Cooperative Law
By Atty. Al P. Sarip Macmod, C.P.A.
Republic Act No. 9520
• The Philippine Cooperative Code of 2008
• Effective March 22, 2009
• Amended the Cooperative Code of 1990 (RA 6938)
State Policy
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Foster creation and growth of cooperatives as a practical vehicle for selfreliance and harnessing people power for the attainment of economic
development and social justice.
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Encourage private sector to undertake actual formation and organization.
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Create an atmosphere conducive to the growth and development of
cooperatives.
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Ensure technical guidance, financial assistance and other services
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Recognizes the principle of subsidiarity wherein the sector will initiate the
promotion and organization, training and research, audit and support
services with government assistance when necessary.
Cooperative
• 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.
• Under the direct supervision of Cooperative Development Authority
(CDA)
Cooperative Principles
Patterned after the Principles as formulated by the International Cooperative
Alliance (ICA)
• Voluntary and open membership
• Democratic Member Control
• Member Economic Participation
• Autonomy and Independence
• Education, Training and Information
• Cooperation among Cooperatives
• Concern for Community
Definitions
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Representative Assembly- full membership elected by sectors, chapter or
district to exercise powers delegated to them by the general assembly.
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Officers- members of board of directors, different committees created by the
GA general manager or CEO, secretary, treasurer and members holding
other positions as provided for in their by laws.
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Social Audit- a procedure wherein the cooperative assesses its social
impact and ethical performance vis-à-vis its stated mission, vision, goal and
code of social responsibility for coops.
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Performance Audit- refers to an audit on the efficiency and effectiveness of
the cooperative as a whole, its management and officers and its various
responsibility centers.
Definitions
• Subsidiary cooperative- any organization, all or majority of whose
membership comes from a cooperative organized for any other purpose
different from that of and receives technical, managerial and financial
assistance from a cooperative.
• Federation of cooperatives- three or more primary cooperatives doing the
same line of business.
• Laboratory cooperatives- composed of minor members (below 18 years
old) and subject to special cooperative rules.
Purposes of Cooperatives
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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;
Establish, own, lease or operate cooperative banks, wholesale and retail
complexes, insurance and agricultural/industrial processing enterprises and
public markets;
Purposes of Cooperatives
• Coordinate and facilitate activities of cooperatives;
• Advocate for the cause of the cooperative movement;
• Ensure viability
technologies;
of
cooperatives
through
utilization
of
new
• Encourage and promote self-help or self-employment as an engine
for economic growth and poverty alleviation; and
• Undertake any and all activities for the efficient and effective
implementation of the provisions
Powers and Capacities
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Exclusive use of registered names to sue and be sued;
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Of succession;
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To amend its articles;
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To adopt its by laws not contrary to law, morals or public policy;
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Deal with real and personal property;
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Enter into division, merger or consolidation;
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Form subsidiary cooperatives and join federations and unions;
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Avail of loans, credits, grants, donations from domestic and foreign sources;
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Avail of preferential rights under RA7160;
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Organize and operate schools in accordance with RA9155.
Requirements for Registration
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Economic Survey including staffing pattern which includes at least a
bookkeeper
Articles of Cooperation
o at least 15 members
o minimum capitalization of Php 15,000 after following the 25%-25% rule
By-laws
Bonds of accountable officers
Approval of the concerned government agency for cooperatives directly
affecting public interest.
Filing Fee
Articles of Cooperation
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Name of the cooperative
Purpose/Scope of Business
Term of Existence
Amount of Capital
Founding Members
Common Bond of Membership
Name of Directors
Area of Operation
Principal Office
By Laws
• Qualification/Requirements for Members
• Qualification of Officers
• Rights and Liabilities
• Termination of Membership
• Rules for Meetings
• Distribution of Net Surplus
• Accounting and Audit Systems
Amendments
• Amendments need 2/3 votes of members with voting rights
• Merger, Consolidation and division of cooperatives require ¾ of all
members with voting rights present and constituting a quorum.
Types of Cooperatives
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Credit- promotes and undertake savings and lending services to its
members.
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Consumers- to procure and distribute commodities to members and nonmembers.
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Producers- undertakes joint production whether agricultural or industrial.
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Marketing- supply of production inputs and markets their products.
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Service- engages in medical and dental care, hospitalization, transportation,
insurance, housing, labor, electric light and power, communication,
professional and other services.
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Multi-purpose- combines 2 or more business activities
Additional Types of Cooperatives
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Advocacy- promotes and advocates cooperativism among its members and the public.
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Agrarian Reform- organized by marginal farmers, majority of whom are agrarian reform beneficiaries.
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Cooperative Bank- providing a wide range of financial services to cooperatives and their members.
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Dairy- production of fresh milk which may be processed and/or marketed as dairy products.
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Fishermen- marginalized fishermen where their products are marketed either as fresh or processed
products.
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Health Services- providing medical, dental and other health services.
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Housing- assist or provide access to housing for members who participate in the savings program for
housing.
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Insurance- business of insuring life and property of cooperatives and members.
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Education- owning and operating licensed educational institutions.
Additional Types of Cooperatives
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Electric- undertaking power generation, acquisition and operation of subtransmission or distribution to its household members.
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Financial Service- engaging in savings and credit services and other
financial services.
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Transport Services- including land and sea transportation.
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Water Services- own, operate and manage water systems for the provision
and distribution of potable water to its members.
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Workers- organized by workers, including self-employed, to provide
employment and business opportunities.
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Other types as may be determined by the Authority.
Types of Cooperatives as to Membership
• Primary Cooperatives- composed of natural persons
• Secondary Cooperatives- composed of primary cooperatives
• Tertiary Cooperatives- composed of secondary cooperatives
Functions of a Coop Federation
• Functions should compliment, augment or supplement but does not
conflict, compete with, nor supplant the business or economic
activities of its members.
Membership
• Kinds of Membership
1. Regular member- one who has complied with all the membership
requirements and entitled to all rights and privileges of membership.
2. Associate 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.
Membership Requirements
• Of Legal age
• Filipino citizen
• Capable and willing to perform the responsibilities of a member
• Share capital contribution
• Pre-membership education seminar
• Approval of Board of Directors
Rights of a Member
• Management Rights
o Right to elect or remove directors
o Right to vote on some cooperative acts
• Proprietary Rights
o Interest on share capital and patronage dividend
o Transfer shares
o Share during liquidation
• Remedial Rights
Grounds for Loss of Membership
• Withdrawal/ Resignation by the member
• Termination by the Board of Directors
• Transfer of share
• Death, insanity or permanent incapacity
General Assembly
• Shall be the highest policy making body of the cooperative
• Quorum is at least 25% of all members entitled to vote
• ¾ votes of members required to delegate some powers to a
representative assembly.
• Voting in primary cooperatives is strictly one member, one vote and
no proxies allowed except for representative assembly.
• Annual regular meeting within 90 days from the close of the fiscal
year of the cooperative.
Board of Directors
• Responsible for strategic planning, direction setting and policy
formulation.
• Term shall be fixed in the coop by laws, a term is 2 years
• Prohibition against holding any other position involved in the day to
day operations and management.
• Disqualification of persons engaged in business similar to the
cooperative.
• All elective officials are ineligible to be officers or directors of
cooperatives except party-list representatives
Board of Directors
▪ Filipinos and of legal age
▪ 5 to 15 persons
▪ Elected by majority vote of members in a GA
▪ Member of the coop in good standing for at least 2 years
▪ Other requirements c/o by laws
Board of Directors
(Important Rules)
▪ Quorum for Board meetings
▪ Compensation for Directors
▪ Removal of Directors
▪ Filling up of vacancy
▪ Meetings
Committees and Officers
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Executive Officers
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General Manager
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Secretary
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Treasurer
Committees
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Audit Committee
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Election Committee
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Mediation and Conciliation Committee
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Ethics Committee
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All officers and committee members required to undergo trainings conducted by accredited institutions by the CDA.
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Responsibilities of above officers are provided in the by laws
Annual Reports
▪ Filed within 120 days from close of calendar/fiscal year
▪ The form and contents of the report shall be prescribed by the rules of the
Authority
▪ Must include the following:
o Comprehensive Annual Progress Report
o Social Audit Report
o Performance Report
o Financial Audit Report
• Liability for non-submission are fines and other penalties imposable until the
cooperative has complied with the requirements.
Tax Liabilities and Exemptions
• 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.
• Exempt from all local taxes regardless of accumulated reserves.
Tax Liabilities and Exemptions
• Coop transactions with non-members are subject to VAT; Coop will
collect from the non-member and remit to BIR; Transactions with
members are tax exempt.
• Provided finally that at least 25% of net surplus of coop is returned to
members as interest and patronage refund.
(Patronage refund is a distribution a cooperative pays to its members based
on a proportion of its profits, calculated according to how much each
member has spent in the purchase of the product of the coop)
• Cooperative is responsible for collection and remittance of individual
withholding taxes (proper recording).
Additional Privileges
• Faculty cooperatives have the right of first refusal in management of
canteen and other services related to the operations of educational
institutions.
• Housing agencies and financial institutions shall create a window for
financing housing projects.
• Agrarian cooperatives can rent public lands for 25 years.
Capital
• Primarily from contributed share capital of members.
• Subsidies, donations, legacies, grants and aids shall not be divided
into individual share capital holdings anytime but subject to escheat
proceedings upon dissolution.
• Limitation on share capital held by one member reduced from 20% to
10% of the total capital of the coop.
• Reasonable and realistic member capital build up program to allow
the continuing growth of the member’s investment in the coop.
Audit
• Financial audit conducted by external auditor in good standing with
PICPA and accredited by Board of Accountancy and CDA.
• Social and performance audits may be conducted by an independent
social auditor accredited by CDA.
Social Auditing
• Based on the 7 Cooperative Principle- Concern for Community
• Defined as the systematic review and appraisal of the cooperative in
relation to the development of its most essential building blocks, its
members, its people and its distinctive contribution to the
development of its community and society as a whole.
Distribution of Net Surplus
• At least 10% of net surplus for reserve funds.
• Not more than 10% for training and education of members, half to be
used by the cooperative; other half is remitted to the federation/
union chosen by the cooperative.
• At least 3% for community development
• Not more than 7% for land and building, including improvements
thereof (optional)
• At least 25% for the members as interest on their share capital and
patronage refund
Other Provisions
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Additional Special Provisions
oTransportation Cooperatives
oElectric Cooperatives
oCooperative Banks
oCredit Cooperatives
oFinancial Service Cooperatives
oHousing Cooperatives
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Conciliation and Mediation Committee
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Additional Penal Provisions
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CDA allowed to formulate rules on the Cooperative Code on certain provisions.
Dissolution Grounds
• Failure to commence operation within 2 years from issuance of
Certificate of Registration
• Involuntary Dissolution by CDA
• Involuntary Dissolution by Regular Courts
• Voluntary Dissolution
• Expiration of its term (50 years)
• Legislative Dissolution
Other Provisions
• Congressional Oversight Committee to review and approve the
implementing rules and regulations.
• Re-registration of all cooperatives to confirm their status by
submitting a) Certificate of Registration/Confirmation, b) Articles of
Cooperation, c) By laws and d) Latest Audited Financial Statement
• Must secure tax exemption certificate from BIR
END