GROUP 4: MIRANDA, MOLINA, MUYOT,

NALUPTA, NUBLA, OIRA, PINEDA

Declaration of Policy
General Concepts
Cooperative Principles
Definition of Terms
Purposes of Cooperatives (Article 6)
Objectives and Goals of a Cooperative (Article 7)
Cooperatives Not in Restraint of Trade (Article 8)
Cooperative Powers and Capacities (Article 9)
Organizing a Primary Cooperative (Article 10)
Economic Survey (Article 11)
Liability (Article 12)
Term (Article 13)
Bylaws (Article 15)
Registration (Article 16)
Certificate of Registration (Article 17)
Amendment of Articles of Cooperation and Bylaws (Article 18)
Contracts Executed Prior to Registration and Effects Thereof (Article 19)
Division, Merger, and Consolidation of Cooperatives (Articles 20 and 21)
Effects of Merger and Consolidation (Article 22)
Types and Categories of Cooperatives (Article 23)
Functions of a Federation of Cooperatives (Article 24)
Cooperative Unions (Article 25)
Entitled to all rights and privileges
of the cooperative
Has right to vote or be voted upon
Has limited liability
Entitled to limited rights and
privileges of the cooperative
Has no right to vote or be voted upon
Has limited liability
May become a regular member after
two (2) years
By Withdrawal
By Death or Insanity (Primary Cooperative); By
Insolvency or Dissolution (Secondary and Tertiary
Cooperatives)
By a majority vote of the Board of Directors for:
Not patronizing any of the services of the
cooperative for an unreasonable period of time
Continuously failing to comply with obligations
Acted in violation of the bylaws and rules of the
cooperative
Any act or omission injurious or prejudicial to
the interest or welfare of the cooperative
Composed of members with voting rights
Nondelegable Powers:
To determine or approve amendments to articles of cooperation and bylaws
To elect or remove members of the Board of Directors
To approve developmental plans of the cooperative
Composed of not less than five nor more than fifteen members elected by the general assembly for a fixed
term not exceeding two years.
Other than by expiration of term, vacancy is filled by the vote of at least a majority of the remaining
directors, if still constituting a quorum (Art. 41).
Liabilities:
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Willfully and knowingly vote for unlawful acts liable jointly and severally.
Attempts to acquire interest adverse to the cooperative or acquires for himself an opportunity which
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should belong to the cooperative liable for damages and accountable for double the profit.
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Illegal use of confidential information liable to compensate for direct losses and accountable for any
direct benefit.
Shall not receive compensation except for reasonable per diems (Art. 46).
Art. 51. Address - Every cooperative shall have an official postal address to which all notices and
communications shall be sent. Such address and every change thereof shall be registered with
the authority.

Art. 52. Books to be Kept Open - Cooperatives must have certain documents ready and
accessible for inspection, including copies of the Cooperative Code and relevant laws,
regulations of the Authority, articles of cooperation and bylaws, register of members, minutes of
meetings, share books, financial statements, and other documents prescribed by laws or bylaws
Primary Responsibility - Accountant or Bookkeeper

Art. 53. Reports - Cooperatives must create and share annual reports detailing their activities
and achievements, including socio-civic efforts, with members. These reports, following the
Authority's rules, must be filed within 120 days from the end of the calendar year.
Art. 54. Prima Facie Evidence
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List of member shares kept the cooperative should include date when the member entered the
cooperatie, and the date when they left the cooperative

Art. 55 Probative Value of Certified Copies of Entries -

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A certified copy of any entry in a cooperative's business records admissible as evidence of the
entry's existence and as prima facie evidence of the recorded matters and transactions.

Art. 56 Bonding of Accountable Officers - This provision mandates that every director, officer, and
employee dealing with funds, securities, or property on behalf of a cooperative must have a surety
bond from a registered insurance or bonding company.
Surety Bond - It is a promise to pay one party a certain amount if a second party fails to meet some
obligations
Protects obligee against losses from the principal’s failure to meet the obligation
Art. 57 Preference of Claims - Establishes that any debt a member owes to a cooperative constitutes a
first lien on the member's raw materials, production, inputs, products, or any acquired assets financed
by the cooperative's loan.

Art. 58 Instrument of Salary or Wage Deduction - This provision allows cooperative members to
authorize their employers to deduct from their salary, leave credits, and other benefits to repay debts
to the cooperative.
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Employer must remit the specified amount as per agreement
Applies to private firms, government entities, and government-owned or controlled corporations.
Art 60. Tax Treatment and Art 61. Tax Exemptions
Tax Treatment - Those who do not transact any business with non members shall not be
subject to tax
Exemptions
Transaction with members (deposits and documentary taxes)
Cooperatives with accumulative reserves up to Php 10,000,000
Beyond 10M, subject to specific income tax, VAT on transactions with non-members
Transactions with banks and insurance companies
EXCEPT: applicable percentage taxes to non-members
Notaries and register of deeds
Exempt from court and sheriff’s fees
Provisions of the Securities Act
 INSOLVENCY OF COOPERATIVES
Art. 63. Proceeding Upon Insolvency
Tackles insolvency of cooperatives
In case a cooperative is unable to fulfill its obligations to creditors due to insolvency, such
cooperative may apply for such remedies as it may deem fit under the provisions of Act No.
1956, as amended, otherwise known as the Insolvency Law.

Note: Republic Act No. 10142 or The Financial Rehabilitation and Insolvency Act repealed the
Insolvency Law
 Voluntary Dissolution
Art. 64: No creditors are affected Art. 65: Creditors are affected
Majority vote of the BOD Petition filing:
Resolution adoption: signed by majority BOD or managing officers
at least 3/4 of all voting members verified by chairperson, board secretary or
members must be present, constituting a director
quorum at a meeting includes all claims and demands
meeting guidelines Dissolution resolution
Resolution Certification: Petition review by the authority
majority of BOD Objection and hearing
board secretary Order of dissolution:
Who will issue the certificate of dissolution? 1). Assets and liabilities
- the Authority 2). Creditors’ claims
3). Membership count
4). Nature and extent of members’ interest
 Involuntary Dissolution
Art. 67: Dissolution by Order
of the Authority
Authority’s power to suspend/revoke the
certificate of registration:
1. Obtained its registration by fraud
2. Existing for an illegal purpose
3. Willful violation of Code or its bylaws
4. Willful failure to operate cooperatively
5. Failure to meet the required minimum number
of members
Art. 68: Dissolution by Failure to Organize
and Operate
Authority’s formal notice if:
No business operations within 2 years after
issuing its certificate of registration
No business activities for 2 consecutive years
Failure to justify cause for its inactivity:
Authority shall warrant to delete its name from
the roster of registered cooperatives,
resulting to dissolution
 Art. 69: Liquidation of a Cooperative
Post-Dissolution Duration (voluntary or involuntary):
shall continue to exist for 3 years after the time it is dissolved
Purpose:
Prosecuting and defending suits against it
Settlement and closure of its affairs
Disposition, conveyance and distribution of its properties and assets
Cooperatives can transfer its properties to trustees to members, creditors, etc, within the said 3
years.
After conveyance, any interests had in the properties are terminated.
Any asset distributable not settled to any creditor, shareholder, or member shall be given to the
affiliated federation or union.
Assets or properties are only distributed after lawful dissolution and after payment of all its
debts and liabilities
Exception: decrease of share capital and as allowed by Code
Art. 72: Capital Sources Art. 73: Limitation on
Share Capital Holdings
Members’ share capital No members outside the
Loans and borrowings cooperative shall own/ hold
Revolving capital more than 10% sharae
Subsidies, donations, capital.
legacies, grants, aids and Inheritance on shares
such other assistance not more than 10%
qualified and admitted
as member
Art. 74: Assignment of Share
Capital Contribution or Interest
no member transfers his
shares/ interest unless:
shares/ interest were held
not less than 1 year
made to the cooperative,
member, a person within
the membership
BOD approved
Art. 75: Capital Build-Up Art. 76: Shares Art. 77: Fines
Required for each bylaws Unit of capital and its par impose a fine on unpaid
Must be reasonable and value: fixed or not more subscribed capital
realistic than 1000 pesos. fair and reasonable under
Allow members to increase Share capital the circumstances
their contributions Share certificates issuance:
Improve own financial prescribed in the bylaws.
circumstances
Art. 78: Investment of Capital
Shares or debentures or securities
Any reputable bank
Government-issued securities
Real estate designated primarily
for cooperative/members’ use
Other authorized methods
Art. 79: Revolving Capital
General assembly authorizes
for capital reinforcement
Methods:
Delaying payments
Deducting percentages
BOD responsibilities:
Issue certificates
Set retirement schedules
 AUDIT, INQUIRY, AND MEMBERS’ RIGHT TO EXAMINE
Art. 80: Annual Audit
Financial audit - external auditor must satisfy the following:
Independent
Member of the PICPA; accredited by BOA and the Authority
Social audit- Independent social auditor
Rules and regulations for the social audit
Art. 81: Audit Report
Auditors must submit the financial audit report to BOD and audit committee, as well as the performance
and social audit reports.
Reports are then presented to the general assembly.
Art. 82: Nonliability for Defamation
Art. 83: Right to Examine
ALLOCATION AND DISTRIBUTION
OF NET SURPLUS
Art. 86: Order of Distribution
Reserve fund
At least 10% of net surplus; first 5 years - not less than 50%
Used for stability and operational losses
Upon dissolution, it will not be distributed among members
Education and training fund
Not more than 10% of net surplus
Particular fees may be provided
50% spent for education and training purposes
Remaining 50% remitted to chosen union/federation
Upon dissolution, transfer to fund of chosen union/federation
ALLOCATION AND DISTRIBUTION
OF NET SURPLUS
Art. 86: Order of Distribution:
Community and Development fund
Not less than 3% of net surplus
Optional fund, a land and building, and any other necessary fund
Total sum must not exceed 7% of net surplus
Remaining net surplus
as interest on members’ share capital
after allocation, remaining amount added to reserve fund
Remaining patronage refunds
distributed to all patrons
 “Organized by marginal farmers, majority of which are
agrarian reform beneficiaries”

Purposes:
System of land tenure, development, consolidation, and
management
Scientific production methods
Storage, marketing, and transportation of farm products
Financial facilities & technology
Benefits & livelihood programs
Conduits for external assistance
Represent beneficiaries & undertake development programs
Important Legal Provisions
Article 89 - Cooperative Estate
Articles 90 & 91: Preferential
government treatment in
infrastructure development and
leasing of public lands to ARCs
(not exceeding 25 years but
subject to renewal for another 25
years only)
Organization and Registration: Upon prior written verification by DAR
Privileges
Preferential rights in the grant of
franchise and certificate of public
convenience
Distribution, marketing, and
resource management.
Government support with
financial and technical
assistance.
 Key Points:
BSP supervises the registration and authorization.
Establishment: 1 cooperative bank per province (potential for
more)
Membership: Regular & Associate
Voting – Voting rights shall be proportionate to the number of
paid-up shares.
General: ½ + 1 of all members in good standing
BOD: ½ + 1 of all BOD
Amendment of articles and bylaws: ¾ of all with voting
rights
BSP prescribes qualifications of BOD
Powers & Functions Capital Requirements Privileges
Primarily provide Minimum paid-up capital Same privileges as other
financial, credit, and as required by BSP (par banks;
banking services to value shares only); Publication of statement
cooperative Barrio Savings Fund (BSF) of its financial condition,
organizations (other and Barrio Guarantee Fund subject to BSP’s approval
banking services (BGF) to be deposited in (with exemption in
subject to BSP) cooperative banks. foreclosure cases)

Inability/unwillingness to maintain a period of liquidity – BSP may appoint a

conservator.
“Existing cooperatives may organize into such for
the purpose of engaging in the business of insuring
life and property of cooperatives and their
members.”
Insurance coverage — life insurance with special
group coverage, loan protection, retirement plans,
endowment, motor vehicle coverage, bonding, crop
and livestock protection, and equipment insurance
Subject to the Insurance Code and all other relevant
laws applicable
 organized to render public services as authorized under a franchise or certificate of public
convenience and necessity duly issued by the appropriate government agency (Article 109).

No public service cooperative shall be registered unless it satisfies the following (Article 110):
1. Its articles of cooperation and bylaws provide for the membership of the users.
2. If there are two or more applicants for the same public service franchise, all things equal, a public
service cooperative shall be given preference.

Regulation of public service cooperatives (Article 111):

1. This Code shall govern the internal affairs of a public service cooperative.
2. The appropriate government agency shall govern all matters relating to the certificate of public
convenience.
3. The Authority and the proper government agency shall issue the necessary rules to implement
4. The authority shall establish a committee for monitoring transportation service cooperatives
 An organization owned and operated by its members with
the following objectives (Article 115):

1. Encourage savings among members.

2. Create a pool of savings for which loans for productive
purposes may be granted.
3. Provide related services to enable its members to
maximize benefits. .

Existing credit and multipurpose cooperatives can be

converted to financial service cooperatives (Article 118).
 Financial organization owned and operated by its members and authorized to provide the following
services (Article 119):

1. The functions of credit cooperatives

2. Other financial services that are subject to regulation by BSP

Financial Cooperatives shall have two types of members (Article 120):

1. Regular members that are natural persons
2. Associate members that are natural persons but do not immediately qualify as regular members.

A certificate of authority issued by the BSP is required to register the articles and bylaws.
The BSP, in coordination with the Authority, shall prescribe the appropriate prudential rules and
regulations applicable to the financial service cooperatives.
They may organize themselves as Financial Service cooperative Federation.
undertake power generation utilizing renewable
energy sources, including hybrid systems,
acquisition, and operation of subtransmission
or distribution as its primary purposes

required number of votes for registration

with the Authority shall be twenty percent
(20%) of all members in good standing

rates and tariffs of electric cooperatives

registered shall be subject to the rules on
application and approval of and by the
Energy Regulatory Commission
The Labor Code and all other labor laws, the Social Security Act, the Medical Care Act, and all other
social legislations, and all other laws and executive orders shall apply to cooperatives duly
registered under this Code.

The conciliation and mediation committee of the cooperative shall facilitate the amicable
settlement of intra-cooperative disputes and disputes among members, officers, directors, and
committee members.

Should such conciliation or mediation proceedings fail, the matter should be settled through
voluntary arbitration which may only be disputed by the Office of the President
 composed of the Chairman of the Senate
Committee on Cooperatives and the Chairman
of the House Committee on Cooperatives
Development, with four (4) members each from
both Houses of Congress.

shall review and approve the implementing

rules and regulations of this Code and monitor
its proper implementation.
The use of the word ‘cooperative’ by any person or of persons or organizations, unless duly
registered as a cooperative under this Code

Willfull attempt in any manner to evade or defeat tax in violation of the provisions of Articles 60
and 61 of this Code of members of cooperatives

Direct or indirect interference or intervention by any public official or employee into the internal
affairs of a cooperative of which he is not a member

Violation of any director, officer or committee member of the provisions of Article 45 on the
Liability of Directors, Officers and Committee Members, Article 48 on the Disloyalty of a Director,
and Article 49 on the Illegal Use of Confidential Information