BUSINESS LAWS AND REGULATIONS – COOPERATIVE LAW

Philippine Cooperative Code of 2008 (RA 9520)

I. Concepts and Rules

General Provisions
1. Definition of Cooperative
• An autonomous and duly registered association of persons, with a common bond of
interest, who have voluntary 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.
2. Cooperative Principles
a. Voluntary and Open Membership
▪ Membership is open to all person without discrimination.
b. Democratic Member Control
▪ “One member, one vote” principle.
c. Member Economic Participation
▪ Members receive limited compensation or limited interest, if any, on capital
subscribed and paid as a condition of membership.
d. Autonomy and Independence
▪ Cooperative is a self-help organization controlled by the members.
e. Education, Training, and Information
▪ The purpose is to contribute for the development of the cooperative.
f. Cooperation Among Cooperatives
▪ Working together through local, national, regional, and international structures.
g. Concern for Community
▪ Sustainable development of the cooperative’s community.
3. Main Objective of Cooperative
▪ To improve the quality of life of its members.
4. Cooperative Not in Restraint of Trade
▪ When cooperative complies with the Philippine Cooperative Code shall not be deemed
conspiracy or combination in restraint of trade or an illegal monopoly, or an attempt to
lessen competition or fix prices arbitrarily in violation of any laws of the Philippines.

Organization and Registration

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5. Cooperative Powers, Rights and Capacities

a. To the Exclusive use of its registered name, to sue and be sued;
b. Of succession;
c. To amend its articles cooperation;
d. To adopt by-laws, amend and repeal the same;
e. To purchase, receive, take or grant, hold, convey, sell, lease, pledge and mortgage, and
otherwise deal with such real or personal property;
f. To enter into division, merger or consolidation;
g. To form subsidiary cooperatives and join federation or unions;
h. To avail of loans, be entitled to credit and to accept and receive grants, donations, and
assistance from foreign and domestic sources subject to the conditions that these will not
undermine the autonomy of the cooperative.
i. To avail of preferential rights under the Local Government Code and other laws;
j. To organize and operate school in accordance with RA 9155;
k. Other powers as provided by the Code and those necessary to carry out its purpose as
stated in the Articles of cooperation.
6. Organization of Primary Cooperative
• It must be formed by fifteen (15) or more natural persons who are Filipino citizens, of
legal age, have a common bond of interest, and actually residing or working in the
intended area of operation.
• A prospective member must have completed a Pre-Membership Education Seminar
(PMES);
• Any newly organized primary cooperative may be registered as multi-purpose
cooperative after compliance with the minimum requirement for multi-purpose
cooperative;
• A single-purpose cooperative may transform into a multi-purpose or may create
subsidiaries only after two (2) years of operations.
• To transform into multi-purpose cooperative, the minimum capital requirement is P
100,000 or amount provided in the feasibility study, whichever is higher; except for
agrarian and agricultural cooperatives.
7. Liability of the Cooperative
• Registered cooperative has limited liability.
8. Term of Cooperative
• Cooperative shall exist for fifty (50) years from the date of registration unless sooner
dissolve or unless said period is extended;
• The term may be extended for not exceeding fifty (50) years by amending the cooperative
articles of cooperation;

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• No extension can be made earlier than five (5) years prior to the original or subsequent
expiry date unless there are justifiable reasons for an earlier extension as may be
determined by the Authority.
9. Articles of Cooperation
• Signed by each of the organizers and submitted to the Authority;
• Must have the following information:
o Name of cooperative;
o Purpose/s and scope of the business;
o Term of existence;
o Area of operation and postal addresses of its principal office;
o Names, nationality, and the postal addresses of the registrants;
o Common bond of membership;
o List of names of the directors;
o Amount of share capital, names and residences of its contributors and a statement
of whether the cooperative is primary, secondary or tertiary;
o Other provisions not inconsistent with the Code;
• The articles of corporation must be accompanied by a BONDs of the accountable officers
and TREASURER’s affidavit showing that 25% of the authorized capital have been
subscribed and 25% of the subscribed have been paid. (Applicable to common shares
only)
Notes: No members of the primary cooperative shall own more than 10% of the total
subscribed share capital of the aforesaid cooperative. In case of secondary and tertiary
cooperatives, no members shall own more than 10% of the total subscribed share capital of
the federation/ union;
When preference shares are provided in the by-laws, it shall not exceed 25% of the total
authorized share capital of the cooperative;
For both common and preference shares, no fractional shares shall be issued.
10. By-Laws
• The cooperative shall adopt by-laws not inconsistent with the Code and it shall be filed at
the same time as articles of cooperation;
• It provides… (o) other matters incident to the purposes and activities of the cooperative.
11. Registration
• Cooperative acquires its juridical personality from the date the Authority issues a
certificate of registration under its official seal;
• Certificate of registration shall be conclusive evidence that it is registered unless it is
proved that the registration has been cancelled.

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• All application shall be finally disposed of by the Authority within 60 days from the
filing thereof, otherwise the application is deemed approve, unless the cause of the dealy
is attributable to the applicant;
• That in case of denial of the application, an appeal shall lie with the Office of the
President within 90 days from the receipt of such denial;
• Failure of the President to act within 90 days from the filing thereof shall mean approval
of said application.
Note: The 60-day period shall not commence unless and until the documents submitted to the
CDA are complete in form and substance.
If not complete in form and substance, and the 60-day period lapsed, the Authority shall
direct the cooperative to complete/rectify the documents within fifteen (15) days from receipt
thereof. Failure to comply within the said period shall result to denial of the application.
These rules are also applicable to amendment of the articles of cooperation and by-laws.
12. Capitalization
• For primary cooperative, the paid-up capital shall not be less than fifteen thousand pesos
(P15,000);
• For multi-purpose cooperative, the minimum paid up capital is one hundred thousand
pesos (P 100,000) or the amount stated in the feasibility study whichever is higher.
13. Cooperative Name
• The word “cooperative” shall be included in the name of the cooperative, which name
shall likewise specify the type of cooperative.
• No Cooperative name shall be allowed by the Cooperative Development Authority
(CDA) if the proposed name is identical or deceptively or confusingly similar to that of
any existing cooperative, contrary to public policy, moral and existing laws.
• The use of the word “development” and “integrated” in the cooperative name shall be
discouraged.
• The use of the word “Federation and Union” in the name of the proposed primary
cooperative is likewise prohibited except if it is part of the registered name of association
or institution where the members of the proposed cooperative come from.
• Name shall not be written in all capital letter except if it is an acronym. Acronym shall be
written after the full name of cooperative.
14. Amendment of Articles if Cooperation and By-laws
• It requires 2/3 votes of all the members with voting rights, without prejudice to the right
of the dissenting members to exercise their right to withdraw their membership.
• The amendments shall take effect upon its approval by the authority or within 30 days
from the date of filing thereof if not acted upon by the Authority for a cause not
attributable to the cooperative.

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15. Contracts Executed Prior to Registration

• Contract executed between private persons and cooperatives prior to registration of the
cooperative shall remain valid and binding between the parties and upon registration of
the cooperative.
16. Division of Cooperative
• It requires the approval by vote of three-fourths (3/4) of all members with voting rights,
present and constituting quorum;
• No division shall be made in fraud of creditors.
17. Merger and Consolidation
• It requires the approval by vote of three-fourths (3/4) of all members with voting rights,
present and constituting quorum of each of the constituent cooperatives at separate
general assembly meetings, without prejudice to the right of the dissenting members to
withdraw.
• The merger or consolidation will take effect upon the issuance of the Authority of the
certificate of merger or consolidation.
18. Effects of Merger and Consolidation
• The constituent cooperative shall be a single cooperative, the separate existence of the
constituent cooperative shall cease, and the surviving or consolidated cooperative will
have its own personality;
• The surviving cooperative or the consolidated cooperative shall possess all the rights,
privileges, immunities, and powers and shall be subject to all duties and liabilities of the
cooperative;
• The surviving or the consolidated cooperative shall posses all the assets, rights,
privileges, and franchises of each of the constituent cooperatives, including the latter’s
liabilities.
19. Types and Categories of Cooperatives
a. Credit Cooperative – savings and lending services among its members.
b. Consumers Cooperative – procure and distribute commodities to members and non-
members;
c. Producers Cooperative – undertake the production and processing of war materials or
goods produced by its members into finished or processed products for sale by the
cooperative to its members and non-members;
d. Marketing Cooperative – engages in the supply of production inputs to members and
markets their products;
e. Service Cooperative – engages in medical and dental care, hospitalization, transportation,
insurance, housing, labor, electric light and power, communication, professional and
other services;

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f. Multipurpose Cooperative – combines two or more of the business activities of these

different types of cooperatives;
g. Advocacy Cooperative – promotes and advocates cooperativism among its members and
the public through different activities to reach out to its intended beneficiaries;
h. Agrarian Reform Cooperative – organized by marginal farmers majority of which are
agrarian reform beneficiaries for the purpose of developing an appropriate system of land
tenure, land development, land consolidation or land management in areas covered by
agrarian reform;
i. Cooperative Bank – provide wide range of financial services to cooperative and their
members;
j. Dairy Cooperative – engaged in the production of fresh milk which may be processed
and/ or marketed as dairy products;
k. Education Cooperative – organized for purpose of owning and operating licensed
educational institution;
l. Electric Cooperative – undertaking power generations, utilizing renewable energy
sources, including hybrid system, acquisition and operation of sub transmission or
distribution to its household members;
m. Fisherman Cooperative – organized by marginalized fishermen in localities whose
products are marketed either as fresh or processed products;
n. Health Services Cooperative – provides medical, dental, and other health services;
o. Housing Cooperative – assist or provide access to housing for the benefit of its regular
members who actively participate in the savings program for housing.
p. Insurance Cooperative – insuring life and property of cooperatives and their members;
q. Transport Cooperative – includes land and sea transportation limited to small vessels, as
defined or classified under the Philippine maritime laws, organized under the provision of
this Code;
r. Water Service Cooperative – provides and distribute potable water to its members and
their household;
s. Workers Cooperative – purpose is to provide employment and business opportunities to
its members;
t. Other types of Cooperatives as may be determined by the Authority.
20. Categories of Cooperative
• According to membership
o Primary – natural persons only
o Secondary – members of which are primaries;
o Tertiary – members of which are secondary cooperatives.
• According to territory
o According to areas of operation which may or may not coincide with the political
subdivision of the country.
21. Federation of Cooperatives

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• It refers to a cooperative the members of which are primary cooperatives doing the same
line of business.
22. Cooperative Union
• It refers to a cooperative the members of which are registered cooperatives and/ or
federations organized purposely to represent the interest and welfare of all types of
cooperatives at the provincial, city, regional, and national levels.
Membership

23. Kinds of Membership

• Regular members – one who has complied with all the membership requirements and
entitled to all the rights and privileges of membership;
• Associate members – one who has no right to vote nor be voted upon and shall be entitled
only to such rights and privileges as the by-laws may provide;
An associate who meets the minimum requirements of regular membership, continues to
patronize the cooperative for two (2) years, and signifies his/her intention to remain a
member shall be considered a regular member.
24. Laboratory Cooperative
• It is organized by minors and it must be affiliated with a registered cooperative called the
guardian cooperative;
• It is governed by special guidelines promulgated by Authority.
25. Government Officers and Employees
• Officers and employees of the Authority shall be disqualified to be elected or appointed
to any position in a cooperative. Provided, that the disqualification does not extend to a
cooperative organized by the officers or employees of the CDA.
• All elective officials of the Government shall be ineligible to become officers and
directors of cooperatives: Provided, that the disqualification does not extend to a party list
representative being an officer of a cooperative he or she represents.
26. Application for Membership
• Applicant shall be deemed a member when the board of directors of the cooperative
approved its application, and shall exercise his rights upon payment of the fees;
• If the application is refused or denied by the board of directors, it may be appealed in the
General Assembly. The assembly may create an ‘appeal and grievance committee’ and
shall decide appeals within 30 days from the receipt thereof, otherwise, the appeal is
deemed approved in favor of the applicant.
27. Liability of the Members

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• The members are liable to the cooperative debts up to the extent of their contribution to
the cooperative.
28. Termination of Membership
• Voluntary Termination
o The member, for valid reason, may withdraw his membership from the
cooperative by giving sixty (60) day notice to the board of directors; member is
entitled to a refund of his share capital contribution and all other interests in the
cooperative: Provided, after paying the withdrawing member, the assets of
cooperative is sufficient to pay the cooperative debts.
o Death or insanity of a member in a primary cooperative and the insolvency or
dissolution of a member in a secondary or tertiary cooperative; but in the case of
death or insanity of an agrarian reform beneficiary-member of a cooperative, the
next-of-kin may assume the duties and responsibilities of the original member.
• Involuntary Termination
o Members may be terminated by a vote of majority of all the members of the board
of directors for any of the following causes:
▪ Not patronizing the products of the cooperative for unreasonable period of
time;
▪ Continuously failed to comply with his obligations;
▪ Acted in violation of the by-laws and the rules of the cooperative;
▪ Act or omission prejudicial or injurious to the interest of the welfare of the
cooperative.
o Due process must be observed in terminating the members. The decision of the
board may be appealed in the general assembly or to ‘appeal and grievance
committee’, as created by general assembly. Action shall be taken within thirty
days from the receipt thereof, otherwise, it is deemed approved in favor of the
member.

ADMINISTRATION
29. General Assembly
• It is composed of such members who are entitled to vote under the articles of cooperation
and by laws of the cooperative;
• It is the highest policy-making body of the cooperative and shall exercise such powers as
are stated in the Code, in the articles of cooperation and by-laws;
30. Non-delegable Powers of the General Assembly
• To determine and approve amendments to the articles of cooperation and by-laws;
• To elect or appoint the members of the board of directors, and to remove them for a
cause;

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• To approve the developmental plans of the cooperative.

31. May the Powers of the General Assembly be Delegated?
• Subject to such other provisions of the Philippine Cooperative Code and only for
purposes of prompt and intelligent decision-making, the general assembly may by a
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 cooperatives. These powers
shall be enumerated under the by-laws of the cooperative.
32. Meetings
• A regular meeting shall be held annually by the general assembly on the date fixed in the
bylaws, or if not so fixed, on any date within ninety (90) days after the close of each
fiscal year; Notice of the meeting in writing, by posting or publication or through other
electronic means shall be sent to all members of record.
• A special meeting of the general assembly may be called at any time by a majority vote
of the board of directors or as provided for in the bylaws. Notice of meeting shall be sent
to the members entitled to vote one week prior to the scheduled meeting.
• Failure to call for a meeting within the given period, the Authority, upon petition of 10%
of all members of the cooperative who are entitled to vote, and for good cause shown,
shall issue an order to the petitioners directing them to call a meeting of the general
assembly by giving proper notice as required in the Code or in the by-laws.
• Notice of any meeting may be waived, expressly or impliedly, by any member.
33. Quorum
• It consists of 25% of all members entitled to vote.
34. Voting System
• For primary cooperative, each member is entitled to one vote;
• For secondary and tertiary cooperative, they have one basic vote and as many incentive
votes as provided for in the bylaws but not to exceed five (5) votes.
35. Voting by Proxy
• The bylaws of a cooperative other than a primary may provide for voting by proxy.
• Voting by Proxy means allowing a delegate of a cooperative to represent or vote in behalf
of another delegate of the same cooperative.
36. Composition and Term of the BOD
• Not less than five (5) nor more than fifteen (15) members elected by the general assembly
for a term of two (2) years and shall hold office until their successors are duly elected and
qualified or until duly removed for cause.
37. Powers of the Board of Directors

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• They are responsible for the strategic planning, direction-setting and policy-formulation
activities of the cooperatives
38. Qualification of the Directors
• Any member of the cooperative who has the right to vote and who possesses all the
qualifications and none of the disqualification as provided in the by-laws may be elected
as a director of the cooperative;
• Members of the BOD shall not hold any other position directly involved in the day to day
operations and management of the cooperatives;
• Any person engaged in business similar to that of the cooperative or who in any way may
have conflict of interest with it is disqualified from election as a director of said
cooperative.
• The cooperative may, by resolution of its BOD, admit as directors, or committee member
one appointed by any financing institution from which the cooperative received financial
assistance solely to provide technical knowledge not available within its membership.
Such director or committee member need not be a member of the cooperative and shall
have no powers, rights, nor responsibilities except to provide technical assistance as
required by the cooperative.
39. Board Meeting and Quorum
• For primary cooperative, regular meeting shall be held monthly; Special meetings may be
called at any time upon the call of the chairperson or a majority of the members of the
board;
• Majority of the members of the Board shall constitute a quorum for the conduct of
business, unless the by-laws provide otherwise;
• Directors cannot attend or vote by proxy at board meetings.
40. Vacancy in the BOD
• Reason other than expiration of term
o Vacancy may be filled by the majority vote of the remaining members of the
board, if constituting quorum, otherwise, it may be voted by the general assembly
thru a regular or special meeting. The elected BOD shall serve only the unexpired
term of the predecessor.
41. Officers of the Cooperative
• The BOD shall elect from among themselves the chairperson and vice-chairperson, and
elect or appoint other officers from outside of the board in accordance with their by-laws;
• No two or more persons with relationships up to the third civil degree of consanguinity or
affinity nor shall any person engaged in a business similar to that of the cooperative nor
who in any other manner has interest in conflict with the cooperative shall serve as
appointive officer;

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• Officers may be removed for a valid cause and after due hearing; Loss of confidence is
not a valid ground for removal unless it affects the honesty and integrity of such officer.
42. Liability of Directors, Officers and Committee Members
• Directors, officers and committee members, who willfully and knowingly vote for or
assent to patently unlawful acts or who are guilty of gross negligence or bad faith in
directing the affairs of the cooperative or acquire personal or pecuniary interest in
conflict with their duty as such directors, officers or committee members shall be jointly
and severally liable for all damages or profits resulting therefrom to the cooperative,
members and other persons.
43. Compensation
• In the absence of any provision in the by-laws fixing their compensation, the Directors
shall not receive any compensation except reasonable per diems.
44. Dealings of Directors, Officers or Committee Members
• The contract entered into by the directors, officers, or committee members with the
cooperative is voidable provided the following conditions are present;
o His (director) presence in the board meeting wherein the contract was approved
was not necessary to constitute a quorum for such meeting;
o His(director) vote was not necessary for the approval of the contract;
o The contract is fair and reasonable under the circumstances;
o In case of an officer or committee member, the contract has been previously
authorized by the general assembly or by the BOD.
• In the absence of the first two conditions, the contract (between director and the
cooperative) must be ratified by the ¾ vote of all the members with voting rights present,
and constituting a quorum in a meeting called for the purpose. Provided, that there must
be a full disclosure of the adverse interest of the director and the contract is fair and
reasonable under circumstances.
45. Disloyalty of Directors
• Any profits earned by the director that supposedly belong to the cooperative, the director
shall be liable for damages and must account for double the profit to the corporation,
unless ratified by the ¾ vote of the of all the members with voting rights present, and
constituting a quorum in a meeting called for the purpose.
46. Illegal Use of Confidential Information
• The director, officer or member committee shall be liable to compensate the cooperative
for the direct losses suffered by the cooperative as a result of the illegal use of
information; and
• Accountable to the cooperative for any direct benefit or advantage received or yet to be
received by him or the associate, as a result of the transaction.

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47. Removal
• Elective officer may be removed by ¾ votes of the regular members present and
constituting quorum, in a regular or special general assembly meeting called for the
purpose.

Responsibilities, Rights and Privileges of the Cooperatives

48. Inspection Books

• Members and representatives of the Authority may inspect the books of the cooperative
during reasonable office hours at its official address.
49. Reports
• Every cooperative shall draw up regular reports accessible to its members and copies
thereof shall be furnished to all its members of records. These reports shall be filed with
the Authority within 120 days from the end of the calendar year.
• Failure to file the required reports shall subject the accountable officers to fines and
penalties as may be prescribed by the Authority, and shall be a ground for revocation of
authority of the cooperative to operate as such.
50. Preference of Claims
• Notwithstanding the provisions of existing laws, rules and regulations to the contrary, but
subject to the prior claim of the Authority, 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, good or services acquired
and held, by such member through the proceeds of the loan or credit granted by the
cooperative to him for as long as the same is not fully paid.
51. Salary or Wage Deduction
• Upon the execution of the member of the instrument (authority to deduct), the employer
shall make a deduction from the member’s salary or wages which must be in accordance
with the agreement as provided in the instrument and remit forthwith the amount so
deducted within 10 days after the end of the payroll month to the cooperative. The
employer shall make deduction for as long as such debt or other demand remains unpaid
by the employee.
52. Primary Lien
• Notwithstanding the provision of any law to the contrary, a cooperative shall have a
primary lien upon the capital, deposits or interest of a member for any debt due to the
cooperative from such a member.

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53. Tax Treatment of Cooperative

• Duly registered cooperatives which do not transaction any business with non-members or
the general public shall not be subject to any taxes and fees imposed under the internal
revenue laws and other tax laws.
54. Tax and Other Exemptions
• Cooperative dealing business with non – members shall enjoy the following privileges:
o With accumulated reserves and undivided net savings of not more than P10M,
shall be exempt from taxes. All tax-free importation shall not be sold nor the
beneficial ownership thereof be transferred to any person until after five years,
otherwise, the cooperative and the transferee or assignee shall be solidary liable to
pay twice the amount of the imposed tax and or duties.
o With accumulated reserves and undivided net savings of more than P10M, shall
pay the following taxes in full:
▪ Income tax, on the amount allocated for interest on capital: Provided, that
the same tax is not consequently imposed on interest individually received
by members.
▪ Valued Added Tax, on transactions with non-members, subject to the
provisions of Internal Revenue Code.
▪ All other taxes unless otherwise provided therein.
▪ Donation to charitable, research, and educational institution and
reinvestment to socioeconomic project within the area of operation of the
cooperative may be tax deductible.
o Regardless of accumulated reserves and undivided net savings, exempt from local
taxes and taxes on transactions with banks and insurance companies; Provided,
that all sales or services rendered to non-members shall be subject to percentage
taxes except sales made by producers, marketing or service cooperatives.
• In the absence of notary public in the areas, the judge, exercising his ex officio capacity
as notary public, shall render service, free of charge, to any person or group of persons
requiring the administration of oath or the acknowledgement of articles of cooperation
and instruments of loan from cooperatives not exceeding P 500,000.
• Any register of deeds shall accept for registration, free of charge, any instrument relative
to a loan made under this Code which does not exceed P 250,000 or deeds of title of any
property acquired by the cooperative or any paper or document drawn in connection with
any action brought by the cooperative or with any court judgement rendered in its favor
or any instrument relative to a bond of any accountable officer of a cooperative for the
faithful performance of his duties and obligations.
• Cooperatives shall be exempt from the payment of all court and sheriff fees.
• All cooperatives shall be exempt from putting up a bond for bringing an appeal.
55. Privileges of Cooperatives

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• Free of charge for depositing cooperative’s sealed cash boxes or containers, documents,
or any valuable papers in the safe of the municipal or city treasurers and other
government agencies;
• Cooperative of government employees shall enjoy the free use of any available space in
their agency, whether owned or rented by the Government;
• Membership in the cooperative rendering special type of services and facilities shall be
opened to all person qualified in their areas of operation;
• Preferential right of the cooperative to supply government institutions and agencies
marine and agricultural products produced by their members;
• 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;
• 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;
• Cooperative and their federations, which have for their primary purpose for the
production and/ or marketing of products from agriculture, fisheries and small
entrepreneurial industries and federations thereof, shall have preferential rights in the
management of public markets and or lease of public market facilities, stalls, or spaces;
• Cooperatives engaged in credit services and/ or federations shall be entitled to loans
credit lines, rediscounting of their loan notes, and other eligible papers with the DBP and
other financial institutions except the BSP;
• A public transport cooperative may be entitled to financing support through the program
of government financial institutions. It shall have the preferential right to the
management and operation of public terminals and ports whether land or sea transport
where the cooperative operates and on securing a franchise for active or potential routes
for the public transport;
• Cooperatives are exempt from prequalification bidding requirements;
• Privilege of the cooperative to be represented by the Fiscal or OSG, free of charge,
except when the adverse party is the Republic of the Philippines;
• Cooperatives by faculty members and employees of educational institution shall have
preferential right in the management of the canteen and other services related to the
operation of the educational institution where they are employed;
• The appropriate housing agencies and government financial institution shall create a
special window for financing housing project undertake by cooperatives, with interest
rates and terms equal to, or better than those given for socialized housing projects.

Insolvency of Cooperatives
• When the cooperative is unable to fulfill its obligation, it may apply for the remedies
provided in the FRIA.

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Dissolution of the Cooperative

56. Voluntary Dissolution Where No Creditors are affected
• Dissolution may be effected by a majority vote of the board of directors, and by
resolution duly adopted by the affirmative vote of at least ¾ of all the members with
voting rights, present and constituting a quorum at a meeting to be held upon a call of the
directors.

57. Voluntary Dissolution where Creditors are Affected

• Petition for dissolution shall be filed with the Authority. The petition shall be signed by a
majority if its BOD or other officers managing its affairs, verified by its chairperson or
board secretary or one of its directors and shall set forth all claim and demands against it
and that its dissolution was resolved upon by the affirmative vote of at least ¾ of all the
members with voting rights, present and constituting a quorum at a meeting called for
that purpose.
58. Involuntary Dissolution
• Cooperative may be dissolved by order of a competent court after due hearing on the
ground of:
1. Violation of any law, regulation or provisions of its bylaws; or
2. Insolvency
59. Dissolution by Order of Authority
• The Authority may suspend or revoke, after due notice and hearing, the certificate of
registration of a cooperative on any of the following grounds:
1. Having obtained its registration by fraud;
2. Existing for an illegal purpose;
3. Willful violation of, despite notice by the Authority, of the provisions of this
Code or its bylaws;
4. Willful failure to operate on a cooperative basis; and
5. Failure to meet the required minimum number of members in the cooperative;
60. Dissolution by Failure to Organize and Operate
• Non-commencement of business of cooperative and its operation within two years after
the issuance of its certificate of registration or has not carried its business for two
consecutive years, shall result to a deemed dissolution of the cooperative, after due notice
and hearing.
61. Liquidation of Cooperative

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• A dissolved cooperative can still exist for three years for the purpose of prosecuting and
defending suits by or against it; settlement and closure of its affairs; disposition,
conveyance and distribution of its properties and assets.
Capital, Property and Funds

62. Sources of Capital

• Share from members
• Loans and borrowings including deposits
• Revolving capital which consists of deferred payment of patronage refunds, or interest on
share capital;
• Subsidies, donations, legacies, grants, aids and such other assistance from any local or
foreign institution whether public or private; this capital shall be formed part of the
donated capital or fund of the cooperative which upon dissolution shall be escheated.
63. Limitation on Share Capital Holdings
• No member shall of the primary cooperative shall own more than 10% of the share
capital of the cooperative;
• When the member dies, his heir shall be entitled to the share of the decedent: Provided,
o The heir qualifies and is admitted as a member of the cooperative;
▪ The total share of the heir shall not exceed 10% of the total share capital
of the cooperative;
o The heir fails to qualify as a member or where his total share holding exceeds ten
percent of the share capital, the share or shares in excess will revert to the
cooperative upon payment to the heir of the value of such shares.
64. Assignment of Share Capital Contribution or Interest
• No member shall transfer his shares or part thereof except:
o He has held such share capital contribution or interest for not less than one year;
o The assignment is made to the cooperative or to a member of the cooperative or to
a person who fails within the field of the membership of the cooperative; and
o The BOD has approved such assignment.
65. Capital Build Up
• The by-laws of every cooperative shall provide for a reasonable and realistic member
capital build-up program to allow the continuing growth of the member’s investment in
their cooperative as their own economic conditions continue to improve.
66. Investment of Capital
• In shares or debentures or securities of any other cooperative;
• In any reputable bank in the locality, or any cooperative;

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 BUSINESS LAWS AND REGULATIONS – COOPERATIVE LAW

• In securities issued or guaranteed by the Government;

• In real estate primarily for the use of cooperative or its members;
• In any other manner authorized in the by-laws.
Audit, Inquiry, and Member’s Right to Examine
67. Annual Audit
• Financial Audit
o Shall be conducted by external auditor who satisfies all of the following
qualifications:
▪ Independent of the cooperative or any of its subsidiary that he is auditing;
▪ Member in good standing of the PICPA and is accredited both by BOA
and Authority;
• Performance Audit
• Social Audit
o Shall be conducted by an independent social auditor accredited by the Authority;
Performance and social audit reports which contain the findings and recommendations of
the auditor shall be submitted to the BOD.
68. Financial Audit Report
• The auditor shall submit to the BOD and to the audit committee the financial audit report
which shall be in accordance with the generally accepted auditing standards for
cooperative;
• The BOD, thereafter shall present the complete audit report to the general assembly in its
next meeting;
69. Nonliability for Defamation
• The auditor is not liable to any person in an action for defamation based on act, done, or
any statement made by him in good faith in connection with any matter he is authorized
or required to do pursuant to this Code;
70. Right to Examine
• The member has the right to examine the records during reasonable hours on business
days and he may demand, in writing, for a copy of excerpts from said records without
cost except the cost of reproduction;
• Any officer of the cooperative who shall refuse to allow any member of the cooperative
to examine and copy excerpts from its records shall be liable to such member for
damages and shall be guilty of an which shall be punishable under Art. 140 of the Code;
• Provided, that if such refusal is pursuant to a resolution or order of the board of directors,
the liability shall be imposed upon the directors who voted for such refusal;
• Exception: the member will use the information improperly; he’s not acting in good faith
or will not be used for legitimate purpose.

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II. Activities

Reference:
Business Laws and Regulations, Atty. Domingo, 2019 Edition.

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