas covered by agrarian reform;
 TYPES OF COOPERATIVES

Cooperative one organized for the primary purpose of providing a wide range of
bank financial services to cooperatives and their members;

dairy one whose members are engaged in the production of fresh milk
cooperative which may be processed and/or marketed as dairy products;

education one organized for the primary purpose of owning and operating
cooperative licensed educational institutions

one organized for the primary purposed of undertaking power

Electric generations, utilizing renewable energy sources, including hybrid
cooperative systems, acquisition and operation of subtransmission or distribution
to its household members;
 TYPES OF COOPERATIVES

fi n a n c i a l one organized for the primary purpose of engaging in savings and

cooperative credit services and other financial services;

fi s h e r m e n one organized by marginalized fishermen in localities whose

c o o p e r a t i v e products are marketed either as fresh or processed products;

Health
services one organized for the primary purpose of providing medical, dental
cooperative and other health services;

housing one organized to assist or provide access to housing for the benefit
cooperative of its regular members who actively participate in the savings
program for housing. It is co-owned and controlled by its members;
 TYPES OF COOPERATIVES

insurance one engaged in the business of insuring life and poverty of

cooperative cooperatives and their members;

transport
c o o p e r a t i v e one which includes land and sea transportation, limited to small
vessels

water
one organized to own, operate and manage waters systems for the
services
provision and distribution of potable water for its members and their
cooperative
households;

w or ke r s principal purpose is to provide employment and business

cooperative opportunities to its members and manage it in accordance with
cooperative principles
 Categories of cooperatives

In terms of membership In terms of territory

primary
members of which are natural persons
shall be categorized according to
areas of operations which may or may
not coincide with the political
secondARY subdivisions of the country

members of which are primaries

TERTIAR
members of which are secondary cooperatives
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 Functions of federation of cooperatives

> To carry on any cooperative enterprise authorized under Article 6 that complements
augments, or supplements but does not conflict, complete with, nor supplant the
business or economic activities of its members;
>
> To carry on, encourage, and assist educational and advisory work relating to its
member cooperatives;

>
> conduct
To render services designed to encourage simplicity, efficiency, and economy in the
of the business of its member cooperatives and to facilitate the
implementation of their bookkeeping, accounting, and other systems and procedures;
>
> Tomember y
print, publish, and circulate any newspaper or other publication in the interest of its
cooperatives and enterprises;
> To coordinate and facilitate the activities of its member cooperatives;
> Tocountries
enter into joint ventures with national or international cooperatives of other
in the manufacture and sale of products and/or services in the Philippines and

> To perform such other functions as may be necessary to attain its objectives.
abroad; and
 membership

• Legal age; Filipino Citizen Kinds of membership

• Capable and willing to perform the
responsibilities of a member Regular
• Allows associate member but needs
to qualify for regular membership
member
One who has complied with
membership requirements and
all the
entitled
to all rights and privileges of
within 2 years membership
• All elective officials are ineligible to
be officers or directors of Associate
cooperatives except partylist
representatives
member
One who has no right to vote or be
voted upon and shall be entitled only to
such rights and privileges as the by
laws may provide
 Termination of membership

> Aof member

directors
of may withdraw his membership by giving a sixty day notice to the board

>
> Death, insanity of a member in a primary cooperative
> Dissolution of a member in a secondary or tertiary cooperative
>
> Majority vote of all the members of the board of directors
>
 administration

General assembly
>Shall be the highest policy making body of the cooperative
>Three-fourths (3/4) vote of all its members with voting rights, present and
constituting a quorum, delegate some of its powers to a smaller body of the

>Quorum is at least 25% of all members entitled to vote

cooperative

>Voting in primary cooperatives is strictly one-member, one vote and no proxies

allowed except for representative assembly
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>
MEETINGS
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>in the bylaws, or if not so fixed, on any dated within ninety (90) days after the
A regular meeting shall be held annually by the general assembly on a date fixed

close of each fiscal year

>
>Notice of regular meetings shall be sent in writing
 administration

General assembly
MEETINGS

>Whenever necessary, a special meeting of the general assembly may be called

at any time by a majority vote of the board of directors

>
>Aentitled
quorum shall consist of a twenty-five per centum (25%) of all the members
to vote.

>Each member of a primary cooperative shall have only one vote.

>
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>For y
the members of secondary or tertiary cooperatives, they shall have one basic
vote and as many incentive votes as provided for in the by-laws but not
>exceeding five votes.
 administration

Board of Directors
>composed of not less than five (5) nor more than fifteen (15) members
elected by the general assembly
>shall be responsible for the strategic planning, direction-setting and policy-
formulation activities of the cooperatives
>shall not hold any other position directly involved in the day to day operation and
management of the cooperative
>majority of the members of the Board shall constitute a quorum or the conduct
of business, unless the bylaws proved otherwise
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> and officers
Committees y
>vice-chairperson, and elect or appoint other officers of the cooperative from
the board of directors shall elect from among themselves the chairperson and

outside of the board

>
>conciliation, ethics, and such other committees as may be necessary for
The bylaws shall provide for the creation of an audit, election, mediation and

the conduct of the affairs of the cooperative

 administration

Committees
Committees
Board and
andofficers
of Directors officers

>All officers and committee members required to undergo trainings conducted by

accredited institutions by the CDA

>
>No compensation except for per diems. If cooperative reports a net loss for the
preceding year, officers are not entitled to per diems

>Removal of officers may be done by a 3/4 vote of the regular members and
constituting a quorum

> responsibilities, training

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Functions, y
>The functions and responsibilities of directors, officers and committee members,
as well as their training requirements, shall be in accordance with the rules and
>regulations issued by the Authority.
 RESPONSIBILITIES OF COOPERATIVES

> Accountant
accounts;
or bookkeeper is responsible for maintenance and safekeeping of books of

> Audit committee responsible for continuous and periodic review of books of accounts;
> monitor adequacy and effectiveness of management’s control system and audit the
performance of the cooperative;
> Audited financial statements required to be posted in principal office;
>
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 Books to be kept open

> Acooperatives;
copy of the Philippine Cooperative Code and all other laws pertaining to

> A copy of the regulations of the Authority;

> A copy of the articles of cooperation and bylaws of the cooperative;
> A register of members;
> The books of the minutes of the meetings of the general assembly, board of directors
and committee;
> Share books, where applicable; y
>
> Financial statement; and
>
> Such other documents as may be prescribed by laws or the bylaws.
 TAX TREATMENT AND EXEMPTIONS OF
COOPERATIVES

> Not subject to taxes and fees imposed under NIRC and other tax laws for cooperatives
transacting business with members only

> Transactions with members are not subject to taxes and fees, including final tax on
members’ deposits and documentary tax
> Non-members will pay VAT; coop will collect and remit to BIR
> Provided, finally that at least 25% of net surplus of coop is returned to members as
interest and patronage refund

> Cooperative
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>
(proper recording) y
is responsible for collection and remittance of individual withholding taxes
 PRIVILEGES OF COOPERATIVES

• Depositing their sealed cash boxes or containers, documents or any valuable papers in the safes of the
municipal or city treasurers and other government offices free of charge

• Free use of any available space in their agency, whether owned or rented by the Government;

• Cooperatives rendering special types of services and facilities such as cold storage, ice plant,
electricity, transportation, and similar services and facilities shall secure a franchise therefore, and
such cooperatives shall open their membership to all persons qualified in their areas of operation;

• 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
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•
produced by their members shall be granted to the cooperatives concerned;
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Preferential treatment in the allocation of fertilizers, including seeds and other agricultural inputs and
implements, and in rice distribution shall be granted to cooperatives by the appropriate government
agencies;
 PRIVILEGES OF COOPERATIVES

•  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;

• Preferential rights in the management of public markets and/or lease of public market facilities, stalls
or spaces

• Shall be entitled to loans 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);

• Shall have the preferential right to the management and operation of public terminals and ports
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whether land or sea transport where the cooperative operates and on securing a franchise for active
or potential routes for the public transport;
 PRIVILEGES OF COOPERATIVES

• To be exempt from prequalification bidding requirements notwithstanding the provisions of Republic

Act No.9184, otherwise known as, the Government Procurement Act;

• Shall enjoy the privilege of being represented by the provincial or city fiscal or the Office of the
Solicitor General, free of charge, except when the adverse party is the Republic of the Philippines;

• 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 the said educational institution; and

• 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
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the form of blanket loans or long-term wholesale loans to qualified cooperatives, without need for
individual processing. y
 InSOLVENCY OF COOPERATIVES

NET SURPLUS

In case a cooperative is unable to fulfill its obligations to creditors due to insolvency, such

No. 1956, as amended, otherwise known as the Insolvency Law.

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cooperative may apply for such remedies as it may deem fit under the provisions of Act

Nothing in this Article, however, precludes creditors from seeking protection from said
insolvency law.
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 Dissolution of cooperatives
Voluntary dissolution involuntary dissolution
(1) Violation of any law, regulation or provisions of its
bylaws; or
Where no creditors are Where creditors are (2) Insolvency.
affected affected
Dissolution by order of authority
majority vote of (1) Having obtained its registration by fraud;
the board of w (2) Existing for an illegal purpose;
directors (3) Willful violation, despite notice by the Authority, of
the provisions of this Code or its bylaws;
affirmative vote of (4) Willful failure to operate on a cooperative basis;
at least three- petition for and
dissolution shall be (5) Failure to meet the required minimum number of
fourths (3/4) of all
filed with the members in the cooperative.
the members with Dissolution by failure to organize or
voting rights, Authority
cooperate
present and
If a cooperative has not commenced business and its
constituting a operation within two (2) years after the issuance of its
quorum at a certificate of registration or has not carried on its
meeting to be held business for two (2) consecutive years,
upon call of the
 liquidation OF COOPERATIVES

NET SURPLUS

Every cooperative whose charter expires by its own limitation or whose existence is
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terminated by voluntary dissolution or through an appropriate judicial proceeding shall
nevertheless continue to exist for three years after the time it is dissolved; not to
continue the business for which it was established but for the purpose of prosecuting and
defending suits or against it; settlement and closure of its affairs; disposition, conveyance
and distribution of its properties and assets.
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 capital and capital sources

> Member’s share capital;

> Loans and barrowings including deposits;
> Revolving capital which consists of the deferred payment of patronage refunds, or
interest on share capital; and
> Subsidies, donations, legacies, grants, aids and such other assistance from any local or
> foreign institution whether public or private: Provided, That capital coming from such
subsides, donations, legacies, grants, aids and other assistance shall not be divided
> into individual share capital holdings at any time but shall instead form part of the
donated capital or fund of the cooperative.

> Limitation on share capital held by one member reduced from 20% to 10%
>
> Bylaws must provide a reasonable and realistic capital build-up program

>
 DISTRIBUTION OF NET SURPLUS

• Excess of payments made by the members for the loans borrowed, or

NET SURPLUS 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 to the cooperative including other inflows of
assets resulting from its other operating activities and which shall be
deemed to have been returned to them if the same is distributed as
prescribed herein.
ORDER OF DISTRIBUTION
• Provide at least ten percent (10%) for the reserve fund. Provided that, in the first five
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of the net surplus y
(5) years after registration, the reserve fund shall not be less than fifty percent (50%)

• Provide not more than 10% for education and training fund; half may be spent by the
coop for education and training while other half may be remitted to the
federation/union chosen by the cooperative
 DISTRIBUTION OF NET SURPLUS

NET SURPLUS
ORDER OF DISTRIBUTION
• The federation/union chosen shall submit to the CDA:
a) List of contributing cooperatives
b) Business consultancy assistance with its nature and cost; and,
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c) Training activities specifying the nature, participants, and cost of each activity

• Not less than 3% for community development fund for projects/activities that will
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benefit the community where the cooperative operates

• Not more than 7% for optional fund, land and building, and other funds

• The remaining net surplus shall be made available to the members in the form of
interest on share capital not to exceed the normal rate of return our investments and
patronage refunds
end