DISSOLUTION OF COOPERATIVES CHAPTER VII

GROUP 6
DEDICATORIA, KYLA A.
MAGNASE, MICHELLE
ROLUNA, FRANCIS
RIVERA, MARICHU
 DISSOLUTION OF COOPERATIVES CHAPTER VII

DISSOLUTION
Refers to the termination or cessation of the business of the
cooperative.
DISSOLUTION OF COOPERATIVES CHAPTER VII

VOLUNTARY DISSULOTION
When cooperative itself, through resolution of the board of
directors and the general assembly, seeks termination of its
business.
 DISSOLUTION OF COOPERATIVES CHAPTER VII

Voluntary Dissolution Where No Creditors Are Affected

Where no creditors’ rights are affected by the dissolution of the
cooperative.
Rules to be followed:
1.) Resolution from the board
2.) Resolution from the general assembly
3.) Notice meeting
4.) Receipt by member of the notice of meeting
5.) Filing of dissolution papers
 DISSOLUTION OF COOPERATIVES CHAPTER VII

Voluntary Dissolution Where Creditors Are Affected

If the dissolution will prejudice the rights of the creditors to collect
the payment from the cooperative because the asserts of the
cooperative are not sufficient anymore to pay all obligations, the proper
recourse is to file a petition for dissolution with the CDA. The CDA, in
case, is the authoritative third person that can mediate between
creditors and debtors and determine the validity of the claims. This
type of dissolution requires a resolution approved by at least two-thirds
of all the members with voting rights, at a meeting called for the
purpose.
 DISSOLUTION OF COOPERATIVES CHAPTER VII

In addition, a petition must be filed with the CDA, conforming in

substance to the following:
1.) It is signed by the majority of its board of directors or other
officers managing its affairs.
2.) It is verified by the cooperative’s president or secretary or one of its
director.
3.) It lays down all claims and demands against the cooperative; and
4.) It states that dissolution was resolved upon by the affirmative vote
of at least two-thirds of all the members with voting rights, at a
meeting called for that purpose.
DISSOLUTION OF COOPERATIVES CHAPTER VII

On a cautionary note, the language of the Code is very clear, it state

that: “.. At least two-thirds of all members with voting rights,…” This
means that the vote required is the totality of regular members not
disqualified to vote and it does not refer only to the voting members
present and constituting a quorum. If there are 100 regular members
with 99 members entitled to vote and 1 member disqualified to vote
due to habitual delinquency in loan payments, a vote of 66 members
will carry dissolution. A quorum, in general, is merely 25 percent of
all members entitled to vote, which in this example is 25 voting
members.
 DISSOLUTION OF COOPERATIVES CHAPTER VII

Processing of Dissolution Petition of the CDA

1.) The CDA will examine the petition and if it finds the petition sufficient in
form and substance, it will issue an order that recited therein in the purpose
of the petition and shall fix a date on or before which objections to the
petition for dissolution may be filed by any person.
2.) Objection to the petition for dissolution may be filed with the CDA within
a period not less than 30 days nor more than 60 days after the entry of the
order.
3.) Within the thirty-day period, a copy of the order is published at least once
a week for three consecutive weeks in a newspaper that either published of
circulating in the municipality or city where the principal office of the
cooperative is situated.
 DISSOLUTION OF COOPERATIVES CHAPTER VII

4.) A similar copy of the order is posted for three consecutive weeks in
three public places in the municipality or city where the principal
office of the cooperative is situated.
5.) Within five days after the maximum sixty-day period to file
objections to the petition for dissolution has expired, the CDA issues
a notice that will proceed to hear the petition and try any issue arising
from the objections submitted.
6.) If no objections have been filed, the dissolution shall be granted.
 DISSOLUTION OF COOPERATIVES CHAPTER VII

7.) if there are objections filed, the CDA shall hear them and if the
objections are found of insufficient merit and the material
allegations of the petition for dissolution are true, the petition for
dissolution shall be granted.
8.) The grant for dissolution is contained in an order dissolving the
cooperative and directing the disposition of its assets as justice
requires.
9.) The order of dissolution includes the assets and liabilities of the
cooperative; the claim of any creditor; the number of members; and
the nature and extent of the interest of the members of the
cooperative.
DISSOLUTION OF COOPERATIVES CHAPTER VII

Involuntary Dissolution
A cooperative may be dissolved by the order of a competent
court such as the Regional Trial Court (RTC), after due hearing
on a the grounds of violation of any law, regulation, or provision
of its by-laws; or insolvency. (Art.67)
DISSOLUTION OF COOPERATIVES CHAPTER VII

Insolvency
Is bankruptcy, or the state when the cooperative is unable to
pay all debts as they become due. In case of insolvency, the
cooperative may avail of the remedies provided for by the
insolvency Law, of Republic Act No. 1956, as the amended.
DISSOLUTION OF COOPERATIVES CHAPTER VII

Proceeding upon Insolvency

Suspension of payments – allowed when the assets of the cooperative
are sufficient to pay all its debts but at present it cannot muster enough cash
to pay all its maturing obligations.
Discharge from debts and liabilities – may be obtained when the
assets of the cooperative are not enough to pay off all debtors or liabilities of
the cooperative.
 DISSOLUTION OF COOPERATIVES CHAPTER VII

Dissolution by Order of the CDA

CDA can with due process, suspend or revoke the certificate of registration of a
cooperative on any of the following grounds:
a.) The cooperative obtained its registration by fraud
b.) The cooperative exists fir an illegal purpose
c.) The cooperative has willfully violated, despite notice by the Authority,
the provisions of the Code or its by-laws
d.) The cooperative has willfully failed to operate on a cooperative basis.
e.) The cooperative has failed to meet the required minimum number of
members.
 DISSOLUTION OF COOPERATIVES CHAPTER VII

A suspension order does not dissolve the co-op

In any the above grounds, the order of suspension will not dissolve
the cooperative. During the suspension period, the CDA can
rehabilitate and the co-op could have a new lease on life. An order
suspending the certificate of registration amounts to an order asking
the cooperative to cease and desist, until further notice, from operating
as a cooperative.
Revocation of a co-ops certificate of registration dissolves the co-op
If the cooperative cannot be rehabilitate, or refuses to remedy its
questioned practice and/or repeatedly does it, the suspension will lead
to the revocation of the certificate of registration.
DISSOLUTION OF COOPERATIVES CHAPTER VII

Dissolution due to failure to Organize and Operate

(2 Consecutive Years)
If a cooperative has not commenced business and its operation
within two (2) years after the issuance of its certificate of registration
or has not carried on its business for two (2) consecutive years, the
Authority 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.
DISSOLUTION OF COOPERATIVES CHAPTER VII

LIQUIDATION
takes place within a three-year period after the dissolution of
the cooperative wherein all assets are collective and all debts are
paid off. In this period the cooperative continues to exits and
exercise its powers but solely for the purpose of collecting all
assets and paying off all creditors. It cannot anymore conduct the
business for which it was organized or established.
DISSOLUTION OF COOPERATIVES CHAPTER VII

ART.70 of the code provides: Every terminated cooperative….

Shall nevertheless be continued as a body cooperative for three
(3) years after the time when it would have been so dissolved, for
the purpose of prosecuting and defending suits by or against it
and enabling it to settle and close its affairs, to dispose of and
convey its property and to distribute its assets, but not for the
purpose of continuing the business for which it was
established.”(Emphasis supplied).
 DISSOLUTION OF COOPERATIVES CHAPTER VII

LIQUIDITION comes about as a result of the following:

A. Cooperative charter expires by its own limitation. This refers to
the terms of existence of the cooperative as stated in its articles of
cooperation, the charter. If the members wish to continue operating
the cooperative, the general assembly, before the actual expiration of
the term of existence, should pass a resolution, approved by the two-
thirds vote of all members with voting rights, for the amendment and
extension of its cooperative existence. If the cooperative does not
decide to extend its corporate existence through an amendment in its
charter, then it will be dissolved and will be subject to liquidation
proceeding.
DISSOLUTION OF COOPERATIVES CHAPTER VII

B. Cooperative existence is terminated by voluntary dissolution.

C. Cooperative existence is terminated by appropriate judicial

proceedings. An example of this would be a case successfully
brought against a cooperative for involuntary dissolution under
Art. 67.Art. 68 and Art. 69 provide cases where the CDA, not the
courts, declares the dissolution in a quasi-judicial proceeding.
DISSOLUTION OF COOPERATIVES CHAPTER VII

Trustees during Liquidation

Cooperative is authorized to convey all its property to trustees who
will hold the properties conveyed for and on behalf of the benefit of
members, creditors, and other person in interest. Any unpaid
subscription, loans, and other payable will be collected and conveyed
to the trustees.
Anything received by the trustees from the cooperative becomes
legally vested in the trustees, and the cooperative losses any legal
interest in the transferred properties.
DISSOLUTION OF COOPERATIVES CHAPTER VII

Order of priority among payees and creditors during Liquidation

In the winding up of the affairs if the cooperative, the
creditors will be paid first according to their lien, if there is
anything left after creditors are paid, what remains will be
distributed pro rata among the preferred share capital holders.
Anything else left will be distributed pro rata among the share
capital holders; otherwise the members will be left empty
handed.
DISSOLUTION OF COOPERATIVES CHAPTER VII

The education fund will donated to an apex organization.

Another item that will go to an apex organization to which co-op
is affiliated, or to the cooperative movement, are the amounts
due to an unknown creditor or member who cannot be found
anymore. The reserved fund will be disposed of in accordance
with the resolution of the board following the choices allowed it
under Art. 87 (c)(i) to (ii).
 DISSOLUTION OF COOPERATIVES CHAPTER VII

Only in two cases does a cooperative have the authority to distribute

assets or property:
a.)during liquidation and winding up after paying claims of creditors.
b.) when the co-op decreases its share capital. (Art. 70)
The CDA issues from time to time the implementing guidelines for the
liquidation of cooperatives. These guidelines appear in Rule 8 of the
Rules and Regulations Implementing Certain Provisions of the
Cooperative Code of the Philippines
DISSOLUTION OF COOPERATIVES CHAPTER VII

GROUP 6
DEDICATORIA, KYLA A.
MAGNASE, MICHELLE
ROLUNA, FRANCIS
RIVERA, MARICHU