Republic Act No.

9520

AN ACT AMENDING THE COOPERATIVE CODE OF THE PHILIPPINES TO

BE KNOWN AS THE “PHILIPPINE COOPERATIVE CODE OF 2008”

GENERAL CONCEPTS AND PRINCIPLES OF COOPERATIVE

A. DEFINITION

A cooperative is a duly registered association of persons, with a

common bond of interest, who have voluntarily joined together to
achieve a lawful common social or economic end, making equitable
contributions to the capital required and accepting a fair share of the
risks and benefits of the undertaking in accordance with universally
accepted principles.

Social end is synonymous with social, community or public purpose. A

social end is a purpose which seeks amelioration, improvement or
progress in social conditions of natural persons. It may also refer to
considerations which are moved by the common good.

A cooperative’s economic endrefers to the pecuniary, material or profit

objective in the organization of the cooperative. Both the lawful,
common, social and economic ends of cooperative is supposed to be
achieve through: (1) common contributions to the capital
requirements; (2) accepting a fair share of risks and benefits of the
cooperative; and (3) compliance with *universally accepted principles.

*universally accepted cooperative principles adhered to worldwide by

cooperatives in other jurisdictions.

B. COOPERATIVE PRINCIPLES

1. Voluntary and Open Membership


o cooperatives are voluntary organizations;
o open to all persons able to use their services;
 o willing to accept the responsibilities of membership without
gender, social, racial, cultural, political, or religious
discrimination.

Open cooperative membership means the availability of cooperative

membership to all individuals regardless of their social, political or
religious background or beliefs. Thus, whether a natural person is a
Catholic, Protestant, Iglesia ni Kristo, Muslim or member of any other
religious sect, is immaterial insofar as cooperative membership is
concerned. Political party affiliations are likewise immaterial insofar
as cooperative membership is concerned. Any member of any political
party may become a member of the cooperative. In other words, open
cooperative membership means its availability to all people of all
walks of life, from whatever segment of society, social, political,
religious backgrounds or beliefs being immaterial thereto.

Voluntary cooperative membership means that an individual’s

cooperative membership proceeded from his own will or his own act of
choice. In other words, it is a free, intelligent and intentional act. In
fact anyone who meets the qualifications set by a cooperative bylaws
can be a member if he willingly shoulders the responsibility.

2. Democrative Member Control


o cooperatives are democratic organizations controlled by their
members who actively participate in setting their policies and
decision-making;
o elected representatives, directors or officers are accountable to
the membership.

In primary cooperatives, members have equal voting rights; one

member, one vote.

Democratic control of cooperative means control by duly elected or

appointed persons of cooperative affairs, characterized by the
democratic principles of rule of the majority of one-member-one-vote.
In a simpler manner, coops are democratic organizations with officers
and managers elected or appointed in a manner agreed on by
members. Each member, no matter the amount of his share, is entitled
to vote.

3. Member Economic Participation

 
o members contribute equitably to the capital of their
cooperatives.
o Members allocate surpluses for any or all of the following:
developing the cooperative by setting up reserves (part of which
should at least be indivisible; benefitting members in proportion
to their patronage of the cooperative’s business; and supporting
other activities approved by the membership.

4. Autonomy and Independence


o cooperatives are autonomous, self-help organizations controlled
by its members.

5. Education, Training and Information


o cooperatives provide education and training for their members,
elected and appointed representatives, manages and employees,
so that they can contribute effectively and efficiently to the
development of their cooperatives.

6. Cooperation among Cooperatives

o Cooperatives serve their members most effectively and

strengthen the cooperative movement by working together
through local, national, regional, and international structures.

7. Concern for Community


o cooperatives work for the sustainable development of their
communities through policies approved by their members.

C. DEFINITION OF TERMS
1. Member – includes a person either natural of juridical that has
been admitted by the cooperative as member (adhering to the
principles of the Code and in the Articles of Cooperative).

Natural person refers to a human being and is a real and living person.
Juridical person refers to a being of legal existence, a legal person
existing in contemplation of law, having a distinct identity although it
may acquire and perform rights and obligations of a natural person as
may be provided by law. (e.g. corporations, government agencies,
cooperatives)
2. General Assembly – full membership of the cooperative duly
assembled for the purpose of exercising all the rights and performing
all the obligations pertaining to cooperatives. Provided that for
cooperatives with dispersed membership, the general assembly may
be composed of delegates elected by each sector, chapter of district
of the cooperative in accordance with the rules and regulations of the
Cooperative Development Authority.

3. Board of Directors – the body entrusted with the management of the

affairs of the cooperative under its articles of cooperation and bylaws.

4. Committee – refers to any body entrusted with specific functions

and responsibilities under the bylaws or resolution of the general
assembly of the board of directors.

5. Articles of Cooperation – the articles of cooperation registered

under the Code and includes a registered amendment thereof.

6. Bylaws – the bylaws registered under the Code and includes any
registered amendment thereof.

7. Registration – the operative act granting the juridical personality

to a proposed cooperative and is evidenced by a certificate of
registration.

8. Cooperative Development Authority (CDA) – the government

agency in charge of the registration and regulation of cooperatives.

9. Universally Accepted Principles – the body of cooperative principles

adhered to worldwide by cooperatives.

10. Representative Assembly – the full membership of a body of

representatives elected by each of the sectors, chapter or district of
the cooperative duly assembled for the purpose of exercising such
powers lawfully delegated unto them by the general assembly in
accordance with its bylaws.

11. Officers of the Cooperative – include the members if the board of

directors, members of the different committee created by the general
assembly, general manager or chief executive officer, secretary,
treasurer, and members holding other positions as may be provided for
in their bylaws.

12. Social Audit – a procedure wherein the cooperative assesses its

social impact and ethical performance in relation to its stated mission,
vision, goals and code of social responsibility for cooperatives to be
established by the Authority in consultation with the cooperative
sector. 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.

13. Performance Audit – refer to an audit on the efficiency and

effectiveness of the cooperative as a whole; its management and
officers; and its various responsibility centers as basis for improving
individual team or overall performance and for objectively informing
the general membership on such performance.

14. Single-Line or Single-Purpose Cooperative – includes cooperative

undertaking activities which are related to its main line of business or
purpose.

15. Service Cooperatives – those which provide any type of service to

its members, including but not limited to transport, information and
communication, insurance, housing, electric, health services,
education, banking, savings and credit.

16. Subsidiary Cooperative – refers to three or more *primary

cooperatives, doing the same line of 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 support of its member-cooperatives.

*primary cooperatives; the members of which are natural persons. –

the articles of cooperation registered under the Code and includes a
registered amendment thereof.
Organization of Cooperatives
Organization relates merely to the systematization and orderly
arrangement of the internal and managerial affairs and organs of an
entity and has nothing to do with the prorogation of its corporate life.
It is the process of forming and arranging into suitable disposition the
parties who are to act together in, and defining the objects of the
compound body. To organize means to prepare for transactions of
business, as an assembly by choosing its officers, committees, etc.

A. Purposes of Cooperatives. A cooperative may be organized and

registered for any or all of the following purposes:

1. To encourage thrift and savings mobilization among the members;

2. To generate funds and extend credit to the members for productive
and provident purposes;
3. To encourage among members systematic production and
marketing;
4. To provide goods and services and other requirements to the
members;
5. To develop expertise and skills among its members;
6. To acquire lands and provide housing benefits for the members;
7. To insure against losses of the members;
8. To promote and advance the economic, social, and educational
status of the members;
9. To establish, own, lease or operate cooperative banks, cooperative
wholesale and retail complexes, insurance and
agricultural/industrial processing enterprises, and public markets;
10. To coordinate and facilitate the activities of cooperatives;
11. To advocate for the cause of the cooperative movements;
12. To ensure the viability of cooperatives through the utilization of
new technologies;
13. To encourage and promote self-help or self-employment as an
engine for economic growth and poverty alleviation; and
14. To undertake any and all other activities for the effective and
efficient implementation of the provisions of the Code.

B. Objectives and Goals of Cooperative. The primary objective of

cooperative is to help improve the quality of life of its members.

1. Provide goods and services to its members to enable them to attain

increased income, savings, investments, productivity, and
purchasing power, and promote among themselves equitable
distribution of net surplus through maximum utilization of
economies of scale, cost-sharing and risk-sharing;

Economies of scale are economies of growth resulting from

expansion of the scale of the productive capacity of a firm or
industry and decreases in its cost of production per unit output. The
purpose of achieving “economies of scale” is to lower unit costs
and prices.

Cost-sharing and risk-sharing literally implies, they mean sharing

by two or more people of costs and risks of whatever endeavour
they are undertaking for the purpose in the end of “profit sharing.”
Applied to cooperatives, they mean sharing by cooperative
members of the costs and risks of business for the ultimate purpose
of profit or gain.

2. Provide optimum social and economic benefits to its members;

3. Teach them efficient ways of doing things in cooperative manner;
4. Propagate cooperative practices and new ideas in business and
management;
5. Allow the lower income and less privileged groups to increase their
ownership in the wealth of the nation; and
6. Cooperate with the government, other cooperatives and people-
oriented organizations to further the attainment of any of the
foregoing objectives.
C. Cooperatives Not in Restraint of Trade. No cooperative or method
or act thereof which complies with the Code shall be deemed a
conspiracy or *combination in restraint of trade or illegal monopoly, or
an attempt to lessen competition or fix prices arbitrary in violation of
any laws of the Philippines.

Combination in restraint of trade means an agreement made, as

among manufacturers of particular goods, for the purpose of
suppressing competition in the market. Thus, even if a cooperative
action is actually monopoly or restraint of trade of other merchants,
the Code exempts the cooperative from any liability.

D. Cooperative Powers and Capacities

The word “power” includes authority, capacity or right. Cooperative

powers are necessary for cooperative to carry out its purposes as
stated in its articles of cooperation and/or authorized by the law.

A cooperative registered under this Code shall have the following

powers, rights, and capacities:

1. To the exclusive use of its registered name, to sue and be sued;

The words “sue and be sued” embrace all civil process incident to a
legal action. The cooperative power to sue and be sued is a natural
consequence of its existence as a juridical person for the assertion,
protection or defense of its legal rights as such.

2. Of succession;
Cooperative power of succession is synonymous with “legal
succession” which takes effect by operation of law. It is actually the
right to become a successor-in-interest to the rights, properties and
obligations of another person, whether natural or juridical. The term
“successor-in-interest” includes one to whom the debtor has
transferred his statutory right of redemption or one who succeeds to
the interest of the debtor by operation of law.

For example: X lends P500, 000 to Y, payable within one (1) year. X’s
right to collect the P500, 000 from Y may be assigned to the Manila
Federation of Market Vendors Cooperatives. In this case, the latter
becomes the successor-in-interest of X.
3. To amend its articles of cooperation in accordance with the
provisions of this Code;
The cooperative power to amend its articles of cooperation and
bylaws, in accordance with the provisions of the Philippine
Cooperative Code means “to add, change, substitute, or omit
something” therefrom. With respect of its bylaws, a cooperative has
the additional power “to repeal” or declare as non-existent said
bylaws.

4. To adopt bylaws not contrary to law, morals or public policy, and to

amend and repeal the same in accordance with this Code;
5. To purchase, receive, take or grant, hold, convey, sell, lease,
pledge, mortgage, and otherwise deal with such real and personal
property as the transaction of lawful affairs of the cooperative may
reasonably and necessarily require, subject to the limitations
prescribed by the law and the Constitution;
The word “purchase” means, in the absence of any expression to
limit any significance, a transmutation of property from one party to
another in consideration of some price or recompense in value; a
transmission of property by a voluntary act or agreement, founded on a
valuable consideration, divesting title out of the vendor and vesting it
in the vendeed. Exchange is equivalent to purchase, the only
difference being that instead of paying the price or consideration,
property is given in lieu thereof.

The word “receive” means an act of receiving anything that is

voluntary. It is an act coupled with the element of knowledge or
voluntariness on the part of the recipient. In this connection, the
words “received original” followed by the signature of the person
receiving, attests only to the receipt of the original document. It does
not show agreement to the contents of the receipt itself.

Lease is a contract by which one of the parties agrees to give to the

other for a fixed time and price the use or profit of a thing, or of his
service. It is a consensual, bilateral and commutative contract by
which the owner temporarily grants the use of his property to another
who undertakes to pay rent.

Grant means a concession, gift, donation, permission, or privilege. Or

confer, bestow, convey, transfer, allow or concede. In its broader
sense, it means to agree or assent to. To allow to be fulfilled. To
accord, to bestow, or confer.

Pledge is a contract whereby personal property is delivered to the

creditor or a third person as a security for the performance of an
obligation. The requisites of a contract of pledge are: (1) that the
contract be constituted to secure the fulfilment of a principal
obligation; (2) that the pledger be the absolute owner of the thing
pledged; and (3) that the person constituting the pledge has the free
disposal of his property and in the absence thereof, that he be legally
authorized for the purpose.

Mortgage means the conveyance of an estate or pledge of property as

security for the payment of money or the performance of some act and
conditioned to become void upon such payment or performance. A
mortgage is a security for the performance of an obligation.

6. To enter into division, merger or consolidation;

7. To form subsidiary cooperatives and join *federations or unions;
*cooperatives whose members are cooperatives

8. 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 of sold loans, credits, grants, donations or
assistance that will not undermine the anatomy of the cooperative.
The Authority, upon written request, shall provide necessary
assistance in the documentary requirements, credit, grants,
donations, and other financial support;
9. To avail of preferential rights granted to cooperative under Republic
Act No. 7160 otherwise known as the Local Government Code, and
other laws, particularly those in the grant of franchises to establish,
construct, operate and maintain ferries, wharves, markets or
slaughterhouses and to lease public utilities, including access to
extension and facilities related to agriculture and fishery activities;
10. To organize and operate schools in accordance with Republic Act
No. 9155 Governance of Basic Education Act of 2001 and other
pertinent laws; and
11. To exercise other powers granted by this Code or necessary to
carry out its purpose or purposes as stated in its Articles of
cooperation.

E. Organizing a Primary Cooperative. Fifteen (15) or more natural

persons, who are citizens of the Philippines, of legal age, having a
common bond of interest and are actually residing or working in the
intended area of operation, may organize a cooperative under this
Code. Provided, that a prospective member of a primary cooperative
must have completed a Pre-Membership Education Seminar (PMES).

In other words, minimum of fifteen (15) natural persons who possess

all the other qualifications required by law, particularly Art. 10, RA No.
9520, may organize a cooperative under the Philippine Cooperative
Code.

Organization of Primary Cooperative


o Ordinary Cooperative (REQUISITES)
o 15/> natural persons
o Legal age
o Filipino citizen
o Complied a Pre-Membership Education Seminar (PMES)

Conversion to Multi-Purpose Cooperative


o WHEN? Upon compliance with the minimum requirements for
multipurpose cooperatives set by the Authority
o For single purpose cooperative, only after at least two (2) years
of operation (may also create subsidiaries)

F. Economic Survey. An economic survey is a general statement

describing the structure, purpose, economic feasibility of the proposed
cooperative, area of operation, size of membership, and other
pertinent data. It is, in fact, a project feasibility study. The structure
describes the kind of cooperative being set up, whether it is primary,
secondary, or tertiary and whether it is a credit, consumer, transport,
or any other type of coop.
The purpose defines the primary secondary and other objectives of the
cooperative. The area of operation merely indicates the geographical
or sectoral scope of the coop. For example, a cooperative may operate
in, say Caloocan City, or it may operate in a certain scope of operation.
This is closely related to cooperative structure.

The most important part of the structure is the economic feasibility.

Here the prospective coop members estimate the income and
expenses of the cooperative. It makes a projection of the possible
growth pattern of the coop over a certain period, preferably three (3)
years, and how this growth generates income and incurs expenses. It
tries to anticipate possible obstacles and constraints and makes
allowances for them.

Necessary documents in the formation of a proposed cooperative

1. General Statement


o Must be submitted by every group of individuals/cooperative
intending to form a cooperative which describes the structure
and purposes of the proposed cooperative
o REQUISITES:
o Bookkeeper – must be present in the structure and actual
staffing pattern of the
 the coop (content).
 Necessary personnel – must be present in order to be allowed
to operate.

2. Economic Survey


o Area of operation
o Size of membership; and
o Other pertinent data in a format provided by the Authority

G. Liability. A cooperative duly registered under this Code shall have

limited liability.

Limited liability means restricted; bounded; prescribed; confined

within positive bounds; restrictive in duration, extent or scope.
Liability means the rights of various parties in the resources owned by
a particular business unit (or which it has a cognizable interest), as
reflected in a balance sheet.

Limited liability as used in this legal provision is synonymous with

restricted obligations to third persons as provided for in the Philippine
Cooperative Code. In other words, member shall only be liable for the
debts of the cooperative to the extent of its contribution to the share
capital of the cooperative.

H. Term. A cooperative shall exist for a period not exceeding fifty (50)
years form the date of registration unless sooner dissolve or unless
said period is extended. The cooperative term , as originally stated in
the articles of cooperation, may be extended for periods not exceeding
fifty (50) years in any single instance by an amendment of the articles
of cooperation, in accordance with this Code; Provided, that no
extension can be made earlier than five (5) years prior to the original
or subsequent expiry date/s unless there are justifiable reasons for an
earlier extension as may be determined by the Authority.

Term means a period of time within which an act may, or must, be

performed or a fact takes place. In the legal sense, a cooperative term
is fixed and definite period of time which the law prescribes for the
existence of a cooperative.

Cooperative Term

1. LIFE: 50 years from the date of registration unless dissolved or

extended

2. EXTENSION:


o Is it allowed? YES
o By how long? 50 years/< in any single instance
o How? Amendment of the articles of cooperation
o Provision: No extension can be made earlier than 5 years PRIOR
to original/subsequent expiry date/s UNLESS there are justifiable
reasons as may be determined by the Authority

For example, X cooperative was organized in 1990 for a term of fifty

(50) years which shall expire in 2040. The first fifty (50) year extension
must be made after 2035, unless an earlier extension is allowed by the
Cooperative Development Authority.
I. Articles of Cooperation. The articles of cooperation is a duly
notarized document that legally binds all the signatories in the
formation of a cooperative.

The articles of cooperation of a cooperative is the fundamental law

or constitution thereof required by law for registration thereof by the
Cooperative Development Authority.

1. Shall be filed with the Authority together with the bylaws (same
time)
2. Signed and acknowledged by


o EACH OF THE ORGANIZERS OR COOPERATORS for primary
cooperatives (members of which are natural persons)
o CHAIRPERSONS/SECRETARIES for secondary and tertiary
cooperatives (members of which are juridical persons)

3. Notarized by a lawyer
4. Contents:


o Name of the cooperative (with the word “Cooperative”); e.g.
Santa Maria Multipurpose Cooperative
o Purpose or purposes and scope of the business for which the
cooperative is to be registered;
o Term of existence (not more than 50 years)
o Area of operation and postal address of the principal office;
o Names, nationality, and postal addresses of the registrants;
o Common bond of membership;
o List of names of the directors who shall manage the cooperative;
and
o Amount of share capital with the names and residences of its
contributors and a statement whether the cooperative is
primary, secondary or tertiary in accordance with Art. 23.

5. General requirements in registering a cooperative


 o Four (4) copies of each of the proposed Articles of Cooperation,
Bylaws, and the Economic Survey
o Articles of cooperation, accompanied with:

1.
1.
1. Bonds of accountable officers (any director, officer and
employee handling funds, securities or properties on behalf of
the cooperative. The board of directors determined the
amount of bonds required based based on the initial net worth
which shall include the paid-up capital, membership fees and
other assets of the cooperative at the time of registration; and
2. Sworn statement of treasurer elected by the subscribers showing:


o

 At least 25% of the authorized share capital has been
subscribed (total subscription
 At least 25% of the total subscription has been paid

Provided, that in no case shall the paid-up share capital be

less than fifteen thousand pesos (P15,000.00).

Note:

 No cooperative (other than a cooperative union as described under

Art. 25) shall be registered UNLESS ALL requirements in the
registration with the CDA were being submitted.
 The CDA shall periodically assess the required paid-up share capital
and may increase every five (5) years when necessary upon the
consultation with the cooperative sector and the National
Economic Development Authority (NEDA).

J. Bylaws.

“Bylaws” means the rules and regulations of an organization. Applied

to cooperatives, the term “bylaws” are rules and regulations adopted
by the members thereof, the provisions of which are consistent with
the Philippine Cooperative Code and its articles of cooperation.
Additionally, bylaws are the set of rules that defines and determines
how a cooperative is to be run without confusion.

1. Shall be filed at the same time as the articles of cooperation;

2. Contents:


o 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;
o Rights and liabilities of membership;
o Circumstances under which membership is acquired, maintained
and lost;
o Procedure to be followed in cases of termination of membership;
o Conditions under which the transfer of a share or interest of the
members shall be permitted;
o Rules and procedures on the agenda, time, place and manner of
calling, convening, conducting meetings, quorum requirements,
voting systems, and other matters relative to the business affairs
of the general assembly, board of directors, and committees
o 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;
o Manner in which the capital may be raised and the purposes for
which it can be utilized; mode of custody and of investment of
net surplus;
o Accounting and auditing systems
o Manner of loaning and borrowing including the limitations
thereof;
o Method of distribution of net surplus;
o Manner of adopting, amending, repealing, and abrogating bylaws;
o Conciliation or mediation mechanism for the amicable
settlement of disputes among members, directors, officers and
committee members of the cooperatives; and
o Other matters incident to the purposes and activities of the
cooperative.
Registration of Cooperatives
Topic Overview

As a juridical entity, a cooperative is similar to a corporation.

However, while corporations are registered and supervised by the
Securities and Exchange Commission (SEC), cooperatives are
registered and supervised by the Cooperative Development Authority
(CDA). This is pursuant to the Philippine Cooperative Code of
2008 (Republic Act No. 9520).
Prospective cooperatives must submit their application to the CDA
Extension Office where the principal office of the cooperative is
located.

A. Registration. A cooperative formed and organized under this Code

acquires juridical personality from the date the Authority issues a
certificate of registration under its official seal. All applications for
registration shall be finally disposed of by the Authority within a period
of sixty (60) days from the filing thereof, otherwise the application is
deemed approved unless the cause of the delay is attributable to the
applicant. Provided, That in case of a denial of the application for
registration, an appeal shall lie with the office of the President within
ninety (90) days from receipt of notice of such denial: Provided
further, That failure of the Office of the President to act on the appeal
within ninety (90) days from the filing thereof shall mean approval of
the said application.

A cooperative is deemed registered upon issuance by the

Cooperative Development Authority (CDA) of its certificate of
registration under its official seal. The mere filing of a cooperative’s
articles of cooperation and bylaws with the CDA does not constitute
registration.

In case of a denial of the application for registration of a cooperative

by the Authority, the denied applicant may appeal to the Office of the
President within ninety (90) days from receipt of notice of such denial.
Failure on the Office of the President to act on the appeal within ninety
(90) days from the filing thereof shall mean approval of the said
application.
Juridical Personality

1. When acquired? Upon ISSUANCE of Certificate of Registration by

the Cooperative Development Authority under its official seal.
2. Procedure:

B. Certificate of Registration. A certificate of registration issued by

the Authority under its official seal shall be conclusive evidence that
the cooperative therein mentioned is duly registered unless it is
proved that the registration thereof has been canceled.

Conclusive evidence is that which establishes the fact, as in the

instance of conclusive presumption. A conclusive presumption is an
inference which the law makes so peremptory that it will not allow
such inference to be overtuned by any contrary proof however strong.
Or a presumption created by law upon the occurrence of specific facts
which, in effect, is a substantive rule of law, to be applied by the court
in its evaluation of the issues, the same as any other fixed rule of law.

C. Amendments of Articles of Cooperation and Bylaws. Unless otherwise prescribed by this

Code and for legitimate purposes, any provision or matter stated in the articles of cooperation
and bylaws may be amended by two-thirds (2/3) vote 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 term “amendment” includes the revision or total overhaul of the

entire instrument. But ordinarily, the act of amending envisages a
change of only specific provisions.

 Vote: 2/3 of ALL members with voting rights (without prejudice to

the right of the dissenting members to exercise their right to
withdraw their membership)

For instance, X cooperative has 3,000 members with voting rights. A

vote of at least 2,000 members is necessary to amend its articles of
cooperation and bylaws.

 When effected?

1.
1. Upon approval by the Cooperative Development Authority within
thirty (30) days from the date of filing; or
2. Within thirty (30) days from date of filing (if not acted upon by
CDA and the cause is not attributable to the cooperative.

D. Division of Cooperatives. Any registered cooperative may, by a

resolution approved by a vote of three fourths (3/4) of all the members
with voting rights, present and constituting a quorum, resolve to divide
itself into two or more cooperatives. The procedure for such division
shall be prescribed in the regulations of the Authority: Provided, That
all the requirements set forth in this Code have been complied with by
the new cooperatives: Provided further, That no division of a
cooperative in fraud of creditors shall be valid.

Cooperative division means the separation of a cooperative into two or

more cooperatives. A resolution approved by a two thirds (2/3) vote of
the members eligible to vote at a general assembly meeting is
necessary for that purpose.

Division of cooperative in fraud of creditors is prohibited. The term

“fraud” in its general sense, is deemed to comprise anything
calculated to deceive, including all acts, omissions, and concealment
involving a breach of legal or equitable duty, trust, or confidence justly
reposed, resulting in damage to another, or by which an undue and
unconscientious advantage is taken of another. Thus, division of
cooperatives to defraud, cheat or deceive creditors is not allowed.


o Divide into two or more cooperatives;
o Vote: ¾ of all members with voting rights, present and
constituting a quorum;
o All requirements must be complied with the new cooperatives;
o Division of cooperatives in fraud is not valid

Note:

 The bylaws may prescribe a FINE of the unpaid subscribed share

capital, provided, that it is fair and reasonable.
 The bylaws shall provide for a reasonable and realistic member
capital build-up program to allow the continuing growth of the
member’s investment as economic conditions continue to improve.

Merger and Consolidation

Two or more cooperatives may merge into a single cooperative which
shall either be one of the constituent cooperatives or the consolidated
cooperative;

No merger or consolidation shall be valid unless approved by a three

fourths (3/4) vote of all members with voting rights, present and
constituting a quorum of each of the constituent cooperatives at a
separate general assembly meeting. The dissenting members shall
have the right to exercise their right to withdraw their membership
pursuant to Art. 30.

The Authority shall issue the guidelines governing the procedure of

merger or consolidation of cooperatives. In any case, the merger or
consolidation of cooperatives. In any case, the merger or consolidation
shall be effective upon the issuance of the certificate of merger or
consolidation by the Authority.

Merger means the combination of two or more cooperatives either

by the creation of a new cooperative or by the absorption of one of the
other or others.
For example, A and B cooperatives may agree to form a new
cooperative such as the X Cooperative or A Cooperative may simply be
absorbed by B cooperative. In the latter case, B Cooperative shall be
the consolidated cooperative.

Effects of Merger and Consolidation. The merger or consolidation of

cooperatives shall have the following effects:


o The constituent cooperatives shall become a single cooperative
which, in case of merger, shall be the surviving cooperative, and,
in case of consolidation, shall be the consolidated cooperative;
o The separate existence of the constituent cooperatives shall
cease, except that of the surviving or the consolidated
cooperative;
o The surviving or the consolidated cooperative, shall possess all
the assets, rights, privileges, immunities and franchises of each
of the constituent cooperatives; and
o The surviving or the consolidated cooperative shall be
responsible for all the liabilities and obligation of each of the
constituent cooperatives in the same manner as if such surviving
or consolidated cooperative had itself incurred such liabilities or
obligations. Any claim, action or proceeding pending by or
against any such constituent cooperatives may be prosecuted by
or against the surviving or consolidated cooperative, as the case
may be. Neither the rights of creditors nor any lien upon the
property of any such constituent cooperatives shall be impaired
by such merger or consolidation.
Constituent cooperatives in case of merger are the cooperatives
absorbed in the merger by the surviving cooperative. Thus, assuming
A, B, and C cooperatives decide on merger among themselves and A
cooperative, the latter absorbing B and C cooperatives. In this case, A
cooperative is the surviving cooperative.

A consolidated cooperative results from consolidation of

cooperatives. The new cooperative, in case of consolidation, is called
the consolidated cooperative. Thus, assuming that R and S
cooperatives decide to consolidate with each other to become R and C
cooperative. The new R and S cooperative is the consolidated
cooperative.

Rights of third persons having claims against constituent

cooperatives, in case of merger or consolidation of such cooperatives,
are prejudiced thereby. The surviving or consolidated cooperative shall
be responsible for all liabilities and obligations of each of the
constituent cooperatives as if such surviving or consolidated
cooperative had itself incurred such liabilities or obligations.

Assume that B cooperative, before being absorbed by A cooperative, in

a merger, owes X Corporation P 1,000,000. After the merger with A
cooperative, X corporation may collect the P 1,000,000 form A
cooperative.

EFFECTS (summary):

1.
1.
1. Constituent cooperatives become single cooperative:

» In the case of MERGER, the new cooperative shall be called

the SURVIVING COOPERATIVE.

» In CONSOLIDATION, the new cooperative shall be called the

CONSOLIDATED COOPERATIVE.

2. Separate existence of constituent cooperatives CEASE except surviving or the

consolidated cooperative.

3. Surviving or consolidated cooperative POSSESS ALL assets, rights, privileges,

immunities and franchises of each of constituent cooperatives.
 4. Surviving or consolidated cooperative is responsible for ALL liabilities, obligation of
each of constituent cooperatives which include:

» claim, action, and pending proceeding and non-impairment of

creditors rights on lien of property.

Categories of Cooperative. Cooperatives shall be categorized

according to membership and territorial consideration as follows:

In terms of membership, cooperative shall be categorized into;

1. Primary – the members of which are natural persons;

2. Secondary – the members of which are primary cooperatives; and
3. Tertiary – the members of which are secondary cooperatives.

In terms of territory, cooperatives shall be categorized into areas of

operations that may or may not coincide with the political subdivision
of the country.

For example, A Rizal Multi-Purpose Cooperative, whose area of

operation is the present province of Rizal, plus the 12 of its former
towns now in Metro Manila, may be formed. Strictly speaking, its area
of operations is not limited to the present Province of Rizal.

Federation of Cooperatives

A federation of cooperatives is an association of primary and/or

secondary cooperatives with single line or multipurpose business
activities registered with the Cooperative Development Authority. A
federation of cooperatives are allowed to carry on cooperative
enterprise under Art. 6 Purposes of Cooperatives.

[samahan ng mga cooperative na pare-pareho]

Only registered or existing cooperatives may organize a federation of

cooperatives at the provincial, city, regional and national levels
according to the type of business carried on.
Cooperative Unions.

A cooperative union is an organization of registered cooperatives and

cooperative federations organized to represent the interest and
welfare if all types of cooperatives at the provincial, city, regional and
national levels. Cooperative unions are also authorized to assist the
national and local government activities in their respective
jurisdictions.

[mas malaki kaysa sa federation]

Membership in Cooperatives
Topic Overview

In continuation with the previous sections under the Philippine

Cooperative Code of 2008, this module focuses on membership in
cooperatives. Students will be introduced to the important practices of
every cooperative upon applying for membership in a certain
cooperative.

A. Kinds of Membership. A cooperative may have two kinds of

membership: (1) regular members; and (2) associate members.

Membership in Cooperatives

Only natural persons may be admitted as members of a primary

cooperative. A natural person, however, must be a citizen of the
Philippines and has to meet the qualifications set in the bylaws of a
primary cooperative to become eligible for membership therein.

Juridical persons such as a cooperative or non-profit organization with

juridical personality shall be eligible for membership in a secondary or
tertiary cooperative.

(1) Regular member

- Complied with all the membership requirements

- Entitled to all the rights and privileges of membership

(2) Associate member

- Has no right to vote and be voted upon

- Entitled only to such rights and privileges as the bylaws may provide

- Can an associate member be a regular member? YES, only if such

member,

 Meets the minimum requirements of regular

membership;
 Continues to patronize the cooperative for two years;
and
 Signifies his/her intention to remain a member.

Laboratory Cooperative


o A cooperative organized by minors shall be considered a
laboratory cooperative and must be affiliated with a registered
cooperative.
o It shall be governed by special guidelines to be promulgated by
the Authority

B. Government Employees and Officers.

Cooperative Development Authority Officers and Employees

Disqualified from Cooperative Positions. Any officer or employee of
the Cooperative Development Authority shall be disqualified to be
elected or appointed to any position in a cooperative. This provision
law seeks to avoid possible conflict of interest between the CDA
officer or employee with any cooperative elective or appointive
position. They are not, however, prohibited form becoming members of
any cooperative.

Ineligibility of Elective Officials to Become Officers and Directors of

Cooperative. As a general rule, elective officials are 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.

Privilege to Government Employee Cooperative Members. Art. 27

paragraph 3 of the Philippine Cooperative Code grants a special
privilege to any government employee in discharge of his duties or a
member of a cooperative, “to use official time for attendance at the
general assembly, board and committee meetings of the cooperative,
as well as cooperative seminars, conference, workshops, technical
meetings, and training courses locally and abroad. Provided: That the
operations of the office conceived are not adversely affected.

C. Application for Membership. An applicant for membership in a cooperative has formally

apply in writing for membership therein. It is the prerogative of the cooperative/s board of
directors (BOD) to approve or disapprove such application for membership. Upon approval of
the applicant’s application for membership, it is further required that before said applicant may
exercise the rights of a members only after having made such payments (share capital
contribution) to the cooperative in respect to membership or acquired such interest in the
cooperative as may be prescribed in the bylaws. In case membership is denied by the BOD, an
appeal may be made to the general assembly (GA) and the latter’s decision shall be final. For this
purpose, the GA may opt to create an appeal and grievance committee (members shall serve for a
period of one year and decides on the appeal of membership application within thirty days). If
the committee fails to decide within the prescribed period, the appeal is deemed approved in
favor of the applicant.

D. Limited Liability of Cooperative Members. Art. 29 of the Philippine Cooperative Code

states “a member shall be liable for the debts o the cooperative to the extent of his contribution to
the share capital of the cooperative.” This means that only the contribution or share capital of the
cooperative is liable for cooperative debts or obligations. The other assets of the cooperative
member are not liable for cooperatives.

E. Termination of Membership.


o A member of a cooperative may withdraw his membership from
the cooperative (for any valid reason) by giving sixty (60) day
notice to the board of directors.
o Withdrawing members shall be entitled to a refund of his share
capital contribution and all other interests in the cooperative.

Exception: No refund shall be made if upon such payment the

Assets<Liabilities exclusive of the withdrawing member’s share
capital contribution.


o Valid grounds for termination:
  Willful termination (made by the withdrawing member)
 Not willful termination (majority vote of the BOD with valid
reason)
 Death or insanity of the members (applicable to primary
cooperative)

Exception: Death/Insanity of an Agrarian Reform, beneficiary-member

of a coop, the next-of-kin (descendant) assumes duties and
responsibilities of the original member.


o Insolvency/Dissolution (applicable to secondary or tertiary
cooperatives)
o Valid reasons for termination:

1.
1.
1. Member has not patronized the goods/services for
unreasonable period of time as determined by the BOD;
2. Member has not complied the obligations continuously;
3. Member has violated the rules and bylaws; and
4. Member has committed act/omission injurious/prejudicial to
the interest of welfare of the cooperative.

*see image below for procedure on termination of membership

Note:

 Failure of the committee to decide on the appeal of the membership

termination within the prescribed period, the appeal is deemed
approved in favor the member.
 Pending a decision by the general assembly (to whom the decision
is final), the membership remains in force.

F. Refund of Interest. All sums computed in accordance with the bylaws to be due form a
cooperative to a former member shall be paid to him either by the cooperative or by the approved
transferee, as the case may be, in accordance with the Cooperative Code.

Meaning of Interest
Interest is the price agreed to be paid for the use of money. In other
words, it is the compensation which is paid by the borrower of money
to the lender for its use, and generally by the debtor to his creditor for
hi detention of the debt.