BAM 241: BUSINESS LAWS AND REGULATIONS

Student Activity Sheets Module #24

Name: ________________________________________________________ Class number: _______

Section: ____________ Schedule: __________________________________ Date: _______________

Lesson title: Philippine Cooperative Code of 2008 Materials:

Lesson Objectives
At the end of this module, I should be able to:
1. Describe the directors, officers, and committee
members in terms of liabilities for damages and
for secret profits, compensation, contract with the
cooperative, disloyalty and removal from position.
2. Explain the tax treatment of cooperatives.
3. Describe the insolvency, dissolution, capital,
property & funds, and net surplus of a cooperative.
Student Activity Sheets, Pen
References:
Philippine Cooperative Code of 2008 (RA
9520)
Atty. A. G. L. B., CPA. (2020). Retrieved from
Studocu.com:
https://www.studocu.com/ph/document/s
aint-louis-college/accountancy/lecture-
notes/philippine-cooperative-code-of-
2008/7174244/view

Productivity Tip: To increase concentration and memory, play music for studying while working on this module.
Relax. Now, start reading the module content and take note of the relevant information.

A. LESSON PREVIEW/REVIEW
1) Introduction

Hi, future accountant! Welcome to learning the Philippine Cooperative Code of 2008. The immediately
preceding module presented the general assembly, board of directors, officers, and the cooperative
committee. As a continuation, this module introduces the following topics: liability for damages and for
secret profits; compensation; self-dealing director, officer or committee member; disloyalty of director;
removal of officers; tax treatment of cooperatives; insolvency; dissolution; capital, property, and funds;
and net surplus.

2) Activity 1: What I Know Chart, part 1

Try answering the questions below by writing your ideas under the first column What I Know. It’s okay if
you write key words or phrases that you think are related to the questions.
What I Know Questions: What I Learned (Activity 4)

1. Do board of directors receive

compensation?

2. Are cooperatives taxable?

3. How much of the net surplus shall be
distributed to community development
fund?

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 BAM 241: BUSINESS LAWS AND REGULATIONS
Student Activity Sheets Module #24

Name: ________________________________________________________ Class number: _______

Section: ____________ Schedule: __________________________________ Date: _______________

B.MAIN LESSON
1) Activity 2: Content Notes

PHILIPPINE COOPERATIVE CODE OF 2008

(RA 9520)
 FOR DAMAGES: Directors, officers and committee members, who are
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 any personal or pecuniary interest in conflict with
LIABILITY FOR their duty as such directors, officers or committee members shall be
DAMAGES AND liable jointly and severally for all damages or profits resulting therefrom
FOR SECRET to the cooperative, members, and other persons.
PROFITS (ART.  FOR SECRET PROFITS: When a director, officer or committee member
45) attempts to acquire or acquires, in violation of his duty, any interest or
equity adverse to the cooperative in respect to any matter which has
been reposed in him in confidence, he shall, as a trustee for the
cooperative, be liable for damages and shall be accountable for double
the profits which otherwise would have accrued to the cooperative.
 DIRECTORS:
a. In the absence of any provisions in the bylaws fixing their
compensation, the directors shall not receive any compensation
except for reasonable per diems.
b. However, the directors and officers shall not be entitled to any
per diem when, in the preceding calendar year, the cooperative
reported a net loss or had a dividend rate less than the official
inflation rate for the same year.
c. Any compensation other than per diems may be granted to
COMPENSATION directors by a majority vote of the members with voting rights at
(ART. 46) a regular or special general assembly meeting specifically called
for the purpose.
d. No additional compensation other than per diems shall be paid
during the first year of existence of any cooperative.
 OFFICERS AND MEMBERS OF THE COMMITTEES: The
compensation of officers of the cooperative as well as the members of
the committees created pursuant to the PCC or its by-laws, may be fixed
in the bylaws.
 EMPLOYEES: Unless already fixed in the bylaws, the compensation of
all other employee shall be determined by the board of directors.
SELF-DEALING  GR: A contract entered into by the cooperative with one (1) or more of
DIRECTOR, its directors, officers, and committee members is voidable, at the option
OFFICER OR of the cooperative.
COMMITTEE EXPN: unless all the following conditions are present -
MEMBER (ART. a. That the presence of such director in the board meeting wherein
47) contract was approved was not necessary to constitute a quorum

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 BAM 241: BUSINESS LAWS AND REGULATIONS
Student Activity Sheets Module #24

Name: ________________________________________________________ Class number: _______

Section: ____________ Schedule: __________________________________ Date: _______________

for such meeting;

b. That the vote of such director was not necessary for the approval
of the contract;
c. That the contract is fair and reasonable under the circumstances;
and
d. That in the case of an officer or committee member, the contract
with the officer or committee member has been previously
authorized by the general assembly or by the board of directors.
 RATIFICATION BY 3/4 OF TMWVR: Where any of the first two
conditions set forth in the preceding paragraph is absent, in the case of
a contract with a director, such contract may be ratified by a 3/4 vote of
all the members with voting rights, present and constituting a quorum in
a meeting called for the purpose: Provided, That full disclosure of the
adverse interest of the directors involved is made at such meeting, and
that the contract is fair and reasonable under the circumstances.
 GR: A director who, by virtue of his office, acquires for himself an
opportunity which should belong to the cooperative shall be liable for
DISLOYALTY OF damages and must account for double the profits that otherwise would
A DIRECTOR have accrued to the cooperative by refunding the same.
(ART. 48) EXPN: unless his act has been ratified by a 3/4 vote of all the members
with voting rights, present and constituting a quorum.
 This provision shall be applicable, notwithstanding the fact that the
director used his own funds in the venture.
 All complaints for the removal of any elected officer shall be filed with
the board of directors. Such officer shall be given the opportunity to be
heard. Majority of the board of directors may place the officer concerned
under preventive suspension pending the resolution of the investigation.
REMOVAL OF
Upon finding of a prima facie evidence of guilt, the board shall present
OFFICERS (ART.
its recommendation for removal to the general assembly.
50)
 An elective officer may be removed by 3/4 votes of the regular members
present and constituting a quorum, in a regular or special general
assembly meeting called for the purpose. The officer concerned shall be
given an opportunity to be heard at said assembly.
TAX TREATMENT  Not subject to taxes and fees imposed under NIRC and other tax
OF laws for cooperatives transacting business with members only.
COOPERATIVES  Transactions with members are not subject to taxes and fees,
(ARTS. 60 & 61) including final tax on members' deposits and documentary tax
In case a cooperative is unable to fulfill its obligations to creditors due to
INSOLVENCY insolvency, such cooperative may apply for such remedies as it may deem fit
(ART. 63) under the provisions of Act No. 1956, as amended, otherwise known as the
Insolvency Law.
A. VOLUNTARY DISSOLUTION
1. WHERE NO CREDITORS ARE AFFECTED - BM + % TMWVR,
resolution to be filed with the CDA

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 BAM 241: BUSINESS LAWS AND REGULATIONS
Student Activity Sheets Module #24

Name: ________________________________________________________ Class number: _______

Section: ____________ Schedule: __________________________________ Date: _______________

2. WHERE CREDITORS ARE AFFECTED - BM + % TMWVR,

DISSOLUTION petition to be filed with the CDA
(ARTS. 64 TO 70)
B. INVOLUNTARY DISSOLUTION
1. BY ORDER OF A COMPETENT COURT
a. for violation of any law, regulation or provisions of its
bylaws; or
b. for insolvency.
2. BY ORDER OF THE CDA
a. for having obtained its registration by fraud;
b. for existing for an illegal purpose;
c. for willful violation, despite notice by the CDA, of the
provisions of the PCC or its bylaws;
d. for willful failure to operate on a cooperative basis; and
e. for failure to meet the required minimum number of
members in the cooperative.
3. BY FAILURE TO ORGANIZE AND OPERATE: If a cooperative
has not commenced business and its operation within 2 years
after the issuance of its certificate of registration or has not
carried on its business 2 consecutive years, the CDA shall send
a formal notice to the said cooperative to show cause as to its
failure to operate. Failure of the cooperative to promptly provide
justifiable cause for its failure to operate shall warrant the
Authority to delete its name from the roster of registered
cooperatives and shall be deemed dissolved.
 Cooperatives registered under the PCC may
derive their capital from any or all of the following
sources:
a. Member's share capital;
b. Loans and borrowings including deposits;
c. Revolving capital which consists of the
deferred payment of patronage refunds, or
interest on share capital; and
d. Subsidies, donations, legacies, grants,
CAPITAL
aids and such other assistance from any
SOURCES
local or foreign institution whether public or
private: Provided, That capital coming
from such subsides, donations, legacies,
grants, aids and other assistance shall not
be divided into individual share capital
holdings at any time but shall instead form
part of the donated capital or fund of the
cooperative.
 Upon dissolution, such donated capital shall be

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 BAM 241: BUSINESS LAWS AND REGULATIONS
Student Activity Sheets Module #24

Name: ________________________________________________________ Class number: _______

Section: ____________ Schedule: __________________________________ Date: _______________

subject to escheat.
LIMITATION ON No member of primary cooperative other than cooperative
CAPITAL, SHARE itself shall own or hold more than 10% of the share capital
PROPERTY AND CAPITAL of the cooperative.
FUNDS (CHAPTER HOLDINGS
VIII) No member shall transfer his shares or interest in the
cooperative or any part thereof unless:
ASSIGNMENT
1. He has held such share capital contribution or interest
OF SHARE
for not less than 1 year.
CAPITAL
2. The assignment is made to the cooperative or to a
CONTRIBUTION
member of the cooperative or to a person who falls within
OR INTEREST
the field of the membership of the cooperative; and
3. The board of directors has approved such assignment.
 The term "share" refers to a unit of capital in a
primary cooperative the par value of which may be
fixed to any figure not more than P1,000.00.
CONCEPT OF  The share of capital of a cooperative is the money
SHARE paid or required to be paid for the operations of
the cooperative.
 The method for the issuance of share certificates
shall be prescribed in its bylaws.
The by-laws of a cooperative may prescribe a fine
on unpaid subscribed share capital. Provided, that
FINES
such fine is fair and reasonable under the
circumstances.
A cooperative may invest its capital in any of the following:
a. In shares or debentures or securities of any other
cooperative;
b. In any reputable bank in the locality, or any
INVESTMENT cooperative;
OF CAPITAL c. In securities issued or guaranteed by the
Government;
d. In real state primarily for the use of the
cooperative or its members; or
e. In any other manner authorized in the bylaws.
The general assembly of any cooperative may authorize
the board of directors to raise a revolving capital to
strengthen its capital structure by deferring the payment
of patronage refunds and interest on share capital or by
REVOLVING
the authorized deduction of a percentage from the
CAPITAL
proceeds of products sold or services rendered, or per
unit of product or services handled. The board of directors
shall issue revolving capital certificates with serial
number, name, amount, and rate of interest to be paid

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 BAM 241: BUSINESS LAWS AND REGULATIONS
Student Activity Sheets Module #24

Name: ________________________________________________________ Class number: _______

Section: ____________ Schedule: __________________________________ Date: _______________

and shall distinctly set forth the time of retirement of such

certificates and the amounts to be returned.
 Every cooperative shall determine its net surplus –
a. at the close of every fiscal year and
b. at such other times as may be prescribed by the bylaws.
 Net surplus not equal to profit
 Net surplus = excess of payments made by the members for the loans
borrowed, or the goods and services availed by them from the
cooperative or the difference of the rightful amount due to the members
for their products sold or services rendered to the cooperative including
other inflows of assets resulting from its other operating activities and
which shall be deemed to have been returned to them if the same is
distributed

 ORDER OF DISTRIBUTION: The net surplus of every cooperative shall

be distributed as follows:
1. RESERVE FUND:
 GR: at least 10% of net surplus
EXPN: not less than 50% of the net surplus in the first 5
years of operation after registration
 The reserve fund shall be used for the stability of the
cooperative and to meet net losses in its operations.
NET SURPLUS
 The reserve fund shall not be utilized for investment,
(CHAPTER IX)
other than those allowed in the PCC.
 Upon the dissolution of the cooperative, the reserve fund
shall not be distributed among the members.
2. EDUCATION AND TRAINING FUND:
 not more than 10% of the net surplus
 The fund shall provide for the training, development and
similar other cooperative activities geared towards the
growth of the cooperative movement.
3. COMMUNITY DEVELOPMENT FUND:
 not less than 3% of the net surplus
 The community development fund shall be used for
projects or activities that will benefit the community where
the cooperative operates.
4. OPTIONAL FUND:
 not exceeding 7%
5. INTEREST ON SHARE CAPITAL:
 not exceeding the normal rate of return over investments
and patronage funds
PATRONAGE FUNDS: The sum allocated for patronage refunds shall be made
available at the same rate to all patrons of the cooperative in proportion to their

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 BAM 241: BUSINESS LAWS AND REGULATIONS
Student Activity Sheets Module #24

Name: ________________________________________________________ Class number: _______

Section: ____________ Schedule: __________________________________ Date: _______________

individual patronage.

2) Activity 3: Skill-building Activity

INSTRUCTIONS: Read the statements below. Before each number, write A, if only the first statement is
TRUE; B, if only the second statement is TRUE; C, if both statements are TRUE; and D, if both statements
are FALSE.

1.
Directors, officers and committee members, who are willfully and knowingly vote for or assent
to patently unlawful acts or who are guilty of gross negligence or bad faith in directing the
Statement I affairs of the cooperative or acquire any personal or pecuniary interest in conflict with their
duty as such directors, officers or committee members shall be solidarily liable for all
damages or profits resulting therefrom to the cooperative, members, and other persons.
If a cooperative has not commenced business and its operation within 2 years after the
Statement issuance of its certificate of registration or has not carried on its business 2 consecutive
II years, the CDA shall send a formal notice to the said cooperative to show cause as to its
failure to operate
2.
In the absence of any provisions in the by-laws fixing their compensation, the directors shall
Statement I
receive a reasonable fixed monthly compensation.
Statement Transactions with members are not subject to taxes and fees, including final tax on
II members' deposits and documentary tax
3.
A contract entered into by the cooperative with one (1) or more of its directors, officers, and
Statement I
committee members is void, at the option of the cooperative.
A director who, by virtue of his office, acquires for himself an opportunity which should belong
Statement
to the cooperative shall be liable for damages and must account for double the profits that
II
otherwise would have accrued to the cooperative by refunding the same.
4.
No member of secondary cooperative other than cooperative itself shall own or hold more
Statement I
than 10% of the share capital of the cooperative.
Statement The by-laws of a cooperative shall not prescribe a fine on unpaid subscribed share
II capital.
5.
Statement I Net surplus is equal to the cooperative’s profit.
Statement The sum allocated for patronage refunds shall be made available at the same rate to all
II patrons of the cooperative in proportion to their individual patronage.

Check your answers against the Key to Corrections found at the end of this SAS. Write your score on your
paper.

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 BAM 241: BUSINESS LAWS AND REGULATIONS
Student Activity Sheets Module #24

Name: ________________________________________________________ Class number: _______

Section: ____________ Schedule: __________________________________ Date: _______________

3) Activity 4: What I Know Chart, part 2

It’s time to answer the questions in the What I Know chart in Activity 1. Log in your answers in the third
column
4) Activity 5: Check for Understanding

MULTIPLE CHOICE. Select the best answer by writing the letter of your choice before each number.

1. No additional compensation other than per diems shall be paid to a director of a cooperative during _
of existence of any cooperative.
A. First year C. First 3 years
B. First 2 years D. First 5 years

2. An elected officer of a cooperative may be removed by _ a vote of all members with voting rights,
present and constituting a quorum in a meeting called for the purpose.
A. 1/2 B. 1/2 + 1 C. 2/3 D. 3/4

3. Who approves any assignment of share capital contribution or interest?

A. General assembly C. Executive committee
B. Board of directors D. Membership committee

4. A cooperative may be dissolved if 1 has not commenced business and its operation within years after
the issuance of its certificate of registration.
A. 2 B. 3 C. 4 D. S

5. The amount allocated to the community development fund of the cooperative shall not be more than
of the net surplus.
A. 7% B. 10% C. 3% D. 5%

*Activity 5: Check for Understanding is a GRADED QUIZ.

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 BAM 241: BUSINESS LAWS AND REGULATIONS
Student Activity Sheets Module #24

Name: ________________________________________________________ Class number: _______

Section: ____________ Schedule: __________________________________ Date: _______________

C. LESSON WRAP-UP
1) Activity 6: Thinking about Learning

Congratulations for finishing this module! Shade the number of the module that you finished.

You are done with the session! Let’s track your progress.
PERIOD 1 PERIOD 2 PERIOD 3
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

Did you have challenges learning the concepts in this module? If none, which parts of the module helped
you learn the concepts?
___________________________________________________________________________

Some question/s I want to ask my teacher about this module is/are:

__________________________________________________________________________________
_________

*KEY TO CORRECTIONS*

Answers to Skill-Building Exercise

1. C
2. B
3. B
4. D
5. B

-END-

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