COOPERATIVE

OBJECTIVES :

AT THE END OF THIS

DISCUSSION, THE
STUDENT WILL BE ABLE
TO KNOW THE
ATTRIBUTES OF A
COOPERATIVE AND
DESCRIBE HOW TO
ORGANIZE A
COOPERATIVE.
 COOPERATIVE
Every cooperative shall conduct its affairs in accordance
with Filipino culture, good values and experience, and the
universally accepted principles of cooperation which
include, but not limited to:

1. VOLUNTARY AND OPEN MEMBERSHIP

2. DEMOCRATIC MEMBER CONTROL
3. MEMBER ECONOMIC PARTICIPATION
4. AUTHONOMY AND INDEPENDENCE
5. EDUCATION TRAINING AND INFORMATION
6. COOPERATION AMONG COOPERATIVES
7. CONCERN FOR THE COMMUNITY
 PURPOSE (b)
A Cooperative may be organized and registered for various purposes for the
benefit of its members.

• It encourage thrift and savings mobilization among the members, generates

funds, and extends credit it each members.

• It also acquires lands and provides housing benefits for its member.

•And it encourages systematic production and marketing and provides good

and services.

• develops expertise and skills among its members

•Promotes and advances the economic, social, and educational status of its
members.

•It establishes, owns, leases, or operates cooperative banks, cooperative

wholesale and retail complexes, insurance and agricultural/industrial and
processing enterprises.
 POWER (n)
A COOPERATIVE enjoys a lot of power.,

• It has the power to exclusively use its registered name, to sue and be sued,
and the power of succession.

• it has the power to amend its articles of cooperation, to adopt bylaws, which
is not contrary to law, moral or public policy, and to amend and repeal the
same.

•It has the power to deal with real and personal property, and enter into
division, merger, or consolidation.

• has the power to form subsidiary cooperatives and join federations and
union.

•It has the power to avail of loans, credits, grants, donations from domestic
and foreign sources and to avail PREPERENTIAL RIGHTS under RA 7160
(local government code o 1191)
TYPES OF COOPERATIVE (n)
• CREDIT COOPERATIVES promotes and undertakes savings and lending
services among its members.

•CONSUMER COOPERATIVES procures and distributes commodities to

members and non-members.

• PRODUCER COOPERATIVE undertakes joint production, whether

agricultural or industrial, and is formed and operated by its members to
undertake the production and good and services.

•MARKETING COOPERATIVE engage supply of production inputs to

member and markets its products

•SERVICES COOPERATIVE engages medical and dental care,

hospitalization, transportation, insurance, housing, labor, and etc…

•MULTIPURPOSE COOPERATIVE combines two or more business

activities.
 TYPES OF COOPERATIVE
• CREDIT

•CONSUMER COOPERATIVES procures and distributes commodities to

members and non-members.

• PRODUCER COOPERATIVE undertakes joint production, whether

agricultural or industrial, and is formed and operated by its members to
undertake the production and good and services.

•MARKETING COOPERATIVE engage supply of production inputs to

member and markets its products

•SERVICES COOPERATIVE engages medical and dental care,

hospitalization, transportation, insurance, housing, labor, and etc…

•MULTIPURPOSE COOPERATIVE combines two or more business

activities.
 In terms of membership, cooperatives are category and tertiary:
Cooperatives enjoy certain privileges? They enjoy the privilege depositing,
free of charge, their sealed cash boxes or containers, documents, or any
valuable papers in the sales of the municipal or city treasurers and other
government offices. Cooperatives organized among government employees
enjoy free use of any available space in their agency. Cooperatives rendering
special types of services and facilities shall secure a franchise, therefore, and
open their membership to a persons qualified in their areas of operation. In
areas where appropriate cooperatives exist, the cooperatives enjoy preferential
right to supply government institutions and agencies rice, corn and other
grains, fish and other marine products, meat, eggs, milk, vegetables, tobacco,
and other agricultural commodities produced by their members. They enjoy
preferential treatment in the allocation of fertilizers, including seeds and other
agricultural inputs and implements, and in rice distribution, and also the
preferential and equitable treatment in the allocation or control of bottomries
of commercial shipping vessels in connection with the shipment of goods and
products Of cooperatives. Cooperatives and their federations which have for
their primary purpose the production and/or the marketing of products from
agriculture, fisheries ,
and small entrepreneurial industries and federations exercise preferential rights
in the management of public markets and/or lease of public market facilities,
stalls, or spaces. Cooperatives engaged in credit services and/or federations are
entitled to loans credit lines, rediscounting of their loan notes, and other eligible
papers with the Development Bank of the Philippines, the Land Bank of the
Philippines, and other financial institutions. A public transport service
cooperative may be entitled to financing support for the acquisition and/or
maintenance of land and sea transport equipment, facilities, and parts through
the program of the government financial institutions and has a preferential right
to the management and operation of public terminals and ports where the
cooperative operates and on securing a franchise for active or potential routes
for the public transport. Cooperatives transacting business with the Government
of the Philippines or any of its political subdivisions or any of its agencies or
instrumentalities, including government-owned and controlled corporations
shall be exempt from prequalification bidding requirements. Cooperatives enjoy
the privilege of being represented by the provincial or city fiscal or the Office of
the Solicitor General, free of charge, except when the adverse party is the
Republic of the Philippines.
General Assembly (n)

The general assembly is the highest policy-making body of the cooperative,

composed of such members who are entitled to vote under the articles of
cooperation and bylaws of the cooperative. Its powers include: (1)
determination and approval of amendments to the articles of cooperation and
bylaws; (2) election or appointment of the members of the board of directors
and their removal for cause; and (3) approval of developmental plans of the
cooperative.

Regular meetings of the general assembly shall be held annually, while special
meetings may be called at any time by a majority vote of the board of directors
or as provided for in the bylaws. The CDA may call for a special meeting for the
purpose of reporting to the members the result of any examination or other
investigation of the cooperative affairs." A quorum shall consist of at least 25%
of all the members entitled to vote but in the case of cooperative banks, the
quorum shall be one-half plus one of the number of voting shares of all the
members in good standing in accordance with Article 99 of the law. In the case
of electric cooperatives, a quorum shall consist of 5% of all the members
entitled to vote, unless otherwise provided in the bylaws.? As to the voting
system, each member of a primary cooperative shall have only one vote, while
members of secondary or tertiary cooperatives shall have one basic vote and as
many incentive votes as provided for in the bylaws but not to exceed five votes.
Board of Directors (b)

Unless otherwise provided in the bylaws, the direction and management of the affairs
of a cooperative shall be vested in a board of directors which shall be composed of 5 to
15 members elected by the general assembly for a term of two years unless removed for
cause.

The members of the board of directors shall not hold any other position directly
involved in the day-to-day operation and management of the cooperative. Any member
of a cooperative who has the right to vote and who possesses all the qualifications and
none of the disqualifications provided in the laws or bylaws shall be eligible for election
as a director. Any person engaged in a business similar to that of the cooperative or who
in any way has a conflict of interest with it is disqualified from election as a director of
the said cooperative.

The chairperson and vice-chairperson shall be elected by the board of directors from
among themselves. They shall appoint the officers of the cooperative who shall not be
members of the board and shall not be removed except for cause after due hearing. Loss
of confidence is not a valid ground for removal unless there is proof of acts or omission
causing loss of confidence in the honesty and integrity of such officer.
Regular meetings of the board of directors of primary cooperatives shall be
held at least once a month, while special meetings may be called at any time by
the chairperson or a majority of the members of the board. Unless the bylaws
provide otherwise, a majority of the members of the board shall constitute a
quorum for the conduct of business, and directors cannot attend or vote by proxy
at board meetings.

The chairperson and vice-chairperson shall be elected by the board of directors

from among themselves. They shall appoint the officers of the cooperative who
shall not be members of the board and shall not be removed except for cause
after due hearing. Loss of confidence is not a valid ground for removal unless
there is proof of acts or omission causing loss of confidence in the honesty and
integrity of such officer.

 Relatives within the third civil degree of consanguinity or affinity and those
persons engaged in a business similar to that of the cooperative or who have
interests in conflict with the cooperative shall not be appointed as officers.
Committees of the Cooperative (y)
The bylaws may create an executive committee to be appointed by the
board of directors with such powers and duties as may be delegated to it in
the bylaws or by a majority vote of all the members of the board of
directors. The bylaws shall provide for the creation of an audit, election,
mediation and conciliation, ethics, and such other committees as may be
necessary for the conduct of the affairs of the cooperative. The members of
both the audit and election committee shall be elected by the general
assembly and the members of the other committees shall be appointed by
the board. The audit committee shall be directly accountable and
responsible to the general assembly and shall continuously monitor the
adequacy and effectiveness of the cooperative's management control system
and audit the performance of the cooperative and its various responsibility
centers.
 Liability for Damages and Secret Profits
(n)
Directors, officers, and committee members, who willfully and knowingly
vote for or assent to patently unlawful acts or who are guilty of gross
negligence or bad faith in directing the affairs of the cooperative or acquire
any personal or pecuniary interest in conflict with their duty as such
directors, officers or committee members shall be liable jointly and
severally for all damages or profits resulting there from to the cooperative,
members, and other persons. When they attempt to acquire or acquire, in
violation of their duty, any interest or equity adverse to the cooperative in
respect to any matter which has been reposed in him in confidence, they
shall, as trustees for the cooperative, be liable for damages and shall be
accountable for double the profits which otherwise would have accrued to
the cooperative.
Compensation (b)
In the absence of any provisions in the bylaws fixing their
compensation, the directors shall not receive any
compensation except for reasonable per dies, but they 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. The compensation of officers of the cooperative as well
as the members of the committees created pursuant to the
Philippine Cooperative Code or its bylaws, may be fixed in
the bylaws. Unless already fixed in the bylaws, the
compensation of all other employees shall be determined by
the board of directors.
 Self-dealing Directors, Officers, or Committee
Members (y)

A contract entered into by the cooperative with one or more of

its directors, officers, and committee members is voidable, at
the option of the cooperative, unless all the following
conditions are present:
(1) that the presence of such director in the board meeting
wherein contract was approved was not necessary to
constitute a quorum for such meeting;
(2) that the vote of such director was not necessary for the
approval of the contract;
3. that the contract is fair and reasonable under the
circumstances;

4. 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. If any of the first two conditions is
absent, in the case of a contract with a director, such
contract may be ratified by a three-fourths vote of all the
members with voting rights, present and constituting a
quorum in a meeting called for the purpose, provided 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.
Disloyalty of a Director (n)
A director who, by virtue of his office, acquires for himself an
opportunity which should belong to the cooperative shall be liable
for damages and must account for double the profits that
otherwise would have accrued to the cooperative by refunding the
same, even if he used his own funds in the venture unless his act
has been ratified by a three-fourths vote of all the members with
voting rights, present, and constituting a quorum.
Illegal Use of Confidential
Information (n)
A director or officer, or an associate of a director or officer,
who, for his benefit or advantage or that of an associate,
makes use of confidential information that, if generally
known, might reasonably be expected to adversely affect
the operation and viability of the cooperative, shall
compensate the cooperative for the direct losses it suffered
as a result of the illegal use of information and shall
account to the cooperative any direct benefit or advantage
received or yet to be received by him or his associate, as a
result of the transaction.
Removal of Officers (b)
Complaints about the removal of any elected officer shall be filed with the
board of directors. Such officer shall be given the opportunity to be heard,
and the majority of the board of directors may place him under preventive
suspension pending the resolution of the investigation. Upon finding of a
prima facie evidence of guilt, the board shall present its recommendation for
removal to the general assembly.. Thereafter he may be removed by three-
fourths votes of the regular members present and constituting a quorum, in a
regular or special general assembly meeting called for the purpose, after he is
given an opportunity to be heard at said assembly.

Tax Treatment of Cooperatives (y)

Cooperatives which do not transact any business with non-members of de general
public are not subject to any taxes and fees imposed under the revenue laws and other
tax laws. Business transactions of members with g cooperative are not subject to any
taxes and fees: Cooperatives transacting business with both members and non-
members are subjected only to tax on their transactions with non-members, but the
cooperatives continue to enjoy certain tax exemption
Insolvency (y)

A cooperative, which is unable to fulfill its obligations to creditors due

to insolvency, may apply for such remedies under Act No. 1956 (the
Insolvency Law)

Dissolution (b)

The dissolution of a cooperative may be done in different ways. If

there are no creditors affected, voluntary dissolution may be done by
a majority vote of the board of directors, and by a resolution duly
adopted by the affirmative vote of at least three-fourths of all the
members with voting rights, present and constituting a quorum at a
meeting to be held upon call of the directors. If there are creditors
affected, the voluntary dissolution may be done through à petition
signed by a majority of its board of directors or other officers
managing its affairs, verified by its chairperson or board secretary or
one of its directors.
The petition shall state all claims and demands against it and that its dissolution was
resolved upon by the affirmative vote of at least three-fourths of all the members with
voting rights, present and constituting a quorum at a meeting called for that purpose.
Involuntary dissolution, on the other hand, is done by order of a competent out after a due
hearing on the grounds of violation of any law, regulation, or provisions of its bylaws, or
insolvency. Dissolution may also be done by order of the Cooperative Development
Authority (CDA). The DA may suspend or revoke, after due notice and hearing, the
certificate of registration of a cooperative on any of the following grounds:

(1) having obtained its registration by fraud;

(2) existing for an illegal purpose;
(3) willful violation, despite notice by the CDA, of the provisions of the
Philippine Cooperative Code or its bylaws;
(4) willful failure to operate on a cooperative basis; and
(5) failure to meet the required minimum number of members in the
cooperative. Lastly, a cooperative may be dissolved for its failure to
organize and operate within two years after the issuance of its
certificate of registration or has not carried on its business for two
consecutive years, without justifiable cause.
Liquidation of a Cooperative (n)

Every cooperative whose term has expired or was

voluntary dissolved or was dissolved through an
appropriate judicial proceeding shall continue to exist
for three years after the time it is dissolved for the
purpose of prosecuting and defending suits by or against
it, settlement and closure of its affairs, and disposition,
conveyance, and distribution of its properties and assets.
 Source of Capital (y)
Cooperatives may derive their capital from the member's share capital,
loans and borrowings (including deposits), revolving capital, and subsidies,
donations, legacies, grants, aids, and such other assistance from any local
or foreign institution.
A member cannot transfer his shares or interest in the cooperative or any
part thereof unless he has held such share capital contribution or interest
for not less than one year and the assignment is made to the cooperative or
to a member of the cooperative, upon approval by the board of directors of
such assignment. The bylaws of every cooperative shall provide a
reasonable and realistic member capital build-up program to allow the
continuing growth of the members' investment in their cooperative. It may
also prescribe a fine on unpaid subscribed share capital.
 Investment of Capital (b)
A cooperative may invest its capital in shares or debentures or
securities of any other, cooperative. It may also invest its
capital in any reputable bank in the locality, or any
cooperative, and in securities issued or guaranteed by the
government. It may also invest its capital in real state primarily
for the use of the cooperative or its members, or in any other
manner authorized in the bylaws.
The governing law for cooperatives is Republic Act No.
11364 (R.A. No. 11364), otherwise known as the
"Cooperative Development Authority Charter of 2019." R.A.
No. 11364 was signed into law by President Rodrigo R.
Duterte, last August 8, 2019, and took effect on August 29,
2019. 

Powers, Functions, and Responsibilities of the Cooperative

Development Authority (CDA) (b)

In pursuance of its mandate, the CDA has 37 powers, functions, and

responsibilities as compared to the 15 powers vested under the old charter.
It exercises developmental, regulatory and quasi-judicial powers,
functions and responsibilities, and other inherent powers such as but not
limited to the establishment and maintenance of a continuing educational
and capability-building program. Both sectoral apex organizations and a
national alliance of cooperatives are recognized; the latter serves as the
overall consultative and coordinating body with the CDA. A strong
partnership between the CDA and the cooperative sector and the academe
is established in implementing the developmental functions of the CDA to
ensure the maximum participation of the cooperative sector on matters of
government plans, projects, and policies affecting cooperatives.
 Powers and Functions of the Board of Directors (y)

The Board of Directors of CDA is composed of a Chairperson and six

members one board of directors from each of the following cluster of
cooperatives:

1) credit and financial services, banking, and insurance;

2) consumers, marketing, producers, and logistics;
3) human services: health, housing, workers, and labor
service;
4) education and advocacy;
5) agriculture, agrarian, aquaculture, farmers, dairy, and
fisher folk; and
6) public utilities: electricity, water, communications, and
transport. As far as practicable, there shall be at least
one lawyer Member of the Board, and gender balance
shall be observed in the membership of the Board.
 The Secretaries of the Department of Trade and Industry (DTI) and the
Department of Interior and Local Government (DILG) serve as ex-officio
members of the board and may designate an alternate in a permanent capacity
with a rank of at least an Assistant Secretary and whose acts shall be considered
as that of the principal.

The Board as a collegial body is responsible for policy formulation, strategic planning
and direction setting of the agency. It exercises the following functions:
(1) formulate policies, rules, and regulations; (2) adopt implementing rules and
regulations; (3) organize the operating structure and functions of the CDA; ( approve
the work and financial plan; (5) approve annual, medium-term, and long. term
cooperative development plans; (6) provide overall direction to the CDA; (7) conduct
regular policy consultations; (8) decide cases involving cooperatives; (9) authorize the
Chairperson or the Administrator to enter into contracts or agreements in behalf of
the CDA; (10) approve and submit the annual proposed budget; (11) appoint Deputy
Administrators;6 and (12) formulate rules and regulations and exercise such other
powers as may be required to implement the objectives of R.A.
No. 11364.7
 Office of the Administrator
(Y)
The President of the Philippines appoints, upon recommendation of the
board of directors, the Administrator of the CDA, with the rank of an
Assistant Secretary.
The Administrator must be a natural-born Filipino citizen, holder of any
bachelor's degree, possess civil service eligibility, and with five years'
experience as an officer of a cooperative or official or employee in a
government office or NGO dealing with cooperatives. Upon
appointment, he/she shall cease to have any direct or indirect pecuniary
interest or dealings with any cooperative. He/She shall execute an
administer the policies, decisions, orders and resolutions as approved by
the Boar and shall have the general executive direction and supervision
of the work an operation of the CDA.
 Registration for Tax Exemption
(y)
The CDA furnishes the Bureau of Internal Revenue (BIR) and the local government
units (LGUs) a certified list of duly registered cooperatives for purposes of processing
tax exemptions. Any public official or employee who violates or in any manner
circumvents this provision is dealt with in accordance with Article 140 of the
Philippine Cooperative Code?

The CDA submits to the BIR the Registered Cooperatives Master List, which shall
contain the names of all registered cooperatives and the list shall be updated within
30 days after the close of every calendar year. It also provides the LGUs with an
updated list of registered cooperatives within their jurisdiction within 60 days after
the close of every calendar year.
 Prohibition (y)
Except as provided for under Article 130 of the Philippine Cooperative Code, the use
by any person or organization of the word "cooperative" "coop," "co-op" and "koop"
in their business name, unless duly registered with the CDA, shall be prohibited and
shall be penalized under Article 140 of the Philippine Cooperative Code The CDA may
motu proprio initiate complaints about violations of this prohibition,"

Settlement of Disputes (b)

Any dispute, controversy, or claim arising out of or relating to the bylaws of the
cooperative, the cooperative laws and related rules, administrative guidelines of
the CDA, including disputes involving members, officers, directors, and committee
members, intra-cooperative disputes, and related issues shall be referred to and
finally resolved by voluntary arbitration under the institutional rules promulgated
by the CDA, after compliance with the conciliation or mediation mechanisms
embodied in the bylaws of the cooperative.13 However, in case of election-related
issues, the aggrieved party may elevate the case for adjudication to the CDA
without undergoing through the alternative dispute resolution.