Philippine Cooperative Code of 2008 PDF
Philippine Cooperative Code of 2008 PDF
Congress of the Philippines about a strong cooperative movement that is free from any conditions that
Metro Manila might infringe upon the autonomy or organizational integrity of cooperatives.
Fourteenth Congress "Further, the State recognizes the principle of subsidiarity under which the
Second Regular Session cooperative sector will initiate and regulate within its own ranks the promotion
and organization, training and reserach, audit and support services relative to
Begun and held in Metro Manila, on Monday, the twenty-eighth day of July, two cooperatives with government assistance where necessary.
thousand eight.
"ART. 3. General Concepts. - A cooperative is an autonomous and duly
Republic Act No. 9520 February 17, 2009 registered association of persons, with a common bond of interest, who have
voluntarily joined together to achieve their social, economic, and cultural
AN ACT AMENDING THE COOPERATIVE CODE OF THE PHILIPPINES TO BE needs and aspirations by making equitable contributions to the capital
KNOWN AS THE "PHILIPPINE COOPERATIVE CODE OF 2008" required, patronizing their products and services and accepting a fair share of
the risks and benefits of the undertaking in accordance with universally
Be it enacted by the Senate and House of Representatives of the Philippines in accepted cooperative principles.
Congress assembled::
"ART. 4. Cooperative Principles. - Every cooperative shall conduct its affairs
SECTION 1. Articles 1, 2, 3, 4 and 5 of Chapter 1 on General Concepts and in accordance with Filipino culture, good values and experience and the
Principles of Republic Act No. 6938, otherwise known as the "Cooperative Code of universally accepted principles of cooperation which include, but are not
the Philippines," are hereby amended to read as follows: limited to, the following:
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capital subscribed and paid as a condition of membership. Members Provided, That for cooperatives with numerous and dispersed
allocate surpluses for any or all of the following purposes: developing membership, the general assembly may be composed of delegates
the cooperative by setting up reserves, part of which should at least elected by each sector, chapter or district of the cooperative in
be indivisible; benefitting members in proportion to their partonage of accordance with the rules and regulations of the Cooperative
the cooperative's bubsiness; and, supporting other activities approved Development Authority;
by the membership.
"(3) Board of Directors shall mean that body entrusted with the
"(4) Autonomy and Independence - Cooperatives are autonomous, management of the affairs of the cooperative under its articles of
self-help organizations controlled by their members. If they enter into cooperation and bylaws;
aggreements with other organizations, including government, or raise
capital from external sources, they shall do so on terms that ensure "(4) Committee shall refer to any body entrusted with specific
democratic control of their members and maintain their cooperative functions and responsibilities under the bylaws or resolution of the
autonomy. general assembly or the board of directors;
"(5) Education, Training and Information - Cooperatives shall provide "(5) Articles of Cooperation means the articles of cooperation
education and training for their members, elected and appointed registered under this Code and includes a registered amendment
representatives, managers, and employees, so that they can thereof;
contribute effectively and efficiently to the development of their
cooperatives. "(6) Bylaws means the bylaws registered under this Code and
includes any registered amendment thereof;
"(6) Cooperation Among Cooperatives - Cooperatives serve their
members most effectively and strengthen the cooperative movement "(7) Registration means the operative act granting juridical personality
by working together through local, national, regional and international to a proposed cooperative and is evidenced by a certificate of
structures. registration;
(7) Concern for Community - Cooperatives work for the sustainable "(8) Cooperative Development Authority refers to the government
development of their communities through policies approved by their agency in charge of the registration and regulation of cooperatives as
members. such hereinafter referred to s the Authority;
"ART. 5. Definition of Terms. – The following terms shall mean: "(9) Universally Accepted Principles means that body of cooperative
principles adhered to worldwide by cooperatives;
"(1) Member includes a person either natural or juridical who adhering
to the principles set forth in this Code and in the Articles of "(10) Representative Assembly means the full membership of a body
Cooperative, has been admitted by the cooperative as member; of representatives elected by each of the sectors, chapter or district o
the cooperative duly assembled for the purpose of exercising such
"(2) General Assembly shall mean the full membership of the powers lawfully delegated unto them by the general assembly in
cooperative duly assembled for the purpose of exercising all the rights accordance with its bylaws;
and performing all the obligations pertaining to cooperatives, as
provided by this Code, its articles of cooperation and bylaws:
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"(11) Officers of the Cooperative shall include the members of the CHAPTER II
board of directors, members of the different committee created by the ORGANIZATION AND REGISTRATION
general assembly, general manager or chief executive officer,
secretary, treasurer and members holding other positions as may be "ART. 6. Purposes of Cooperatives. – A cooperative may be organized and
provided for in their bylaws; registered for any or all of the following purposes:
"(12) Social Audit is a procedure wherein the cooperative assesses its "(1) To encourage thrift and savings mobilization among the
social impact and ethical performance vis-à-vis its stated mission, members;
vision, goals and code of social responsibility for cooperatives to be
established by the Authority in consultation with the cooperative "(2) To generate funds and extend credit to the members for
sector. It enables the cooperative to develop a process whereby it can productive and provident purposes;
account for its social performance and evaluate its impact in the
community and be accountable for its decisions and actions to its "(3) To encourage among members systematic production and
regular members; marketing;
"(13) Performance Audit shall refer to an audit on the efficiency and "(4) To provide goods and services and other requirements to the
effectiveness of the cooperative as a whole; its management and members;
officers; and its various responsibility centers as basis for improving
individual team or overall performance and for objectively informing "(5) To develop expertise and skills among its members;
the general membership on such performance;
"(6) To acquire lands and provide housing benefits for the members;
"(14) A Single-Line or Single-Purpose Cooperative shall include
cooperative undertaking activities which are related to its main line of
"(7) To insure against losses of the members;
business or purpose;
"(8) To promote and advance the economic, social and educational
"(15) Service Cooperatives are those which provide any type of
status of the members;
service to its members, including but not limited to, transport,
information and communication, insurance, housing, electric, health
services, education, banking, and savings and credit; "(9) To establish, own, lease or operate cooperative banks,
cooperative wholesale and retail complexes, insurance and
agricultural/industrial processing enterprises, and public markets;
"(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 "(10) To coordinate and facilitate the activities of cooperatives;
economic zones created by law, registered with the Authority to
undertake business activities in support of its member-cooperatives." "(11) To advocate for the cause of the cooperative movements;
SEC. 2. Articles 6, 7, 9, 10, 11, 12, 13, 14, 16, 17, 18, 20, 21, 23, 24 and 25 of "(12) To ensure the viability of cooperatives through the utilization of
Chapter II on Organization and Registration of the same Code are hereby amended new technologies;
to read as follows:
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"(13) To encourage and promote self-help or self-employment as an "(1) To the exclusive use of its registered name, to sue and be sued;
engine for economic growth and poverty alleviation; and
"(2) Of succession;
"(14) To undertake any and all other activities for the effective and
efficient implementation of the provisions of this Code. "(3) To amend its articles of cooperation in accordance with the
provisions of this Code;
"ART. 7. Objectives and Goals of a Cooperative. – The primary objective of
every cooperative is to help improve the quality of life of its members. "(4) To adopt bylaws not contrary to law, morals or public policy, and
Towards this end, the cooperative shall aim to: to amend and repeal the same in accordance with this Code;
"(a) Provide goods and services to its members to enable them to "(5) To purchase, receive, take or grant, hold, convey, sell, lease,
attain increased income, savings, investments, productivity, and pledge, mortgage, and otherwise deal with such real and personal
purchasing power, and promote among themselves equitable property as the transaction of the lawful affairs of the cooperative may
distribution of net surplus through maximum utilization of economies reasonably and necessarily require, subject to the limitations
of scale, cost-sharing and risk-sharing; prescribed by law and the Constitution;
"(b) Provide optimum social and economic benefits to its members; "(6) To enter into division, merger or consolidation, as provided in this
Code;
"(c) Teach them efficient ways of doing things in a cooperative
manner; "(7) To form subsidiary cooperatives and join federations or unions, as
provided in this Code;
"(d) Propagate cooperative practices and new ideas in business and
management; "(8) To avail of loans, be entitled to credit and to accept and receive
grants, donations and assistance from foreign and domestic sources,
"(e) Allow the lower income and less privileged groups to increase subject to the conditions of said loans, credits, grants, donations or
their ownership in the wealth of the nation; and assistance that will not undermine the autonomy of the cooperative.
The Authority, upon written request, shall provide necessary
"(f) Cooperate with the government, other cooperatives and people- assistance in the documentary requirements for the loans, credit,
oriented organizations to further the attainment of any of the foregoing grants, donations and other financial support;
objectives.
"(9) To avail of preferential rights granted to cooperatives under
"ART. 8. Cooperatives Not in Restraint of Trade. – No cooperative or method Republic Act No. 7160, otherwise known as the Local Government
or act thereof which complies with this Code shall be deemed a conspiracy or Code, and other laws, particularly those in the grant of franchises to
combination in restraint of trade or an illegal monopoly, or an attempt to establish, construct, operate and maintain ferries, wharves, markets
lessen competition or fix prices arbitrarily in violation of any laws of the or slaughterhouses and to lease public utilities, including access to
Philippines. extension and on-site research services and facilities related to
agriculture and fishery activities;
"ART. 9. Cooperative Powers and Capacities. – A cooperative registered
under this Code shall have the following powers, rights and capacities:
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"(10) To organize and operate schools in accordance with Republic accordance with this Code: Provided, That no extension can be made earlier
Act No. 9155, Governance of Basic Education Act of 2001 and other than five (5) years prior to the original or subsequent expiry date/dates unless
pertinent laws; and there are justifiable reasons for an earlier extension as may be determined by
the Authority.
"(11) To exercise such other powers granted by this Code or
necessary to carry out its purpose or purposes as stated in its Articles "ART. 14. Articles of Cooperation. – (1) All cooperatives applying for
of cooperation. registration shall file with the Authority the articles of cooperation which shall
be signed by each of the organizers and acknowledged by them if natural
"ART. 10. Organizing a Primary Cooperative. – Fifteen (15) or more natural persons, and by the chairpersons or secretaries, if juridical persons, before a
persons who are Filipino citizens, of legal age, having a common bond of notary public.
interest and are actually residing or working in the intended area of operation,
may organize a primary cooperative under this Code: Provided, That a "(2) The articles of cooperation shall set forth:
prospective member of a primary cooperative must have completed a Pre-
Membership Education Seminar (PMES). "(a) The name of the cooperative which shall include the word
cooperative;
"Any newly organized primary cooperative may be registered as multipurpose
cooperative only after compliance with the minimum requirements for "(b) The purpose or purposes and scope of business for which the
multipurpose cooperatives to be set by the Authority. A single-purpose cooperative is to be registered;
cooperative may transform into a multipurpose or may create subsidiaries
only after at least two (2) years of operations. "(c) The term of existence of the cooperative;
"ART. 11. Economic Survey. - Every group of individuals or cooperatives "(d) The area of operation and the postal addresses of its principal
intending to form a cooperative under this Code shall submit to the Authority office;
a general statement describing, among others the structure and purposes of
the proposed cooperative: Provided, That the structure and actual staffing "(e) The names, nationality, and the postal addresses of the
pattern of the cooperative shall include a bookkeeper; Provided, further, That registrants;
they shall not be allowed to operate without the necessary personnel and
shall also submit an economic survey, indicating therein the area of "(f) The common bond of membership;
operation, the size of membership, and other pertinent data in a format
provided by the Authority.
"(g) The list of names of the directors who shall manage the
cooperative; and
"ART. 12. Liability. – A cooperative duly registered under this Code shall
have limited liability.
"(h) The amount of its share capital, the names and residences of its
contributors and a statement of whether the cooperative is primary,
"ART. 13. Term. – A cooperative shall exist for a period not exceeding fifty secondary or tertiary in accordance with Article 23 hereof.
(50) years from the date of registration unless sooner dissolve or unless said
period is extended. The cooperative term, as originally stated in the articles of
"(3) The articles of cooperation may also contain any other provisions not
cooperation, may be extended for periods not exceeding fifty (50) years in
inconsistent with this Code or any related law.
any single instance by an amendment of the articles of cooperation, in
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"(4) Four (4) copies each of the proposed articles of cooperation, bylaws, and "(f) The rules and procedures on the agenda, time, place and manner
the general statement required under Article 11 of this Code shall be of calling, convening, conducting meetings, quorum requirements,
submitted to the Authority. voting systems, and other matters relative to the business affairs of
the general assembly, board of directors, and committees;
"(5) No cooperative, other than a cooperative union as described under
Article 25 hereof, shall be registered unless the articles of cooperation is "(g) The general conduct of the affairs of the cooperative, including
accompanied with the bonds of the accountable officers and a sworn the powers and duties of the general assembly, the board of directors,
statements of the treasurer elected by the subscribers showing that at least committees and the officers, and their qualifications and
twenty-five per centum (25%) of the authorized share capital has been disqualifications;
subscribed and at least twenty-five per centum (25%) of the total subscription
has been paid: Provided, That in no case shall the paid-up share capital be "(h) The manner in which the capital, may be raised and the purposes
less than Fifteen thousand pesos (P15,000.00). for which it can be utilized;
"The Authority shall periodically assess the required paid-up share capital "(i) The mode of custody and of investment of net surplus;
and may increase it every five (5) years when necessary upon consultation
with the cooperative sector and the National Economic and Development "(j) The accounting and auditing systems;
Authority (NEDA).
"(k) The manner of loaning and borrowing including the limitations
"ART. 15. Bylaws. – (1) Each cooperative to be registered under this Code thereof;
shall adopt bylaws not inconsistent with the provisions of this Code. The
bylaws shall be filed at the same time as the articles of cooperation. "(l) The method of distribution of net surplus;
"(2) The bylaws of each cooperative shall provide: "(m) The manner of adopting, amending, repealing, and abrogating
bylaws;
"(a) The qualifications for admission to membership and the payment
to be made or interest to be acquired as a conditions for the exercise "(n) A conciliation or mediation mechanism for the amicable
of the right of membership; settlement of disputes among members, directors, officers and
committee members of the cooperative; and
"(b) The rights and liabilities of membership;
"(o) Other matters incident to the purposes and activities of the
"(c) The circumstances under which membership is acquired, cooperative.
maintained and lost;
"ART. 16. Registration. – A cooperative formed and organized under this
"(d) The procedure to be followed in cases of termination of Code acquires juridical personality from the date the Authority issues a
membership; 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
"(e) The conditions under which the transfer of a share or interest of from the filing thereof, otherwise the application is deemed approved, unless
the members shall be permitted; 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
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of the President within ninety (90) days from receipt of notice of such the two (2) or more cooperatives. The procedure for such division shall be
denial: Provided, further, That failure of the Office of the President to act on prescribed in the regulations of the Authority: Provided, That all the
the appeal within ninety (90) days from the filing thereof shall mean approval requirements set forth in this Code have been complied with by the new
of said application. cooperatives: Provided, further, That no division of a cooperative in fraud of
creditors shall be valid.
"ART. 17. Certificate of Registration. – A certificate of registration issued by
the Authority under its official seal shall be conclusive evidence that the "ART. 21. Merger and Consolidation of Cooperatives. – (1) Two (2) or more
cooperative therein mentioned is duly registered unless it is proved that the cooperatives may merge into a single cooperative which shall either be one
registration thereof has been cancelled. of the constituent cooperatives or the consolidated cooperative.
"ART. 18. Amendment of Articles of Cooperation and Bylaws. – Unless "(2) No merger or consolidation shall be valid unless approved by a three-
otherwise prescribed by this Code and for legitimate purposes, any provision fourths (3/4) vote of all the members with voting rights, present and
or matter stated in the articles of cooperation and by laws may be amended constituting a quorum of each of the constituent cooperatives at separate
by two-thirds (2/3) vote of all the members with voting rights, without general assembly meetings. The dissenting members shall have the right to
prejudice to the right of the dissenting members to exercise their right to exercise their right to withdraw their membership pursuant to Article 30.
withdraw their membership under Article 30.
"(3) The Authority shall issue the guidelines governing the procedure of
Both the original and amended articles and/or bylaws shall contain all merger or consolidation of cooperatives. In any case, the merger or
provisions required by law to be set out in the articles of cooperation and by consolidation of cooperatives. In any case, the merger or consolidation shall
laws. Amendments shall be indicated by underscoring or otherwise be effective upon the issuance of the certificate of merger or consolidation by
appropriately indicating the change or changes made and a copy of the the Authority.
amended articles or amended bylaws duly certified under oath by the
cooperative secretary and a majority of the directors stating the fact that said "ART. 22. Effects of Merger and Consolidation. – The merger or consolidation
amendment or amendments to the articles of cooperation and/or bylaws have of cooperatives shall have the following effects:
been duly approved by the required vote of the members. All amendments to
the article of cooperation and/or bylaws shall be submitted to the Authority. "(1) The constituent cooperatives shall become a single cooperative
The amendments shall take effect upon its approval by the authority or within which, in case of merger, shall be the surviving cooperative, and, in
thirty (30) days from the date of filing thereof if not acted upon by the case of consolidation, shall be the consolidated cooperative;
Authority for a cause not attributable to the cooperative.
"(2) The separate existence of the constituent cooperatives shall
"ART. 19. Contracts Executed Prior to Registration and Effects Thereof. – cease, except that of the surviving or the consolidated cooperative;
Contracts executed between private persons and cooperatives prior to the
registration of the cooperative shall remain valid and binding between the "(3) The surviving or the consolidated cooperative shall possess al the
parties and upon registration of the cooperative. A formal written contract assets, rights, privileges, immunities and franchises of each of the
shall be adopted and made in the cooperative’s name or on its behalf prior to constituent cooperatives;
its registration.
"(4) The surviving or the consolidated cooperative shall possess all
"ART. 20. Division of Cooperatives. – Any registered cooperative may, by a the assets, rights, privileges, immunities and franchises of each of the
resolution approved by a vote of three-fourths (3/4) of all the members with constituent cooperatives; and
voting rights, present and constituting a quorum, resolve to divide itself into
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"(5) The surviving or the consolidated cooperative shall be "(f) Multipurpose Cooperative is one which combines two (2) or more
responsible for all the liabilities and obligation of each of the of the business activities of these different types of cooperatives;
constituent cooperatives in the same manner as if such surviving or
consolidated cooperative had itself incurred such liabilities or "(g) Advocacy Cooperative is a primary cooperative which promotes
obligations. Any claim, action or proceeding pending by or against any and advocates cooperativism among its members and the public
such constituent cooperatives may be prosecuted by or against the through socially-oriented projects, education and training, research
surviving or consolidated cooperative, as the case may be. Neither and communication, and other similar activities to reach out to its
the rights of creditors nor any lien upon the property of any such intended beneficiaries;
constituent cooperatives shall be impaired by such merger or
consolidation. "(h) Agrarian Reform Cooperative is one organized by marginal
farmers majority of which are agrarian reform beneficiaries for the
"ART. 23. Type and Categories of Cooperatives. – (1) Types of Cooperatives purpose of developing an appropriate system of land tenure, land
– Cooperatives may fall under any of the following types: development, land consolidation or land management in areas
covered by agrarian reform;
"(a) Credit Cooperative is one that promotes and undertakes savings
and lending services among its members. It generates a common "(i) Cooperative Bank is one organized for the primary purpose of
pool of funds in order to provide financial assistance to its members providing a wide range of financial services to cooperatives and their
for productive and provident purposes; members;
"(b) Consumers Cooperative is one of the primary purpose of which is "(j) Dairy Cooperative is one whose members are engaged in the
to procure and distribute commodities to members and non-members; production of fresh milk which may be processed and/or marketed as
dairy products;
"(c) Producers Cooperative is one that undertakes joint production
whether agricultural or industrial. It is formed and operated by its "(k) Education Cooperative is one organized for the primary purpose
members to undertake the production and processing of raw materials of owning and operating licensed educational institutions
or goods produced by its members into finished or processed notwithstanding the provisions of Republic Act No. 9155, otherwise
products for sale by the cooperative to its members and non- known as the Governance of Basic Education Act of 2001;
members. Any end product or its derivative arising from the raw
materials produced by its members, sold in the name and for the "(l) Electric Cooperative is one organized for the primary purposed of
account of the cooperative, shall be deemed a product of the undertaking power generations, utilizing renewable energy sources,
cooperative and its members; including hybrid systems, acquisition and operation of
subtransmission or distribution to its household members;
"(d) Marketing Cooperative is one which engages in the supply of
production inputs to members and markets their products; "(m) Financial Service Cooperative is one organized for the primary
purpose of engaging in savings and credit services and other financial
"(e) Service Cooperative is one which engages in medical and dental services;
care, hospitalization, transportation, insurance, housing, labor, electric
light and power, communication, professional and other services;
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"(n) Fishermen Cooperative is one organized by marginalized "(ii) Secondary – The members of which are primaries; and
fishermen in localities whose products are marketed either as fresh or
processed products; "(iii) Tertiary – The members of which are secondary
cooperatives; and
"(o) Health Services Cooperative is one organized for the primary
purpose of providing medical, dental and other health services; "(b) In terms of territory, cooperatives shall be categorized according
to areas of operations which may or may not coincide with the political
"(p) Housing Cooperative is one organized to assist or provide access subdivisions of the country.
to housing for the benefit of its regular members who actively
participate in the savings program for housing. It is co-owned and "ART. 24. Functions of a Federation of Cooperatives. – A federation of
controlled by its members; cooperatives shall undertake the following functions:
"(q) Insurance Cooperative is one engaged in the business of insuring "(a) To carry on any cooperative enterprise authorized under Article 6
life and poverty of cooperatives and their members; that complements augments, or supplements but does not conflict,
complete with, nor supplant the business or economic activities of its
"(r) Transport Cooperative is one which includes land and sea members;
transportation, limited to small vessels, as defined or classified under
the Philippine maritime laws, organized under the provisions of this "(b) To carry on, encourage, and assist educational and advisory work
Code; relating to its member cooperatives;
"(s) Water Service Cooperative is one organized to own, operate and "(c) To render services designed to encourage simplicity, efficiency,
manage waters systems for the provision and distribution of potable and economy in the conduct of the business of its member
water for its members and their households; cooperatives and to facilitate the implementation of their bookkeeping,
accounting, and other systems and procedures;
"(t) Workers Cooperative is one organized by workers, including the
self-employed, who are at same time the members and owners of the "(d) To print, publish, and circulate any newspaper or other publication
enterprise. Its principal purpose is to provide employment and in the interest of its member cooperatives and enterprises;
business opportunities to its members and manage it in accordance
with cooperative principles; and "(e) To coordinate and facilitate the activities of its member
cooperatives;
"(u) Other types of cooperative as may be determined by the
Authority. "(f) To enter into joint ventures with national or international
cooperatives of other countries in the manufacture and sale of
"(2) Categories of Cooperative – Cooperatives shall be categorized according products and/or services in the Philippines and abroad; and
to membership and territorial considerations as follows:
"(g) To perform such other functions as may be necessary to attain its
"(a) In terms of membership, cooperative shall be categorized into: objectives.
"Registered cooperatives may organize a federation according to the type of CHAPTER III
business activity engaged in by the cooperatives. MEMBERSHIP
"ART. 25. Cooperative Unions. – Registered cooperatives and federations at "ART. 26. Kinds of Membership. – A cooperative may have two (2) kinds of
the appropriate levels may organize or join cooperative unions to represent members, to wit: (1) regular members and (2) associate members.
the interest and welfare of all types of cooperatives at the provincial, city,
regional, and national levels. Cooperative unions may have the following "A regular member is one who has complied with all the membership
purposes: requirements and entitled to all the rights and privileges of membership. An
associate member is one who has no right to vote nor be voted upon and
"(a) To represent its member organizations; shall be entitled only to such rights and privileges as the bylaws may
provide: Provided, That an associate who meets the minimum requirements
"(b) To acquire, analyze, and disseminate, economic, statistical, and of regular membership, continues to patronize the cooperative for two (2)
other information relating to its members and to all types of years, and signifies his/her intention to remain a member shall be considered
cooperatives within its area of operation; a regular member.
"(c) To sponsor studies in the economic, legal, financial, social and "A cooperative organized by minors shall be considered a laboratory
other phases of cooperation, and publish the results thereof; cooperative and must be affiliated with a registered cooperative. A laboratory
cooperative shall be governed by special guidelines to be promulgated by the
"(d) To promote the knowledge of cooperative principles and Authority.
practices;
"ART. 27. Government Officers and Employees. – (1) Any officer or
"(e) To develop the cooperative movement in their respective employee of the Authority shall be disqualified to be elected or appointed to
jurisdictions; any position in a cooperative: Provided, That the disqualification does not
extend to a cooperative organized by the officers or employees of the
"(f) To advise the appropriate authorities on all questions relating to Authority.
cooperatives;
"(2) All elective officials of the Government shall be ineligible to become
"(g) To raise funds through membership fees, dues and contributions, officers and directors of cooperatives: Provided, That the disqualification does
donations, and subsidies from local and foreign sources whether not extend to a party list representative being an officer of a cooperative he or
private or government; and she represents; and
"(h) To do and perform such other non-business activities as may be "(3) Any government employee or official may, in the discharge of is duties as
necessary to attain the foregoing objectives. a member in the cooperative, be allowed by the end of office concerned to
use official time for attendance at the general assembly, board and
"Cooperative unions may assist the national and local governments in committee meetings of cooperatives as well as cooperative seminars,
the latter’s development activities in their respective jurisdictions." conferences, workshops, technical meetings, and training courses locally or
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abroad: Provided, That the operations of the office concerned are not "(a) When a member has not patronized any of the services of the
adversely affected. cooperative for an unreasonable period of time as may be previously
determined by the board of directors;
"ART. 28. Application. – An applicant for membership shall be deemed a
member after approval of his membership by the board of directors and shall "(b) When a member has continuously failed to comply with his
exercise the rights of member after having made such payments to the obligations;
cooperative in respect to membership or acquired interest in the cooperative
as may be prescribed in the bylaws. In case membership is refused or denied "(c) When a member has acted in violation of the bylaws and the rules
by the board of directors, an appeal may be made to the general assembly of the cooperative; and
and the latter’s decision shall be final. For this purpose, the general assembly
may opt to create an appeal and grievance committee, the members of which "(d) For any act or omission injurious or prejudicial to the interest or
shall serve for a period of one (1) year and shall decide appeals on the welfare of the cooperative.
membership application within thirty (30) days upon receipt thereof. If the
committee fails to decide within the prescribed period, the appeal is deemed "A member whose membership the board of directors may wish to terminate
approved in favor of the applicant. shall be informed of such intended action in writing and shall be given an
opportunity to be heard before the said board makes its decision. The
"ART. 29. Liability of Members. – A member shall be liable for the debts of decision of the board shall be in writing and shall be communicated in person
the cooperative to the extent of his contribution to the share capital of the or by registered mail to said member and shall be appealable within thirty
cooperative. (30) days from receipt thereof to the general assembly whose decision shall
be final. The general assembly may create an appeal and grievance
"ART. 30. Termination of Membership. – (1) A member of a cooperative may, committee whose members shall serve for a period of one (1) year and shall
for any valid reason, withdraw his membership from the cooperative by giving decide appeals on membership termination. The committee is given thirty
a sixty (60) day notice to the board of directors. Subject to the bylaws of the (30) days from receipt thereof to decide on the appeal. Failure to decide
cooperative, the withdrawing member shall be entitled to a refund of his share within the prescribed period, the appeal is deemed approved in favor of the
capital contribution and all other interests in the cooperative: Provided, That member. Pending a decision by the general assembly, the membership
such fund shall not be made if upon such payment the value of the assets of remains in force.
the cooperative would be less than the aggregate amount of its debts and
liabilities exclusive of his share capital contribution. "ART. 31. Refund of Interests. – All sums computed in accordance with the
bylaws to be due from a cooperative to a former member shall be paid to him
"(2) The death or insanity of a member in a primary cooperative, and the either by the cooperative or by the approved transferee, as the case may be,
insolvency or dissolution of a member in a secondary or tertiary cooperative in accordance with this Code."
may be considered valid grounds for termination of membership: Provided,
That in case of death or insanity of an agrarian reform beneficiary-member of SEC. 4. Articles 33, 34, 35, 36, 37, 38, 39, 40, 42, 42, 43, 44, 45, 46, 47, 48, 49, 50
a cooperative, the next-of-kin may assume the duties and responsibilities of and 51 of Chapter IV on Administration of the same Code are hereby renumbered
the original member and amended to read, as follows:
11
"ART. 32. Composition of the General Assembly. – The general assembly "(2) Whenever necessary, a special meeting of the general assembly may be
shall be composed of such members who are entitled to vote under the called at any time by a majority vote of the board of directors or as provided
articles of cooperation and bylaws of the cooperative. for in the bylaws: Provided, That a notice in writing shall be sent one (1) week
prior to the meeting to all members who are entitled to vote. However, a
"ART. 32. Powers of the General Assembly. – The general assembly shall be special meeting shall be called by the board of directors after compliance with
composed of such members who are entitled to vote under the articles of the required notice within from at least ten per centum (10%) of the total
cooperation and bylaws of the cooperative. members who re entitled to vote to transact specific business covered by the
call.
"ART. 33. Powers of the General Assembly. – The general assembly shall be
the highest policy-making body of the cooperative and shall exercise such "If the board fails to call a regular or a special meeting within the given period,
powers as are stated in this Code, in the articles of cooperation and in the the Authority, upon petition of ten per centum (10%) of all the members of the
bylaws of the cooperative. The general assembly shall have the following cooperative who are entitled to vote, and for good cause shown, shall issue
exclusive powers which cannot be delegate: an order to the petitioners directing them to call a meeting of the general
assembly by giving proper notice as required in this Code or in the bylaws;
"(1) To determine and approve amendments to the articles of
cooperation and bylaws; "(3) In the case of a newly approved cooperative, a special general assembly
shall be called, as far as practicable, within ninety (90) days from such
"(2) To elect or appoint the members of the board of directors, and to approval;
remove them for cause. However, in the case of the electric
cooperatives registered under this Code, election of the members of "(4) The Authority may call a special meeting of the cooperative for the
the board shall be held in accordance with its bylaws or election purpose of reporting to the members the result of any examination or other
guideline of such electric cooperative; and investigation of the cooperative affairs; and
"(3) To approve developmental plans of the cooperative. "(5) Notice of any meeting may be waived, expressly or impliedly, by any
member.
"Subject to such other provisions of this Code and only for purposes of
prompt and intelligent decision-making, the general assembly may be a "ART. 35. Quorum. – A quorum shall consist of at least twenty-five per
three-fourths (3/4) vote of all its members with voting rights, present and centum (25%) of all the members entitled to vote. In the case of cooperative
constituting a quorum, delegate some of its powers to a smaller body of the banks, the quorum shall be as provided in Article 99 of this Code. In the case
cooperative. These powers shall be enumerated under the bylaws of the of electric cooperatives registered under this Code, a quorum, unless
cooperative. otherwise provided in the bylaws, shall consist of five per centum (5%) of all
the members entitled to vote.
"ART. 34. Meetings. – (1) A regular meeting shall be held annually by the
general assembly on a date fixed in the bylaws, or if not so fixed, on any "ART. 36. Voting System. – Each member of a primary cooperative shall
dated within ninety (90) days after the close of each fiscal year: Provided, have only one (1) vote. In the case of members of secondary or tertiary
That notice of regular meetings shall be sent in writing, by posting or cooperatives, they shall have one (1) basic vote and as many incentive votes
publication, or through other electronic means to all members of record. as provided for in the bylaws but not exceed five (5) votes. The votes cast by
the delegates shall be deemed as votes cast by the members thereof.
12
"However, the bylaws of a cooperative other than a primary may provide for "ART. 40. Meeting of the Board and Quorum Requirement. – (1) In the case
voting by proxy. Voting by proxy means allowing a delegate of a cooperative of primary cooperatives, regular meetings of the board of directors shall be
to represent or vote in behalf of another delegate of the same cooperative. held at least once a month.
"ART. 37. Composition and Term of the Board of Directors. – Unless "(2) Special meetings of the board of directors may be held at any time upon
otherwise provided in the bylaws, the direction and management of the affairs the call of the chairperson or a majority of the members of the
of a cooperative shall be vested in a board of directors which shall be board: Provided, That written notices of the meeting specifying the agenda of
composed of not less that five (5) nor more than fifteen (15) members elected the special meeting shall be given to all members of the board at least one
by the general assembly for a term of two (2) years and shall hold office until (1) week before the said meeting.
their successors are duly elected an qualified, or until duly removed for
caused. "(3) A majority of the members of the Board shall constitute a quorum or the
conduct of business, unless the bylaws proved otherwise.
"ART. 38. Powers of the Board of Directors. – The board of directors shall be
responsible for the strategic planning, direction-setting and policy-formulation "(4) Directors cannot attend or vote by proxy at board meetings.
activities of the cooperatives.
"ART. 41. Vacancy in the Board of Directors. – Any vacancy in the board of
"ART. 39. Directors. – (1) Any member of a cooperative who under the directors, other than by expiration of term, may be filled by the vote of at least
bylaws of the cooperative, has the right to vote and who possesses all the a majority of the remaining directors, if still constituting a quorum; otherwise,
qualifications and none of the disqualifications provided in the laws or bylaws the vacancy must be filled by the general assembly in a regular or special
shall be eligible for election as director. meeting called for the purpose. A director so elected to fill a vacancy shall
serve only the unexpired term of his predecessor in office.
"(2) The cooperative may, by resolution of its board of directors, admit as
directors, or committee member one appointed by any financing institution "ART. 42. Officers of the Cooperative. – The board of directors shall elect
from which the cooperative received financial assistance solely to provide from among themselves the chairperson and vice-chairperson, and elect or
technical knowledge not available within its membership. Such director or appoint other officers of the cooperative from outside of the board in
committee member not be a member of the cooperative and shall have no accordance with their bylaws. All officers shall serve during good behavior
powers, rights, nor responsibilities except to provided technical assistance as and shall not be removed except for cause after due hearing. Loss of
required by the cooperative. confidence shall not be a valid ground for removal unless evidenced by acts
or omission causing loss of confidence in the honesty and integrity of such
"(3) The members of the board of directors shall not hold any other position officer. No two (2) or more persons with relationships up to the third civil
directly involved in the day to day operation and management of the degree of consanguinity or affinity nor shall any person engaged in a
cooperative. business similar to that of the cooperative nor who in any other manner has
interests in conflict with the cooperative shall serve as an appointive officer.
"(4) 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 "ART. 43. Committees of Cooperatives. – (1) The bylaws may create an
a director of said cooperative. 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.
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"(2) The bylaws shall provide for the creation of an audit, election, mediation officers shall not be entitled to any per diem when, in the preceding calendar
and conciliation, ethics, and such other committees as may be necessary for year, the cooperative reported a net loss or had a dividend rate less than the
the conduct of the affairs of the cooperative. The members of both the audit official inflation rate for the same year. Any compensation other than per
and election committee shall be elected by the general assembly and the rest diems may be granted to directors by a majority vote of the members with
shall be appointed by the board. The audit committee shall be directly voting rights at a regular or special general assembly meeting specifically
accountable and responsible to the general assembly. It shall have the power called for the purpose: Provided, That no additional compensation other
and duty to continuously monitor the adequacy and effectiveness of the than per diems shall be paid during the first year of existence of any
cooperative’s management control system and audit the performance of the cooperative.
cooperative and its various responsibility centers.
"(2) The compensation of officers of the cooperative as well as the members
"Unless otherwise provided in the bylaws, the board, in case of a vacancy in of the committee as well as the members of the committees created pursuant
the committees, may call an election to fill the vacancy or appoint a person to to this Code or its bylaws may be fixed in the bylaws.
fill the same subject to the provision that the person elected or appointed
shall serve only for the unexpired portion of the term. "(3) Unless already fixed in the bylaws, the compensation of all other
employee shall be determined by the board of directors.
"ART. 44. Functions, Responsibilities and Training Requirements of
Directors, Officers and Committee Members. – the functions and "ART. 47. Dealings of Directors, Officers, or Committee Members. – A
responsibilities of directors, officers and committee members, as well as their contract entered into by the cooperative with one (1) or more of its directors,
training requirements, shall be in accordance with the rules and regulations officers, and committee members is voidable, at the option of the cooperative,
issued by the Authority. unless all the following conditions are present.
"ART. 45. Liability of Directors, Officers and Committee Members. – "(1) That the presence of such director in the board meeting wherein contract
Directors, officers and committee members, who are willfully and knowingly was approved was not necessary to constitute a quorum for such meeting;
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 "(2) That the vote of such director was not necessary for the approval of the
any personal or pecuniary interest in conflict with their duty as such directors, contract;
officers or committee members shall be liable jointly and severally for all
damages or profits resulting therefrom to the cooperative, members, and "(3) That the contract is fair and reasonable under the circumstances; and
other persons.
"(4) That in the case of an officer or committee member, the contract with the
"When a director, officer or committee member attempts to acquire or officer or committee member has been previously authorized by the general
acquires, in violation of his duty, any interest or equity adverse to the assembly or by the board of directors.
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 "Where any of the first two conditions set forth in the preceding paragraph is
and shall be accountable for double the profits which otherwise would have absent, in the case of a contract with a director, such contract may be ratified
accrued to the cooperative. by a three-fourths (3/4) vote of all the members with voting rights, present
and constituting a quorum in a meeting called for the purpose: Provided, That
"ART. 46. Compensation. – (1) In the absence of any provisions in the bylaws full disclosure of the adverse interest of the directors involved is made at such
fixing their compensation, the directors shall not receive any compensation
except for reasonable per diems: Provided however, That the directors and
14
meeting, and that the contract is fair and reasonable under the general assembly meeting called for the purpose. The officer concerned shall
circumstances. be given an opportunity to be heard at said assembly.
"ART. 48. Disloyalty of a Director. – A director who, by virtue of his office, SEC. 5. Articles 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62 and 63 of Chapter V on
acquires for himself an opportunity which should belong to the cooperative Responsibilities, Rights and Privileges of Cooperatives of the same Code are hereby
shall be liable for damages and must account for double the profits that renumbered and amended to read, as follows:
otherwise would have accrued to the cooperative by refunding the same,
unless his act has been ratified by a three-fourths (3/4) vote of all the CHAPTER V
members with voting rights, present and constituting a quorum. This provision RESPONSIBILITIES, RIGHTS AND PRIVILEGES OF COOPERATIVE
shall be applicable, notwithstanding the fact that the director used his own
funds in the venture. "ART. 51. Address. – Every cooperative shall have an official postal address
to which all notices and communications shall be sent. Such address and
"ART. 49. Illegal Use of Confidential Information. – (1) A director or officer, or every change thereof shall be registered with the Authority.
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 "ART. 52. Books to be Kept Open. – (1) Every cooperative shall have the
known, might reasonably be expected to adversely affect the operation and following documents ready and accessible to its members and
viability of the cooperative, shall be held: representatives of the Authority for inspection during reasonable office hours
at its official address:
"(a) Liable to compensate the cooperative for the direct losses
suffered by the cooperative as a result of the illegal use of information; "(a) A copy of this Code and all other laws pertaining to cooperatives;
and
"(b) A copy of the regulations of the Authority;
"(b) Accountable to the cooperative for any direct benefit or advantage
received or yet to be received by him or his associate, as a result of "(c) A copy of the articles of cooperation and bylaws of the
the transaction. cooperative;
"(2) The cooperative shall take the necessary steps to enforce the liabilities "(d) A register of members;
described in subsection (a)
"(e) The books of the minutes of the meetings of the general
"ART. 50. Removal. – All complaints for the removal of any elected officer assembly, board of directors and committee;
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 "(f) Share books, where applicable;
officer concerned under preventive suspension pending the resolution of the
investigation. Upon finding of a prima facie evidence of guilt, the board shall
"(g) Financial statement; and
present its recommendation for removal to the general assembly.
"(h) Such other documents as may be prescribed by laws or the
"An elective officer may be removed by three fourths (3/4) votes of the
bylaws.
regular members present and constituting a quorum, in a regular or special
15
"(2) The accountant or the bookkeeper of the cooperative shall be cooperative shall be the calendar year except as may be otherwise provided
responsible for the maintenance of the cooperative in accordance with in the bylaws.
generally accepted accounting practices. He shall also be responsible for the
production of the same at the time of audit or inspection. "(2) If a cooperative fails to make, publish and file the reports required herein,
or fails to include therein any matter required by the Code, the Authority shall,
"The audit committee shall be responsible for the continuous and periodic within fifteen (15) days from the expiration of the prescribed period, send
review of the books and records of account to ensure that these are in such cooperative a written notice, stating its non-compliance and the
accordance with generally accepted accounting practices. He shall also be commensurate fines and penalties that will be imposed until such time that
responsible for the production of the same at the time of audit or inspection. the cooperative has complied with the requirements.
"(3) Each cooperative shall maintain records of accounts such that the true "ART. 54. Register of Members as Prima Facie Evidence. – Any register or
and correct condition and the results of the operation of the cooperative may list of members shares kept by any registered cooperative shall be prima
be ascertained therefrom at any time. The financial statements, audited facie evidence of the following particulars entered therein:
according to generally accepted auditing standards, principles and practices,
shall be published annually and shall be kept posted in a conspicuous place "(1) The date on which the name of any person was entered in such
in the principal office of the cooperative. register or list of member; and
"(4) Subject to the pertinent provisions of the National Internal Revenue Code "(2) The date on which any such person ceased to be a member.
and other laws, a cooperative may dispose by way of burning or other
method of complete destruction any document, record or book pertaining to "ART. 55. Probative Value of Certified Copies of Entries. – (1) A copy of any
its financial and nonfinancial operations which are already more than five (5) entry in any book, register or list regularly kept in the course of business in
years old except those relating to transactions which are the subject of civil, the possession of a cooperative shall, if duly certified in accordance with the
criminal and administrative proceedings. An inventory of the audited rules of evidence, be admissible as evidence of the existence of entry and
documents, records and books to be disposed of shall be drawn up and prima facie evidence of the matters and transactions therein recorded.
certified to by the board secretary and the chairman of the audit committee
and presented to the board of directors which may thereupon approve the "(2) No person or a cooperative is possession of the books of such
disposition of said records. cooperative shall, in any legal proceedings to which the cooperative is not a
party, be compelled to produce any of the books of the cooperative, the
"ART. 53. Reports. – (1) Every cooperative shall draw up regular reports of its contents of which can be proved and the matters, transactions and accounts
program of activities, including those in pursuance of their socio-civic therein recorded, unless by order of a competent court.
undertakings, showing their progress and achievements at the end of every
fiscal year. The reports shall be made accessible to its members, and copies "ART. 56. Bonding of Accountable Officers. – Every director, officer, and
thereof shall be furnished to all its members or record. These reports shall be employee handling funds, securities or property on behalf of any cooperative
filed with the Authority within one hundred twenty (120) days from the end of shall be covered by a surety bond to be issued for a duly registered insurance
the calendar year. The form and contents of the reports shall be as or bonding company for the faithful performance of their respective duties and
prescribed by the rules of the Authority. Failure to file the required reports obligations. The board of directors shall determine the adequacy of such
shall subject the accountable officer/s to fines and penalties as may be bonds.
prescribed by the Authority, and shall be a ground for the revocation of
authority of the cooperative to operate as such. The fiscal year of every
16
"Upon the filing of the application for registration of a cooperative, the bonds "(3) The term "employer" as used in this article shall include all private firms
of the accountable officers shall be required by the Authority. Such bonds and the national and local governments and government-owned or controlled
shall be renewed manually and the Authority shall accordingly be informed of corporations who have under their employer a member of a cooperative and
such renewal. have agreed to carry out the terms of the instrument mentioned in paragraphs
(1) and (2) of this article.
"ART. 57. Preference of Claims. – (1) Notwithstanding the provisions of
existing laws, rules and regulations to the contrary, but subject to the prior "(4) The provisions of this article shall apply to all similar agreements referred
claim of the Authority, any debt due to the cooperative from the member shall to in paragraph (1) and were enforced prior to the approval of this Code.
constitute a first lien upon any raw materials, production, inputs, and products
produced; or any land, building, facilities, equipment, goods or services "(5) Notwithstanding the provisions of existing laws to the contrary, the
acquired and held, by such member through the proceeds of the loan or responsibilities of the employer as stated in paragraphs (1) and (2) of this
credit granted by the cooperative to him for as long as the same is not fully articles shall be mandatory: Provided, That in the case of private employer,
paid. the actual and reasonable cost deducting and remitting maybe collected.
"(2) No property or interest on property which is subject to a lien under "ART. 59. Primary Lien. - Notwithstanding the provision of any law with the
paragraph (1) shall be sold nor conveyed to third parties without the prior contrary, a cooperative shall have primary lien upon the capital, deposits or
permission of the cooperative. The lien upon the property or interest shall interest of a member for any debt due to the cooperative from such a
continue to exit even after the sale or conveyance thereof until such lien has member.
been duly extinguished.
"ART. 60. Tax Treatment of Cooperative. - Duly registered cooperatives
"(3) Notwithstanding the provisions of any law to the contrary, any sale or under this Code which do not transact any business with non-members or the
conveyance made in contravention of paragraph (2) hereof shall be void. general public shall not be subject to any taxes and fees imposed under the
internal revenue laws and other tax laws. Cooperatives not falling under this
"ART. 58. Instrument for Salary or Wage Deduction. – (1) A member of a article shall be governed by the succeeding section.
cooperative may, notwithstanding the provisions of existing laws to the
contrary, execute an instrument in favor of the cooperative authorizing his "ART.61. Tax and Other Exemptions. Cooperatives transacting business with
employer to deduct from his/her salary or wages, commutation of leave both members and non-members shall not be subjected to tax on their
credits and any other monetary benefits payable to him by the employer and transactions with members. In relation to this, the transactions of members
remit such amount as maybe specified in satisfaction of a debt or other with the cooperative shall not be subject to any taxes and fees, including not
demand due from the member to the cooperative. limited to final taxes on members’ deposits and documentary tax.
Notwithstanding the provisions of any law or regulation to the contrary, such
"(2) Upon the execution of such instrument and as may be required by the cooperatives dealing with nonmembers shall enjoy the following tax
cooperative contained in a written request, the employer shall make the exemptions:
deduction in accordance with the agreement and deduction in accordance
with the agreement and remit forthwith the amount so deducted within ten "(1) Cooperatives with accumulated reserves and undivided net savings of
(10) days after the end of the payroll month to the cooperative. The employer not more than Ten million pesos (P10,000,000.00) shall be exempt from all
shall make the deduction for as long as such debt or other demand remains national, city, provincial, municipal or barangay taxes of whatever name and
unpaid by the employee. nature. Such cooperatives shall be exempt from customs duties, advance
sales or compensating taxes on their importation of machineries, equipment
17
and spare parts used by them and which are not available locally a certified "(3) All cooperatives, regardless of the amount of accumulated reserves and
by the department of trade and industry (DTI). All tax free importations shall undivided net savings shall be exempt from payment of local taxes and taxes
not be sold nor the beneficial ownership thereof be transferred to any person on transactions with banks and insurance companies: Provided, That all
until after five (5) years, otherwise, the cooperative and the transferee or sales or services rendered for non-members shall be subject to the applicable
assignee shall be solidarily liable to pay twice the amount of the imposed tax percentage taxes sales made by producers, marketing or service
and / or duties. cooperatives: Provided further, That nothing in this article shall preclude the
examination of the books of accounts or other accounting records of the
"(2) Cooperatives with accumulated reserves and divided net savings of more cooperative by duly authorized internal revenue officers for internal revenue
than Ten million pesos (P10,000,000.00) shall fee the following taxes at the tax purposes only, after previous authorization by the Authority.
full rate:
"(4) In areas where there are no available notaries public, the judge,
"(a) Income Tax - On the amount allocated for interest on capitals: exercising his ex officio capacity as notary public, shall render service, free of
Provided, That the same tax is not consequently imposed on interest charge, to any person or group of persons requiring the administration of oath
individually received by members: Provided, further, That or the acknowledgment of articles of cooperation and instruments of loan
cooperatives regardless of classification, are exempt income tax from from cooperatives not exceeding Five Hundred Thousand Pesos
the date of registration with the Authority; (P500,000.00).
"(b) Value-Added Tax – On transactions with non- "(5) Any register of deeds shall accept for registration, free of charge, any
members: Provided, however, That cooperatives duly registered with instrument relative to a loan made under this Code which does not exceed
the Authority; are exempt from the payment of value-added tax; Two Hundred Fifty Thousand Pesos (P250,000.00) or the deeds of title of any
subject to Section 109, sub-sections L, M and N of Republic Act No. property acquired by the cooperative or any paper or document drawn in
9337, the National Internal Revenue Code, as amended: Provided, connection with any action brought by the cooperative or with any court
That the exempt transaction under Section 109 (L) shall include sales judgment rendered in its favor or any instrument relative to a bond of any
made by cooperatives duly registered with the Authority organized accountable officer of a cooperative for the faithful performance of his duties
and operated by its member to undertake the production and and obligations.
processing of raw materials or of goods produced by its members into
finished or process products for sale by the cooperative to its "(6) Cooperatives shall be exempt from the payment of all court and sheriff’s
members and non-members: Provided, further, That any processed fees payable to the Philippine Government for and in connection with all
product or its derivative arising from the raw materials produced by its actions brought under this Code, or where such actions is brought by the
members, sold in then name and for the account of the Authority before the court, to enforce the payment of obligations contracted in
cooperative: Provided , finally, That at least twenty-five per favor of the cooperative.
centum (25%) of the net income of the cooperatives is returned to the
members in the form of interest and/or patronage refunds; "(7) All cooperatives shall be exempt from putting up a bond for bringing an
appeal against the decision of an inferior court or for seeking to set aside any
"(c) All other taxes unless otherwise provided herein; and third party claim: Provided, That a certification of the Authority showing that
the net assets of the cooperative are in excess of the amount of the bond
"(d) Donations to charitable, research and educational institutions and required by the court in similar cases shall be accepted by the court as a
reinvestment to socioeconomic projects within the area of operation of sufficient bond.
the cooperative may be tax deductible.
18
"(8) Any security issued by cooperatives shall be exempt from the provisions "(7) Cooperatives and their federations, such as farm and fishery
of the Securities Act provided such security shall not be speculative. producers and suppliers, market vendors and such other
cooperatives, which have for their primary purpose the production
"ART. 62. Privileges of Cooperatives. – Cooperatives registered under this and/or the marketing of products from agriculture, fisheries and small
Code, notwithstanding the provisions of any law to the contrary, be also entrepreneurial industries and federations thereof, shall have
accorded the following privileges: preferential rights in the management of public markets and/or lease
of public market facilities, stalls or spaces: Provided, That these rights
"(1) Cooperatives shall enjoy the privilege of depositing their sealed shall only be utilized exclusively by cooperatives: Provided, further,
cash boxes or containers, documents or any valuable papers in the That no cooperative forming a joint venture, partnership or any other
safes of the municipal or city treasurers and other government offices similar arrangement with a non-cooperative entity can utilize these
free of charge, and the custodian of such articles shall issue a receipt rights;
acknowledging the articles received duly witnessed by another
person; "(8) Cooperatives engaged in credit services and/or federations shall
be entitled to loans credit lines, rediscounting of their loan notes, and
"(2) Cooperatives organized among government employees, other eligible papers with the Development Bank of the Philippines,
notwithstanding any law or regulation to the contrary, shall enjoy the the Land Bank of the Philippines and other financial institutions except
free use of any available space in their agency, whether owned or the Bangko Sentral ng Pilipinas (BSP);
rented by the Government;
"The Philippine Deposit Insurance Corporation (PDIC) and other
"(3) Cooperatives rendering special types of services and facilities government agencies, government-owned and controlled corporations
such as cold storage, ice plant, electricity, transportation, and similar and government financial institutions shall provide technical
services and facilities shall secure a franchise therefore, and such assistance to registered national federations and unions of
cooperatives shall open their membership to all persons qualified in cooperatives which have significant engagement in savings and credit
their areas of operation; operations in order for these federations and unions to establish
and/or strengthen their own autonomous cooperative deposit
"(4) In areas where appropriate cooperatives exist, the preferential insurance systems;
right to supply government institutions and agencies rice, corn and
other grains, fish and other marine products, meat, eggs, milk, "(9) A public transport service cooperative may be entitled to financing
vegetables, tobacco and other agricultural commodities produced by support for the acquisition and/or maintenance of land and sea
their members shall be granted to the cooperatives concerned; transport equipment, facilities and parts through the program of the
government financial institutions. It shall have the preferential right to
"(5) Preferential treatment in the allocation of fertilizers, including the management and operation of public terminals and ports whether
seeds and other agricultural inputs and implements, and in rice land or sea transport where the cooperative operates and on securing
distribution shall be granted to cooperatives by the appropriate a franchise for active or potential routes for the public transport;
government agencies;
"(10) Cooperatives transacting business with the Government of the
"(6) Preferential and equitable treatment in the allocation or control of Philippines or any of its political subdivisions or any of its agencies or
bottomries of commercial shipping vessels in connection with the instrumentalities, including government-owned and controlled
shipment of goods and products of cooperatives; corporations shall be exempt from prequalification bidding
19
requirements notwithstanding the provisions of Republic Act No.9184, "Nothing in this Article, however, precludes creditors from seeking protection
otherwise known as, the Government Procurement Act; from said insolvency law."
"(11) Cooperative shall enjoy the privilege of being represented by the SEC. 7. Articles 65, 66. 67, 68, 69, 70 and 71 of Chapter VII on Dissolution of
provincial or city fiscal or the Office of the Solicitor General, free of Cooperatives of the same Code are hereby renumbered and amended to read, as
charge, except when the adverse party is the Republic of the follows:
Philippines;
CHAPTER VII
"(12) Cooperatives organized by faculty members and employees of DISSOLUTION OF COOPERATIVES
educational institutions shall have the preferential right in the
management of the canteen and other services related to the "ART. 64. Voluntary Dissolution Where no Creditors are Affected. – If the
operation of the educational institution where they are employed: dissolution of a cooperative does not prejudice the rights of any creditor
Provided, That such services are operated within the premises of the having a claim against it, the dissolution may be affected by a majority vote of
said educational institution; and the board of directors, and by a resolution duly adopted by the affirmative
vote of at least three-fourths (3/4) of all the members with voting rights,
"(13) The appropriate housing agencies and government financial present and constituting a quorum at a meeting to be held upon call of the
institutions shall create a special window for financing housing directors: Provided, That the notice of time, place and object of the meeting
projects undertaken by cooperatives, with interest rates and terms shall be published for three (3) consecutive weeks in a newspaper published
equal to, or better than those given for socialized housing projects. in the place where the principal office of said cooperative is located, or if no
This financing shall be in the form of blanket loans or long-term newspaper is published in such place, in a newspaper of general circulation
wholesale loans to qualified cooperatives, without need for individual in the Philippines: Provided, further, That the notice of such meeting is sent to
processing. each member of record either by registered mail or by personal delivery at
least thirty (30) days prior to said meeting. A copy of the resolution
"The Authority, in consultation with the appropriate government authorizing the dissolution shall be certified to by a majority of the board of
agencies and concerned cooperative sector, shall issue rules and directors and countersigned by the board secretary. The Authority shall
regulations on all matters concerning housing cooperatives." thereupon issue the certificate of dissolution.
SEC. 6. Article 64 of Chapter VI on Insolvency of Cooperatives of the same Code is "ART. 65. Voluntary Dissolution Where Creditors Are Affected. – Where the
hereby renumbered and amended to read, as follows: dissolution of a cooperative may prejudice the rights of any creditor, the
petition for dissolution shall be filed with the Authority. The petition shall be
CHAPTER VI signed by a majority of its board or directors or other officers managing its
INSOLVENCY OF COOPERATIVES affairs, verified by its chairperson or board secretary or one of its directors
and shall set forth all claims and demands against it and that its dissolution
"ART. 63. Proceeding Upon Insolvency.- In case a cooperative is unable to was resolved upon by the affirmative vote of at least three-fourths (3/4) of all
fulfill its obligations to creditors due to insolvency, such cooperative may the members with voting rights, present and constituting a quorum at a
apply for such remedies as it may deem fit under the provisions of Act No. meeting called for that purpose.
1956, as amended, otherwise known as the Insolvency Law.
"If the petition is sufficient in form and substance, the Authority shall issue an
order reciting the purpose of the petition and shall fix a date which shall not
be less than thirty (30) nor more than sixty (60) days after the entry of the
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order. Before such date, a copy of the order shall be published at least once "(3) Willful violation, despite notice by the Authority, of the provisions
a week for three (3) consecutive weeks in a newspaper of general circulation of this Code or its bylaws;
published in the municipality or city where the principal office of the
cooperative is situated or in the absence of such local newspaper, in a "(4) Willful failure to operate on a cooperative basis; and
newspaper of general circulation in the Philippines, and a copy shall likewise
be posted for three (3) consecutive weeks in three (3) public places in the "(5) Failure to meet the required minimum number of members in the
municipality or city where the cooperative’s office is located. cooperative.
"Upon expiry of the five (5) day notice to file objections, the Authority shall "ART. 68. Dissolution by Failure to Organize and Operate.- If a cooperative
proceed to hear the petition and try any issue raised in the objection filed; and has not commenced business and its operation within two (2) years after the
if the objection is sufficient and the material allegations of the petition are issuance of its certificate of registration or has not carried on its business for
proven, it shall issue an order to dissolve the cooperative and direct the two (2) consecutive years, the Authority shall send a formal notice to the said
disposition of its assets in accordance with existing rules and regulations. The cooperative to show cause as to its failure to operate. Failure of the
order of dissolution shall set forth therein: cooperative to promptly provide justifiable cause for its failure to operate shall
warrant the Authority to delete its name from the roster of registered
"(1) The assets and liabilities of the cooperative; cooperatives and shall be deemed dissolved.
"(2) The claim of any creditor; "ART. 69. Liquidation of a Cooperative. – Every cooperative whose charter
expires by its own limitation or whose existence is terminated by voluntary
"(3) The number of members; and dissolution or through an appropriate judicial proceeding shall nevertheless
continue to exist for three (3) years after the time it is dissolved; not to
"(4) The nature and extend of the interests of the members of the continue the business for which it was established but for the purpose of
cooperative. prosecuting and defending suits by or against it; settlement and closure of its
affairs; disposition, conveyance and distribution of its properties and assets.
"ART. 66. Involuntary Dissolution. – A cooperative may be dissolved by order
of a competent court after due hearing on the grounds of: "At any time during the said three (3) years, the cooperative is authorized and
empowered to convey all of its properties to trustees for the benefit of its
"(1) Violation of any law, regulation or provisions of its bylaws; or members, creditors and other persons in interest. From and after any such
conveyance, all interests which the cooperative had in the properties are
"(2) Insolvency. terminated.
"ART. 67. Dissolution by Order of the Authority. – The Authority may suspend "Upon the winding up of the cooperative affairs, any asset distributable to any
or revoke, after due notice and hearing, the certificate of registration of a creditor, shareholder or member who is unknown or cannot be found shall be
cooperative on any of the following grounds: given to the federation or union to which the cooperative is affiliated with.
"(1) Having obtained its registration by fraud; "A cooperative shall only distribute its assets or properties upon lawful
dissolution and after payment of all its debts and liabilities, except in the case
"(2) Existing for an illegal purpose; of decrease of share capital of the cooperative and as otherwise allowed by
this Code.
21
"ART. 70. Rules and Regulations on Liquidation. – The Authority shall issue exceed ten per centum (10%) of the share capital of the
the appropriate implementing guidelines for the liquidation of cooperatives." cooperative; Provided, further, That the heir qualify and is admitted as
members of the cooperative: Providedfinally , That where the heir fails to
SEC. 8. Articles 72, 73, 74, 75, 76, 77, 78, 79 and 80 of Chapter VIII on Capital, qualify as a member or where his total share holding exceeds ten per
Property, and Funds of the same Code are hereby renumbered and amended to centum (10%) of the share capital , the share or shares excess will revert to
read, as follows: the cooperative upon payment to the heir of the value of such shares.
CHAPTER VIII "ART. 74. Assignment of Share Capital Contribution or Interest.- Subject to
CAPITAL, PROPERTY, AND FUNDS the provisions of this Code, no member shall transfer his shares or interest in
the cooperative or any part thereof unless.
"ART. 71. Capital. - The capitalization of cooperatives and the accounting
procedures shall be governed by the provisions of this Code and the "(1) He has held such share capital contribution or interest for not less
regulations which shall be issued. than one (1) year.
"ART. 72. Capital Sources.- Cooperatives registered under this Code may "(2) The assignment is made to the cooperative or to a member of the
derive their capital from any or all of the following sources: cooperative or to a person who falls within the field of the membership
of the cooperative; and
"(1) Member’s share capital;
"(3) The board of directors has approved such assignment.
"(2) Loans and barrowings including deposits;
"ART.75. Capital Build-Up.- Te bylaws of every cooperative shall be provided
"(3) Revolving capital which consists of the deferred payment of for a reasonable and realistic member capital build-up program to allow the
patronage refunds, or interest on share capital; and continuing growth of the members’ investment in their cooperative as their
economic conditions continue to improve.
"(4) Subsidies, donations, legacies, grants, aids and such other
assistance from any local or foreign institution whether public or "ART.76. Shares.- The term "share" refers to a unit of capital in a primary
private: Provided, That capital coming from such subsides, donations, cooperative the par value of which may be fixed to any figure not more than
legacies, grants, aids and other assistance shall not be divided into One thousand pesos (P1,000.00). The share of capital of a cooperative is the
individual share capital holdings at any time but shall instead form part money paid or required to be paid for the operations of the cooperative. The
of the donated capital or fund of the cooperative. method for the issuance of share certificates shall prescribed in its bylaws.
"Upon dissolution, such donated capital shall be subject to escheat. "ART.77. Fines. - The bylaws of a cooperative may prescribe a fine on unpaid
subscribed share capital. Provided, that such fine is fair and reasonable
"ART. 73. Limitation on Share Capital Holdings.- No member of primary under the circumstances.
cooperative other than cooperative itself shall own or hold more than ten per
centum (10%) of the share capital of the cooperative. "ART.78. Investment of Capital. - A cooperative may invest its capital in any
of the following:
"Where a member of cooperative dies, his heir shall be entitled to the shares
of the decedent: Provided, That the total share holding of the heir does not "(a) In shares or debentures or securities of any other cooperative;
22
"(b) In any reputable bank in the locality, or any cooperative; "Performance and social audit reports which contain the findings and
recommendations of the auditor shall be submitted to the board of directors.
"(c) In securities issued or guaranteed by the Government;
"The Authority, in consultation with the cooperative sector, shall promulgate
"(d) In real state primarily for the use of the cooperative or its the rules and standards for the social audit of cooperatives.
members; or
"ART. 81. Audit Report. – The auditor shall submit to the board of directors
"(e) In any other manner authorized in the bylaws. and to the audit committee the financial audit report which shall be in
accordance with the generally accepted auditing standards for cooperatives
"ART. 79. Revolving Capital. – The general assembly of any cooperative may as jointly promulgated by the Philippine Institute of Certified Public
authorize the board of directors to raise a revolving capital to strengthen its Accountants (PICPA) and the Authority.
capital structure by deferring the payment of patronage refunds and interest
on share capital or by the authorized deduction of a percentage from the "Thereafter, the board of directors shall present the complete audit report to
proceeds of products sold or services rendered, or per unit of product or the general assembly in its next meeting.
services handled. The board of directors shall issue revolving capital
certificates with serial number, name, amount, and rate of interest to be paid "ART. 82. Nonliability for Defamations. – The auditor is not liable to any
and shall distinctly set forth the time of retirement of such certificates and the person in an action for defamation based on any act, done, or any statement
amounts to be returned." made by him in good faith in connection with any matter he is authorized or
required to do pursuant to this Code.
SEC. 9. Articles 81, 82, 83, 84 and 85 of Chapter IX on Audit, Inquiry and Members’
Right to Examine of the same Code are hereby renumbered and amended to read, "ART. 83. Right to Examine. – A member shall have the right to examine the
as follows: records required to be kept by the cooperative under Article 52 of this Code
during reasonable hours on business days and he may demand, in writing,
"ART. 80. Annual Audit. – Cooperatives registered under this Code shall be for a copy of excerpts from said records without charge except the cost of
subject to an annual financial, performance and social audit. The financial production.
audit shall be conducted by an external auditor who satisfies all the following
qualifications: "Any officer of the cooperative who shall refuse to allow any member of the
cooperative to examine and copy excerpts from its records shall be liable to
"(1) He is independent of the cooperative or any of its subsidiary that such member for damages and shall be guilty of an offense which shall be
he is auditing; and punishable under Article 140 of this Code: Provided, That if such refusal is
pursuant to a resolution or order of the board of directors, the liability under
"(2) He is a member in good standing of the Philippine Institute of this article shall be imposed upon the directors who voted for such
Certified Public Accountants (PICPA) and is accredited by both the refusal: Provided, further, That it shall be a defense to any action under this
Board and Accountancy and the Authority. article that the member demanding to examine and copy excerpts from the
cooperative records has improperly used any information secured through
"The social audit shall be conducted by an independent social auditor any prior examination of the records of such cooperative or was not acting in
accredited by the Authority. good faith or for a legitimate purpose in making his demand.
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"ART. 84. Safety of Records. – Every cooperative shall, at its principal office, "Any sum recovered on items previously charged to the
keep and carefully preserve the records required by this Code to be prepared reserve fund shall be credited to such fund.
and maintained. It shall take all necessary precaution to prevent its loss,
destruction or falsification." "(b) The reserve fund shall not be utilized for investment, other
than those allowed in this Code. Such sum of the reserve fund
SEC. 10. Articles 86 and 87 of Chapter X on Allocation and Distribution of Net in excess of the share capital may be used at anytime for any
Surplus of the same Code are hereby renumbered and amended to read, as follows: project that would expand the operations of the cooperative
upon the resolution of the general assembly.
CHAPTER X
ALLOCATION AND DISTRIBUTION OF NET SURPLUS "(c) Upon the dissolution of the cooperative, the reserve fund
shall not be distributed among the members. The general
"ART. 85. Net Surplus. – Notwithstanding the provisions of existing laws, the assembly may resolves:
net surplus of cooperatives shall be determined in accordance with its
bylaws. Every cooperative shall determine its net surplus at the close of every "(i) To establish a usufructuary trust fund for the benefit
fiscal year and at such other times as may be prescribed by the bylaws. of any federation or union to which the cooperative is
affiliated; and
"Any provision of law to the contrary notwithstanding, the net surplus shall not
be construed as profit but as an excess of payments made by the members "(ii) To donate, contribute, or otherwise dispose of the
for the loans borrowed, or the goods and services availed by them from the amount for the benefit of the community where the
cooperative or the difference of the rightful amount due to the members for cooperative operates. If the members cannot decide
their products sold or services rendered to the cooperative including other upon the disposal of the reserve fund, the same shall
inflows of assets resulting from its other operating activities and which shall go to the federation or union to which the cooperative
be deemed to have been returned to them if the same is distributed as is affiliated.
prescribed herein.
"(2) An amount for the education and training fund, shall not be more
"ART. 86. Order of Distribution. – The net surplus of every cooperative shall than ten per centum (10%) of the net surplus. The bylaws may
be distributed as follows: provide that certain fees or a portion thereof be credited to such fund.
The fund shall provide for the training, development and similar other
"(1) An amount for the reserve fund which shall be at least ten per cooperative activities geared towards the growth of the cooperative
centum (10%) of net surplus: Provided, That, in the first five (5) years movement:
of operation after registration, this amount shall not be less than
fifty per centum (50%) of the net surplus: "(a) Half of the amounts transferred to the education and
training fund annually under this subsection shall be spent by
"(a) The reserve fund shall be used for the stability of the the cooperative for education and training purposes; while the
cooperative and to meet net losses in its operations. The other half may be remitted to a union or federation chosen by
general assembly may decrease the amount allocated to the the cooperative or of which it is a member. The said union or
reserve fund when the reserve fund already exceeds the share federation shall submit to the Authority and to its contributing
capital. cooperatives the following schedules:
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"(i) List of cooperatives which have remitted their "(b) In the case of a member patron with unpaid share capital
respective Cooperative Education and Training Funds contribution, his proportionate amount of patronage refund shall be
(CETF); credited to his account until his account until his share capital
contribution has been fully paid;
"(ii) Business consultancy assistance to include the
nature and cost; and "(c) In the case of a non-member patron, his proportionate amount of
patronage refund shall be set aside in a general fund for such patrons
"(iii) Other training activities undertaken specifying and shall be allocated to individual non-member patrons only upon
therein the nature, participants and cost of each request and presentation of evidence of the amount of his patronage.
activity. The amount so allocated shall be credited to such patron toward
payment of the minimum capital contribution for membership. When a
"(b) Upon the dissolution of the cooperative, the unexpended sum equal to this amount has accumulated at any time within a period
balance of the education and training fund appertaining to the specified in the bylaws, such patron shall be deemed and become a
cooperative shall be credited to the cooperative education and member of the cooperative if he so agrees or requests and complies
training fund of the chosen union or federation. with the provisions of the bylaws for admission to membership; and
"(3) An amount for the community development fund, which shall not "(d) If within any period of time specified in the bylaws, any subscriber
be less than three per centum(3%) of the net surplus. The community who has not fully paid his subscribed share capital or any non-
development fund shall be used for projects or activities that will member patron who has accumulated the sum necessary for
benefit the community where the cooperative operates. membership but who does not request nor agree to become a
member or fails to comply with the provisions of the bylaws for
"(4) An optional fund, a land and building, and any other necessary admission to membership, the amount so accumulated or credited to
fund the total of which shall not exceed seven per centum (7%). their account together with any part of the general fund for
nonmember patrons shall be credited to the reserve fund or to the
"(5) The remaining net surplus shall be made available to the education and training fund of the cooperative, at the option of the
members in the form of interest on share capital not to exceed the cooperative."
normal rate of return our investments and patronage
refunds: Provided, That any amount remaining after the allowable SEC. 11. Articles 88, 89, 90, 91, 92, 93, 94 and 95 of Chapter XI on the Special
interest and the patronage refund have been deducted shall be Provisions Relating to Agrarian Reform Cooperatives of the same Code are hereby
credited to the reserve fund. renumbered retitled and amended to read, as follows:
"The sum allocated for patronage refunds shall be made available at the CHAPTER XI
same rate to all patrons of the cooperative in proportion to their individual AGRARIAN REFORM COOPERATIVES
patronage: Provided, That:
"ART. 87. Coverage. – The provisions of this Chapter shall primarily govern
"(a) In the case of a member patron with paid-up share capital agrarian reform cooperatives: Provided, That the provisions of the other
contribution, his proportionate amount of patronage refund shall be chapters of this Code shall apply suppletorily except insofar as this Chapter
paid to him unless he agrees to credit the amount to his account as otherwise provides.
additional share capital contribution;
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"ART. 88. Definition and Purpose. – An agrarian reform cooperative is one concern for the development of agro-based, marine-based, and
organized by marginal farmers, majority of which are agrarian reform cottage-based industries;
beneficiaries, for the purpose of developing an appropriate system of land
tenure, land development, land consolidation or land management in areas "(9) To represent the beneficiaries on any or all matters that affect
covered by agrarian reform. their interest; and
"An agrarian reform cooperative as defined shall be organized for any or all of "(10) To undertake such other economic or social activities as may be
the following purposes: necessary or incidental in the pursuit of the foregoing purposes.
"(1) To develop an appropriate system of land tenure, land "ART. 89. Cooperative Estate. – Landholdings like plantations, estates or
development, land consolidation or land management in areas haciendas acquired by the State for the benefit of the workers in accordance
covered by agrarian reform; with the Comprehensive Agrarian Reform Program which shall be collectively
owned by the worker-beneficiaries under a cooperative set-up.
"(2) To coordinate and facilitate the dissemination of scientific
methods of production, and provide assistance in the storage, "ART. 90. Infrastructure. – In agrarian reform and resettlement areas, the
transport, and marketing of farm products for agrarian reform Government shall grant to agrarian reform cooperatives preferential treatment
beneficiaries and their immediate family, hereinafter referred to as in the construction, maintenance and management of roads, bridges, canals,
"beneficiaries"; wharves, ports, reservoirs, irrigation systems, waterworks systems, and other
infrastructures with government funding. For this purpose, the Government
"(3) To provide financial facilities to beneficiaries for provident or shall provide technical assistance, facilities and equipment to such agrarian
productive purposes at reasonable costs; reform cooperatives.
"(4) To arrange and facilitate the expeditious transfer of appropriate "ART. 91. Lease of Public Lands. – The Government may lease public lands
and suitable technology to beneficiaries and marginal farmers at the to any agrarian reform cooperative for a period not exceeding twenty-five
lowest possible cost; (25%) years, subject to renewal for another twenty-five (25) years
only: Provided, That the application for renewal shall be made one (1) year
"(5) To provide social security benefits, health, medical and social before the expiration of the lease: Provided, further, That such lease shall be
insurance benefits and other social and economic benefits that for the exclusive use and benefit of the beneficiaries and marginal farmers
promote the general welfare of the agrarian reform beneficiaries and subject to the provisions of the Comprehensive Agrarian Reform Program.
marginal farmers;
"ART. 92. Preferential Right. – In agrarian reform areas, an agrarian reform
"(6) To provide non-formal education, vocational/technical training, cooperative shall have the preferential right in the grant of franchise and
and livelihood programs to beneficiaries and marginal farmers; certificate of public convenience and necessity for the operation of public
utilities and services: Provided, That it meets the requirements and conditions
"(7) To act as conduits for external assistance and services to the imposed by the appropriate government agency granting the franchise or
beneficiaries and marginal farmers; certificate of public convenience and necessity. If there is an electric service
provider in the area, it shall upon the request of an agrarian reform
"(8) To undertake a comprehensive and integrated development cooperative, immediately provide electric services to the agrarian reform
program in agrarian reform and resettlement areas with special areas. If the electric service provider fails to provide the services requested
26
within a period of one (1) year, the agrarian reform cooperative concerned BSP shall draw up a joint program for the organization and financing of the
may undertake to provide the electric services in the area through its own agrarian reform cooperatives subject of this Chapter. The joint program shall
resources. All investments made by the said agrarian reform cooperative for be geared towards the beneficiaries gradual assumption of full ownership and
the electrification of the agrarian reform resettlement areas shall be the management control of the agrarian reform cooperatives.
subject of sale to the electric service provider once it takes on the service.
"ART. 94. Organization and Registration. – Agrarian reform cooperatives may
"ART. 93. Privileges. – Subject to such reasonable terms and conditions as be organized and registered under this Code only upon prior written
the Department of Agrarian Reform (DAR) and the Authority may impose, verification by the DAR to the effect that the same is needed and desired by
agrarian reform cooperatives may be given the exclusive right to do any or all the beneficiaries; results of a study that has been conducted fairly indicate
of the following economic activities in agrarian reform and resettlement areas; the economic feasibility of organizing the same and that it will be
economically viable in its operations; and that the same may now be
"(1) Supply and distribution of consumer, agricultural, aqua-cultural, organized and registered in accordance with requirements of this Code.
and industrial goods, production inputs, and raw materials and
supplies, machinery, equipment, facilities and other services and "The Authority, in consultation with the concerned government agencies and
requirements of the beneficiaries and marginal farmers at reasonable cooperative sector, shall issue appropriate rules and regulations pertaining to
prices; the provisions of this Chapter."
"(2) Marketing of the products and services of the beneficiaries in SEC. 12. Articles 96, 97 and 98 of Chapter XII on the Special Provisions on Public
local and foreign markets; Services Cooperatives of the same Code are hereby transferred to another chapter.
Chapter XII as amended shall now read, as follows:
"(3) Processing of the members’ products into finished consumer or
industrial goods for domestic consumption or for export; CHAPTER XII
COOPERATIVE BANKS
"(4) Provision of essential public services at cost such as power,
irrigation, potable water, passenger and/or cargo transportation by "ART. 95. Governing Law. – The provisions of this Chapter shall primarily
land or sea, communication services, and public health and medical govern cooperative banks registered under this Code and the other
care services; provisions of this Code shall apply to them only insofar as they are not
inconsistent with the provisions contained in this Chapter.
"(5) Management, conservation, and commercial development of
marine, forestry, mineral, water, and other natural resources subject "ART. 96. Supervision. – The cooperative banks registered under this Code
to compliance with the laws and regulations on environmental and shall be under the supervision of the BSP. The BSP, upon consultation with
ecological controls; and the Authority and the concerned cooperative sector, shall formulate
guidelines regarding the operations and the governance of cooperative
"(6) Provision of financial, technological, and other services and banks. These guidelines shall give due recognition to the unique nature and
facilities required by the beneficiaries in their daily lives and livelihood. character of cooperative banks. To this end, cooperative banks shall provide
financial and banking services to its members.
"The Government shall provide the necessary financial and technical
assistance to agrarian reform cooperatives to enable them to discharge "ART. 97. Organization, Membership and Establishment of a Cooperative
effectively their purposes under this article. The DAR, the Authority and the Bank. – (1) Cooperative organizations duly established and registered under
27
this Code may organize a cooperative bank, which shall likewise be accompanied by a certificate of authority issued by the BSP, under its official
considered a cooperative registrable under provisions of this Code subject to seal.
the requirements and requisite authorization from the BSP. Only one
cooperative bank may be established in each province: Provided, That an "ART. 98. Administration of Cooperative Banks. – To maintain the quality of
additional cooperative bank may be established in the same province to cater bank management and accord appropriate protection to depositors and the
to the needs in the same province to cater to the needs of the locality public in general, the BSP shall prescribed the fit and proper qualifications of
depending on the economic conditions of the province as may be determined bank directors and officers for the purposes of this article, giving due
by the BSP: Provided, further, That the additional cooperative bank shall be recognition to the unique nature and character of cooperative banks.
located in the City or municipality other that the city or municipality where the
first cooperative bank is located. "Notwithstanding the provisions of this Code, the number, computation and
term of the board of directors shall be defined in the articles of cooperation
"(2) Membership in a cooperative bank shall either be regular or associate. and bylaws of the cooperative bank.
Regular membership shall be limited to cooperative organizations which are
holders of common shares of the bank. Associate members are those "ART. 99. Quorum and Voting Rights. – The quorum requirement for general
subscribing and holding preferred shares of the bank, which may include but assembly meetings, whether special or regular, shall be one half plus one of
are not limited to the following: the number of voting shares of all the members in good standing. In the
meetings of the board of directors, whether special or regular, the quorum
"(a) Individual members of the bank’s member-primary cooperatives; requirement shall be one-half plus one of all the members of the board of
and directors. Each director shall only have one vote.
"(b) Samahang Nayon and Municipal Katipunan ng mga Samahang "Notwithstanding the provisions of this Code to the contrary, the quorum
Nayon (MKSN) which held common shares of cooperative banks prior requirement for amendments of articles of cooperation and bylaws shall be
to the effectivity of this Act shall apply for conversion to full-pledged three-fourths (3/4) vote of all the members with voting rights, present and
cooperatives in order to maintain their status as regular members of constituting a quorum. All other voting requirements shall be as prescribed by
cooperative banks: Provided, That they shall notify the cooperative the BSP.
bank concerned their intention to convert within a period of ninety (90)
days from the effectivity of this Act. Samahang Nayon and MKSN are "The voting rights of the members shall be proportionate to the number of
hereby given a period of one (1) year from the effectivity of this Act to their paid-up shares.
complete their conversion as cooperatives. Cooperative bank shall
exert reasonable efforts to inform their member Samahang Nayon and "ART. 100. Powers, Functions and Allied Undertakings of Cooperative Banks.
MKSN to finally convert or to give the notice of conversion within the – A cooperative bank shall primarily provide financial, banking and credit
prescribed period. Upon the failure of the Samahang Nayon and services to cooperative organizations and their members. However, the BSP
MKSN to finally convert to a full-pledged cooperative within the may prescribe appropriate guidelines, ceilings and conditions on borrowing of
maximum period of one (1) year, the cooperative bank concerned a cooperative organization from a cooperative bank.
may convert the common shares held by such associations to
preferred shares. "The powers and functions of a cooperative bank shall be subject to such
rules and regulations as may be promulgated by the BSP.
"(3) The articles of cooperative and bylaws of a cooperative bank, or any
amendment thereto, shall be registered with the Authority only when
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"In addition to the powers granted by this Code and other existing laws, any least once every quarter in a newspaper of local circulation in the city or
cooperative bank may perform any or all of the banking services offered by province where the principal office is located or, if no newspaper is published
other types of banks subject to the prior approval of the BSP. in the same provinces, then in a newspaper published in the nearest city or
province or in a newspaper of general circulation. The BSP, however, may
"ART. 101. Capital Requirements of Cooperative Banks. – (1) A cooperative allow the posting of the financial statements of the cooperative bank in
bank shall have a minimum paid-up capital in such amount as may be conspicuous places it may determine in lieu of the publication required in the
required by the BSP. preceding sentence when warranted by the circumstances.
"The BSP may prescribe rules and regulations on the types of shares a "However, in cases of foreclosure of mortgages covering loans granted by a
cooperative bank may issue, including the terms thereof and rights cooperative bank, and the execution of judgments thereon involving real
appurtenant thereto to determine compliance with laws and regulations properties and levied upon by a sheriff, it shall be exempt from publication
governing capital and equity structure of banks: Provided, That cooperative requirement where the total amount of the loan, excluding interest and other
banks shall issue par value shares only. charges due and unpaid, does not exceed Two hundred fifty thousand
(P250,000.00) or such amount as the BSP may prescribe, as may be
"(2) The Barrio Savings Fund (BSF) and Barrio Guarantee Fund (BGF) warranted by the prevailing economic conditions and by the nature and
collected/deducted by various banks throughout the country from the loan character of the cooperative banks. It shall be sufficient publication in such
proceeds of farmer-borrowers who were members of cooperatives and cases if the notice of foreclosure and execution of judgment are posted in
Samahang Nayon in compliance with Presidential Decree No. 175 and conspicuous areas in the cooperative bank’s premises, the municipal hall, the
accompanying letters of instruction, which are still floating and outstanding municipal public market, the barangay hall, or the barangay public market, if
either as active or dormant deposit accounts in the books of those banks, there be any where the property mortgaged is situated, within a period of
shall be deposited to the cooperative bank located in the province where the sixty (60) days immediately preceding the public auction or the execution of
depository banks of BSF and BGF are located, or if there is no cooperative judgment. Proof of publication as required herein shall be accomplished by
bank in the province. The BSP, in coordination with the Authority, shall come an affidavit of the sheriff or officer conducting the foreclosure sale or
up with the implementing guidelines on how to credit the owners of the funds. execution of judgment, and shall be attached to the record of the case.
"Those funds whose owners could not be located or identified shall be "(2) A cooperative bank shall be allowed to foreclosure lands mortgaged to its
subject to escheat. subject to the provisions of Republic Act No. 6657, otherwise known as
Comprehensive Agrarian Reform Law of 1988.
"ART. 102. Privileges and Incentives of Cooperative Banks. – The
cooperative banks registered under this Code shall be given the same "ART. 103. Assistance to Cooperative Banks. – In accordance with existing
privileges and incentives granted to the rural banks, private development policies, government agencies, government-owned or controlled corporations
bank, commercial banks, and all other banks to rediscount notes with the and financial institutions shall provide assistance, technical or otherwise, to
BSP, the Land Bank of the Philippines, and other government banks without cooperative banks to permit them to grow, develop and perform their role in
affecting in any way the provisions of this Code. countryside development towards a sustainable national economic
development. Whenever a cooperative bank organized under this Code is in
"(1) Subject to the approval of the BSP, a cooperative bank shall publish a a state of continuing inability or unwillingness to maintain a period of liquidity,
statement of its financial statement of its financial condition, including those of the BSP may designate one of its officials or a person of recognized
its subsidiaries and affiliates in such terms understandable to the layman and competence, preferably with experience in cooperative banking and finance,
in such frequency as may be prescribed by the BSP, in English or Filipino, at as conservator of the said bank pursuant to the appropriate provisions of
existing banking laws.
29
"ART. 104. Applicability of Banking Laws and Regulations. – With respect to "ART. 108. Implementing Rules. – The Insurance Commission and the
the provisions and governance of the cooperative banks, the provisions of the Authority, in consultation with the concerned cooperative sector, shall issue
banking laws, rules and regulations shall prevail, notwithstanding Section 71 the appropriate rules and regulations implementing the provisions of this
of Republic Act No. 8791, otherwise known as the General Banking Act of Chapter."
2000.
SEC. 14. Articles 110, 111, 112, 113 and 114 of Chapter XIV on Special Provisions
"The BSP and the Authority, in consultation with the concerned relating to Credit Cooperative of this Code are hereby transferred to another chapter.
cooperative sector, shall issue appropriate rules and regulations Chapter XIV as amended shall now read, as follows:
pertaining to the provisions of this Chapter."
CHAPTER XIV
SEC. 13. Articles 99, 100, 101, 102, 103, 104, 105, 106, 107, 108 and 109 of PUBLIC SERVICE COOPERATIVES
Chapter XIII on Special Provisions Relating to Cooperative Banks of the same Code
are hereby transferred to another chapter. Chapter XIII as amended shall now read, "ART. 109. Definition and Coverage. – A public service cooperative, within
as follows the meaning of this Code, is one organized to render public services as
authorized under a franchise or certificate of public convenience and
CHAPTER XIII necessity duly issued by the appropriate government agency. Such services
INSURANCE COOPERATIVE may include the following:
"ART. 105. Cooperative Insurance Societies. – Existing cooperatives may "(1) Power generation, transmission, and/or distribution;
organize themselves into a cooperative insurance entity for the purpose of
engaging in the business of insuring life and property of cooperatives and "(2) Ice plants and cold storage services;
their members.
"(3) Communication services including telephone, telegraph, and
"ART. 106. Types of Insurance Provided. – Under the cooperative insurance communications:
program established and formed by the virtue of the provisions of this Code,
the cooperative insurance societies shall provide its constituting members "(4) Land and sea transportation cooperatives for passenger and/or
different types of insurance coverage consisting of, but not limited to, life cargo. Transport cooperatives organized under the provisions of
insurance with special group coverage, loan protection, retirement plans, Executive Order No. 898, Series of 1983, shall be governed by this
endowment, motor vehicle coverage, bonding, crop and livestock protection Chapter.
and equipment insurance.
"(5) Public markets, slaughterhouses and other similar services; and
"ART. 107. Applicability of Insurance Laws. – The provisions of the Insurance
Code and all other laws and regulations relative to the organization and "(6) Such other types of public services as may be engaged in by any
operation of an insurance company shall apply to cooperative insurance cooperative. Such cooperative shall be primarily governed by this
entities organized under this Code. The requirements on capitalization, Chapter and the general provisions of this Code insofar as they may
investments and reserves of insurance firms may be liberally modified upon be applicable unless they are inconsistent herewith.
consultation with the Authority and the cooperative sector, but in no case may
be requirement to be reduced to less than half of those provided for under the
Insurance Code and other related laws.
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"ART. 110. Registration Requirements. – Unless otherwise provided in this "ART. 112. Engagement in Allied Business by Transportation Service
Code, no public service cooperative shall be registered unless it satisfies the Cooperatives. – Subject to pertinent national laws and local ordinances,
following requirements. primary transportation service cooperatives including secondary and tertiary
federation of cooperatives may engage in a business related to transportation
"(1) Its articles of cooperation and bylaws provide for the membership service, including but not limited to:
of the users and/or producers of the service of such cooperatives; and
"(1) Importation, distribution and, marketing of petroleum products in
"(2) Such other requirements as may be imposed by the other accordance with existing laws;
pertinent government agencies concerned. In case there are two (2)
or more applicants for the same public service franchise or certificate "(2) Operation of gasoline stations and transportation service centers;
of public convenience and necessity, all things being equal,
preference shall be given to a public service cooperative. "(3) Importation, distribution and marketing of spare parts and
supplies; and
"ART. 111. Regulation of Public Service Cooperatives. – (1) The internal
affairs of public service cooperatives such as the rights and privileges of "(4) Marketing of vehicle/drivers insurance policies.
members, the rules and procedures for meetings of the general assembly,
board of directors and committees; for the election and qualifications of "ART. 113. Renewal of Franchise and Vehicle Registration. – Renewals of
officers, directors, and committee members; allocation and distribution of franchise and vehicle registration shall be granted to transportation service
surpluses; and all other matters relating to their internal affairs shall be cooperatives: Provided, That such cooperative presents a certificate of good
governed by this Code. standing issued by the Authority, OTC, and the local government unit
concerned as proof that it has continuously provided the required public
"(2) All matters relating to the franchise or certificate of public convenience transportation services.
and necessity of public service cooperatives such as capitalization and
investment requirements, equipment and facilities, frequencies, rate-fixing "The Authority, in consultation with the concerned government agencies and
and such other matters affecting their public service operations shall be cooperative sector, shall issue appropriate rules and regulations pertaining to
governed by the proper government agency concerned. the provisions of this Chapter."
"(3) The Authority and the proper government agency concerned shall jointly SEC. 15. Articles 115, 116, 117 and 118 of Chapter XV on Special Provisions
issue the necessary rules and regulations to implement this Chapter. relating to Cooperative Insurance Societies of the same Code are hereby transferred
to another chapter. Chapter XV as amended shall now read, as follows:
"(4) The Authority shall establish a committee for the monitoring of
transportation service cooperatives composed of representatives from the CHAPTER XV
Authority, the Land Transportation Franchising and Regulatory Board CREDIT COOPERATIVES
(LTFRB), the Land Transportation Office (LTO), Office of Transport
Cooperatives (OTC), other concerned government agencies, as may be "ART. 114. Coverage. – This Chapter shall apply to credit cooperatives and
necessary, and the National Federation of Transportation Cooperatives. A other cooperatives, including multipurpose cooperatives, that provide savings
local monitoring committee shall likewise be established at the extension and credit to their members only. The rest of the provisions of this Code shall
offices of the Authority to facilitate the monitoring of transportation apply to them insofar as the same are not inconsistent with the provisions of
cooperatives. this Chapter.
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"ART. 115. Definition and Objectives. – A credit cooperative is a financial SEC. 17. A new Chapter on Financial Service Cooperatives shall be inserted in this
organization owned and operated by its members with the following Chapter and shall read, as follows:
objectives:
CHAPTER XVI
"(1) To encourage savings among its members; FINANCIAL SERVICE COOPERATIVES
"(2) To create a pool of such savings for which loans for productive or "ART. 119. Definition and Functions of Financial Services Cooperatives. – A
provident purpose may be granted to its members; and financial service cooperative is a financial organization owned and operated
by its members and authorized to provide the following service, exclusively to
"(3) To provide related services to enable its members to maximize its members:
the benefit from such loans.
"(a) The functions of credit cooperatives and other cooperatives, including
"ART. 116. Organization and Registration.- Credit cooperatives shall be multipurpose cooperatives, that provide savings and credit to their members,
organized and registered in accordance with the general provisions of this and"(b) Other financial services subject to regulation by the BSP.
Code.
"The articles of cooperation and bylaws of any financial service cooperative,
"ART. 117. Organizational Linkage. – Credit cooperatives may organize or any amendment thereto, shall be registered with the Authority only if
chapters or subsidiaries, or join leagues and federations for the purpose of accompanied by a certificate of authority issued by the BSP, under its official
providing commonly needed essential services including but not limited to the seal.
following:
"The authority granted this provision may be revoked by the BSP if any of the
"(1) Interlending of surplus fund;"(2) Mutual benefits;"(3) Deposit grounds for receivership mentioned under Section 53 and 56 of Republic Act
guarantee;"(4) Bonding;"(5) Education and training;"(6) Professional and No. 8791 is present or if the financial service cooperative has willfully violated
technical assistance;"(7) Research and development;"(8) Representation; this Code of any of the related rules and regulations.
and "(9) Other services needed to improve their performance.
"The BSP shall issue a cease and desist order to cooperatives exercising the
"Existing support organizations such as federations of credit cooperatives, function of a financial service cooperative without authority from the BSP.
credit cooperatives at the provincial, regional and national levels may
continue as such under this Code." "The BSP may charge equitable rates or fees, as may be prescribed by the
Monetary Board for licensing, examination and other services which it
SEC. 16. A new Article is inserted in Chapter XV on Credit Cooperatives and shall renders under this Code.
now read, as follows:
"Upon the favorable certification of the BSP and the prior approval of the
"ART. 118. Conversion of Credit Cooperatives to Financial Service Authority, a cooperative, the main purpose of which is to perform savings and
Cooperatives. – Existing credit and multipurpose cooperatives with savings credit functions, may convert to financial service cooperative subject to the
and credit facilities shall formally inform the Authority of its intention to required qualifications and procedures provided under this Code and in the
continue performing its present functions. Should the said cooperatives implementing rules and regulations.
decide to exercise enhanced functions, it shall notify the Authority and satisfy
the requirements for conversion to financial service cooperative."
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"ART. 120. Membership and Affiliation. – A financial service cooperative shall "(5) Conduct regular examination of the books of accounts, records
have the two (2) types of members: and other documents of financial service cooperatives;
"(1) Regular members, who are natural persons; and "(6) Inquire into the solvency and liquidity of a financial service
cooperatives;
"(2) Associate members, who are natural persons but who do not
immediately qualify under the requirements for membership set out in the "(7) Prescribe appropriate fees for supervision and examination of
bylaws of the cooperative. All associate members who are natural persons financial service cooperatives to among others, monitor and oversee
shall be given two (2) years to become regular members. Failure to convert that existing laws and regulations are complied with;
within the said period shall mean automatic withdrawal of their associate
membership. They may, however, re-apply as regular members after two (2) "(8) Pass upon and review the qualifications and disqualifications of
years. individuals elected or appointed directors or officers and disqualify
those found unfit;
"Minors who are dependents of regular members can qualify as associate
members. When they reach the age of majority and within two (2) years from "(9) Disqualify, suspend or remove any director or officer who commits
acceptances of their associate membership, they have the option to convert or omits an act which render him unfit for the position;
into regular members. As associate members, they may open accounts,
deposit funds and withdraw from their account, subject to the bylaws and "(10) Select, designate and deputize federations, through an
rules of the cooperative, and the rules and regulations of the Authority, approved accreditation criteria, that will supervise primary financial
notwithstanding the provisions of existing laws to the contrary. service cooperatives and issue basic guidelines therefor;
"ART. 121. Regulation and Supervision. – The Authority shall exercise lead "(11) Require the submission of relevant reports from the deputized
regulatory powers and supervision over the operations of the financial service supervisor;
cooperatives, to wit:
"(12) Provide remedial measures in the operations of financial service
"(1) Issue rules and regulations for the safe and sound conduct of cooperatives that are in a state of continuing inability or unwillingness
operations of financial service cooperatives; to maintain a period of liquidity at the request of the deputized
supervisor or when the deputized supervisor fails to perform its
"(2) Establish standards of operation for uniform application to all functions;
financial service cooperatives;
"(13) Accredit external auditors in accordance with standards for audit
"(3) Prescribe ratios, ceilings, limitations, or other forms of regulation and financial reporting in cooperation with the PICPA; and
on the different types of accounts and practices of financial service
cooperatives which shall, conform to internationally accepted "(14) Appoint a conservator or a receiver as may be necessary
standards; subject to the rules and regulations to be promulgated by the Authority
in coordination with the BSP, taking into consideration the grounds,
"(4) Investigate to determine whether a financial service cooperative is powers and procedures under Sections 29 and 30 of Republic Act No.
conducting its business in a safe and sound manner; 7653 as may be deemed appropriate to financial service cooperatives.
33
"The Authority shall include in its rules and regulations, appropriate sanctions "(d) Establish a savings guarantee system for the protection of their
and penalties, on the financial service cooperatives, its members, officers and affiliates' member-depositors within three (3) years from the approval
responsible persons, for any action that fails to adhere to sound and prudent of this Code;
management practices or are inconsistent with the provisions of this Code,
other applicable laws on cooperatives, rules, regulations, circulars or orders "(e) Exercise on-site and off-site supervisory power over its members;
issued by the Authority, and require the cooperative to undertake corrective
or remedial measures relative thereto. "(f) Provide remedial assistance to its members concerning their
operations and management;
"The BSP is authorized to conduct risk-based supervision and examination of
financial service cooperatives as it may deem necessary. "(g) Act as the liquidator and when applicable, sequester properties to
satisfy an obligation secured by a mortgage when authorized by the
"ART. 122. Promulgation of Rules and Regulations. – The BSP, in Authority; and
coordination with the Authority, shall prescribe the appropriate prudential
rules and regulations applicable to the financial service cooperatives. "(h) Transmit relevant and required information regarding the
operations and performance of member-cooperatives to the Authority.
"Subject to the regulations of the BSP, the banking laws, rules and
regulations shall have suppletory application to financial services "The Authority and other government agencies, government-owned or
cooperatives: Provided, however, That the provisions on access to borrowing controlled corporations and government financial institutions shall provide
or financial assistance to be extended by the BSP of the Philippine Deposit technical and such other assistance that may be allowed by their charters to
Insurance Corporation (PIDC) shall not apply to financial service financial service cooperative federations for the establishment and/or
cooperatives: Provided, further, That the deposit liabilities of the financial strengthening of their respective cooperative savings guarantee system. The
service cooperatives shall not be insured by the PDIC. technical assistance to be provided shall include, among others, training
supervision and examination.
"ART. 123. Financial Service Cooperative Federations. – Financial service
cooperatives may organize themselves into financial service cooperative may "ART. 124. Designation of Existing Unit at the Cooperative Development
organize themselves into financial service cooperative federations, and Authority to Perform Regulatory and Supervisory Functions. – Within six (6)
register their federation with the Authority. These financial service months from the approval of this Code, the Authority shall designate the unit
cooperative federations may be deputized by the Authority as the supervisor to formulate and implement the necessary regulations, rules, policies,
of their members, and they shall have the following functions: guidelines and standards applicable solely to financial service cooperatives
and deputized federations in the performance of their savings, credit and
"(a) Develop standards and provide services for the benefit of its such other related enhanced financial service operations.
affiliates and their members in accordance with the rules and
regulations of the Authority; "The Department of Finance, the BSP and other concerned government
agencies shall provide technical and training support for the effective and
"(b) Define common objectives and coordinate activities for the efficient implementation of the regulatory and supervisory functions and
financial service cooperative federation; responsibilities of the Authority.
"(c) Establish and administer funds such as liquidity fund, loan fund, "ART. 125. Prohibition. – The terms credit cooperative, financial service
investment fund, stabilization fund and such other funds; cooperative and financial service cooperative federation shall be used
34
exclusively by those who are duly registered under this Code, and no person, "(c) Duly audited financial statements for the past two (2) years;
group of persons, or organizations shall use the said terms unless duly
registered with the Authority. Violations of this prohibition shall be punishable "(d) List of names of incumbent board of directors and their addresses
in accordance with Article 140 of this Code." certified by the board secretary and attested by the chairperson;
SEC. 18. A new Chapter on Electric Cooperatives shall be inserted and shall read, "(e) Within six (6) months from the registration, the treasurer shall
as follows: submit a sworn statement of the authorized share capital, the
subscribed share capital of members and the amount of paid-up share
CHAPTER XVII capital received by the treasurer; and
ELECTRIC COOPERATIVE
"(f) Bonds of accountable officers.
"ART. 126. Coverage. – The provisions of this Code shall apply to all electric
cooperatives registered with the Authority. This shall also cover new "ART. 130. Registration Options of Electric Cooperatives. – Electric
distribution utilities that will register with the Authority. Cooperatives registered with the National Electrification Administration (NEA)
under Presidential Decree No. 269, as amended which opt not to register with
"Electric cooperatives may undertake power generation utilizing renewable the Authority are allowed to retain the word ‘cooperative’ in their registered
energy sources, including hybrid systems, acquisition and operation of names: Provided, That they shall not be entitled to the benefits and privileges
subtransmission or distribution as its primary purposes. under this Code.
"ART. 127. Registration of Electric Cooperatives. – The registration of an "ART. 131. Role of the Energy Regulatory Commission. – All rates and tariffs
electric cooperative with the Authority under this Code shall be submitted for of electric cooperatives registered under the Authority shall be subject to the
approval to the members through a referendum, called for the purpose as rules on application and approval of and by the Energy Regulatory
provided for under Articles 183 and 129 of this Code. Commission for distribution utilities.
"ART. 128. Voting Requirement for Registration. – In compliance with the "ART. 132. Effects of Registration with the Authority. – (1) Upon the effectivity
referendum as a voting procedure, the required number of votes for of this Code, electric cooperatives that are duly registered with the Authority,
registration with the Authority shall be twenty percent (20%) of all members in and issued a certificate of registration, shall no longer be covered by
good standing. Presidential Decree No. 269, as amended by Presidential Decree No.
1645: Provided, That electric cooperatives registered with the Authority shall
"ART. 129. Documents to be Submitted for Registration with the Authority. – now be covered by the provisions of this Code as well as future rules and
For purposes of registration, electric cooperatives shall submit the following issuances of the Authority: Provided, however, That the security of tenure
documents: and the collective bargaining agreement between the cooperative
management and the employees shall be respected, with no diminution of
"(a) Copy of the board resolution certifying to the result of the vote their existing salaries, emoluments, ranks and other benefits;
approved through a referendum approving the registration of the
cooperative with the Authority in compliance with Article 128; "(2) The electric cooperatives registered with the Authority with existing loans
obtained from NEA after June 26, 2001 shall continue to observe the terms of
"(b) Certified copy of the articles of incorporation/cooperation and such loans until full payment or settlement thereof;
bylaws as required by the Authority;
35
"(3) Except as provided in the immediately preceding paragraph, the NEA SEC.19. Articles 119, 120 and 121 of Chapter XVI on Miscellaneous Provisions of
shall no longer exercise regulatory or supervisory powers on electric the same Code are hereby amended and shall now read, as follows:
cooperatives duly registered with the Authority;
CHAPTER XVIII
"(4) Electric cooperatives registered with the Authority are entitled to MISCELLANEOUS PROVISIONS
congressional allocations, grants, subsidiaries and other financial assistance
for rural electrification which can be coursed through the Department of "ART. 135. Compliance With Other Laws. – The Labor Code and all other
Energy, the Authority and/or local government units. The electric labor laws, the Social Security Act, the Medical Care Act, and all other social
cooperatives registered under this Code can avail of the financial services legislations, and all other laws and executive orders shall apply to
and technical assistance provided by the government financial institutions cooperatives duly registered under this Code.
and technical development agencies on terms respecting their independence
as autonomous cooperatives; "ART. 136. Register of Cooperatives. – The Authority shall establish a
register which shall contain a chronological entry of the name of every
"(5) All condoned loans, subsidies, grants and other assistance shall form cooperative registered or dissolved under this Code together with the basic
part of the donated capital and funds of the electric cooperatives and as such, information required for registration or dissolution and any other information
it shall not be sold, traded nor be divided into shareholdings at any time; considered useful. The Authority shall publish annually a list of existing
these donated capital/fund shall be valuated for the sole purpose of cooperatives, cooperatives under dissolution and those whose registration
determining the equity participation of the members: Provided, That in the are cancelled during the year together with such information on each of them
case of dissolution of the cooperative, said donated capital shall be subject to as may be prescribed in the rules and regulations.
escheat; and
"ART. 137. Settlement of Disputes, Conciliation, and Mediation Proceedings.
"(6) Electric cooperatives registered and confirmed with the Authority under – Disputes among members, officers, directors, and committee members,
Republic Act No. 6938 and Republic Act No. 6939 are hereby deemed and intra-cooperative, inter-cooperative, intra-federation or inter-federation
registered under this Code. disputes shall, as far as practicable, be settled amicably in accordance with
the conciliation or mediation mechanisms embodied in the bylaws of
"ART. 133. Share Capital in the Electric Cooperatives. – The electric cooperatives and in such other applicable laws.
cooperative shall issue and distribute share certificates under the name of
their members, taking into consideration their previous equity contributions, "The conciliation and mediation committee of the cooperative shall facilitate
the amortization component through the payments made, capital build-up and the amicable settlement of intra-cooperative disputes and disputes among
other capital contributions. members, officers, directors, and committee members.
"ART. 134. Cancellation of Registration with the Authority. – The cancellation "Should such conciliation or mediation proceeding fail, the matter shall be
of the registration of an electric cooperative shall be granted by the Authority settled through voluntary arbitration: Provided, however, That before any
as provided under Articles 64 to 70 of this Code. party can validly file a complaint with the Authority for voluntary arbitration, it
must first secure a certification from its conciliation and mediation committee
"The Authority, in consultation with the concerned cooperative sector, shall and from its conciliation and mediation committee and from the cooperative
issue appropriate rules and regulations pertaining to the provisions of this union or federation to which it belongs that despite all efforts to settle the
Chapter." issues, the same have failed.
36
"The jurisdiction of the voluntary arbitrators shall be exclusive and original particular government agencies which shall issue the regulations called for by
and their decisions shall be appealable to the Office of the President. The any provision of this Code.
Authority shall issue and adopt the proper rules of procedure governing
arbitration as the primary and exclusive mode for dispute resolution in "ART. 140. Penal Provisions. – The following acts or omissions affecting
accordance with the Alternative Dispute Resolution Act of 2004. cooperatives are hereby prohibited:
"For this purpose, the Authority shall constitute a list of qualified voluntary "(1) The use of the word ‘cooperative’ by any person or of persons or
arbitrators." organizations, unless duly registered as a cooperative under this
Code except as provided for under Article 130 hereof. In case of
SEC. 20. A new article is inserted in Chapter XVIII on the Miscellaneous Provisions violation, the individual or individuals concerned, or in the case of an
of the same Code and shall read, as follows: organization, its officers and directors shall, upon conviction, each
suffer the penalty of imprisonment of not less than two (2) years nor
"ART. 138. Joint Congressional Oversight Committee on Cooperative more than five (5) years and a fine not exceeding Twenty thousand
(JCOCC). – There is hereby created a Joint Congressional Oversight pesos (P20,000.00) or both at the discretion of the court;
Committee composed of the Chairman of the Senate Committee on
Cooperatives and the Chairman of the House Committee on Cooperatives "The Authority may motu proprio, initiate complaints for violations of
Development, with four (4) members each from both Houses. The said this provision.
members shall be duly appointed by the Senate President and the Speaker of
the House of Representatives from the members of the respective committee "(2) Any person who willfully attempts in any manner to evade or
based on the proportional representation of the parties or coalition therein. defeat tax in violation of the provisions of Articles 60 and 61 of this
Code shall in addition thereof, be punished by a fine of not less than
"The Joint Oversight Committee shall review and approve the implementing Thirty thousand pesos (P30,000.00) but not more than One hundred
rules and regulations of this Code and monitor its proper implementation. thousand pesos (P100,000.00) and suffer imprisonment of not less
than two (2) years but not more than four (4) years: Provided, That the
"The annual appropriate for the oversight committee shall be charged to the conviction or acquittal obtained under this Article shall not be a bar to
budget of both Houses of Congress in the General Appropriations Act the filing of a civil suit for the collection of taxes;
(GAA)."
"(3) Direct or indirect violation or circumvention of the provisions of
SEC. 21. Article 122 is hereby deleted. Articles 123, 124, 125, 126, 127, 128, 129 Articles 60 and 61 of this Code committee by any public official or
and 130 of Chapter XVII on Final Provisions of this Code are amended to read, as employee of any bureau, office or agency of the government that
follows: deprives, diminishes or in any manner hinders or restricts any duly
registered cooperative from the full enjoyment of the exemption from
CHAPTER XIX the payment of the taxes, fees and charges enumerated therein, shall
FINAL PROVISIONS upon conviction, suffer a penalty of not less that one (1) year but not
more than five (5) years imprisonment or a fine in the amount of not
"ART. 139. Implementing Rules and Regulations. – The Authority shall issue less than Five thousand pesos (P5,000.00) or both at the discretion of
rules and regulations to implement those provisions of this Code which the court and shall further be disqualified to hold any other office;
expressly call for the issuance thereof. This paragraph shall not apply to
those cases wherein a specific provision of this Code expressly designates
37
"(4) Direct or indirect interference or intervention by any public official "(c) Omission or refusal to keep a book or register under this
or employee into the internal affairs of a cooperative of which he is not Code or to make the required entry therein;
a member, such as, but not limited to, the following:
"(d) Making an entry required under this Code in a book or
"(a) Influencing the election or appointment of officers, register, which the person knows to be false or misleading;
directors, committee members and employees through public
or private endorsement or campaign for or against any person "(e) Hindering an authorized person from making an
or group of persons; inspection, audit, examination or investigation required under
this Code;
"(b) Requiring prior clearances for any policy or decision within
the cooperative; "(f) Failure to comply with an order or written instructions
issued or given by the Authority;
"(c) Requesting or demanding for the creation of positions or
organizational units, or recommending any person for "(g) Violation of the provisions regarding transactions with a
appointment, transfer, or removal from his position; or restricted party; and
"(d) Any other acts inimical or adverse to the autonomy and "(h) Abetting, counseling, allowing, authorizing or commanding
independence of cooperatives. another person to commit an offense punishable by this
Code: Provided, That in case the violator is a cooperative or
"(5) A director, officer or committee member who violated the juridical person, the penalty shall be imposed on its directors
provisions of Article 45 on the Liability of Directors, Officers and and officers.
Committee Members, Article 48 on the Disloyalty of a Director, and
Article 49 on the Illegal Use of Confidential Information shall upon "(7) Any violation of any provision of this Code for which no penalty is
conviction suffer a fine of not less than Five hundred thousand pesos imposed shall be punished by imprisonment of not less than six (6)
(P500,000.00) nor more than Five hundred thousand pesos months nor more than one (1) year and a fine of not less than One
(P500,000.00) or imprisonment of not less than five (5) years but not thousand pesos (P1,000.00), or both at the discretion of the court.
more than ten (10) years or both at the court’s discretion;
"In case of violation of any provision of this Code, the individual or individuals,
"(6) The following are considered offenses punishable by a penalty of and in the case of organizations or government agencies, its officers, and
imprisonment of not less than one (1) year nor more than five (5) directors shall, upon conviction by a Court, each suffer a penalty of not less
years or a fine of not more than Fifty thousand pesos (P50,000.00) or than two (2) years but not more than five (5) years imprisonment or a fine in
both at the discretion of the court: the amount of not less than Twenty thousand pesos (P20,000.00), or both at
the discretion of the court. In the case of a public official or employee, the
"(a) Omission or refusal to furnish any information, report or offender shall upon conviction, suffer the accessory penalty of temporary
other document that is required under this Code; absolute disqualification.
"(b) Providing information, reports or other documents to the "ART. 141. Printing and Distribution. – (1) The National Printing Office shall
Authority that are required under this Code which the person publish this Code in the Official Gazette in full within sixty (60) days from the
knows to be false or misleading; date of approval thereof. Copies of this Code shall be given to every
38
department, agency and instrumentality of the National Government, cooperative shall be the subject of compromise settlement on terms favorable
including regional, provincial offices and local governments including to such cooperative; and: Provided, finally, That the BIR and the authority
government-owned and controlled corporations. shall be jointly issue the necessary regulations on this exemption and
compromise within ninety (90) days from the effectivity from this Code.
"(2) All duly registered cooperatives and their federations, unions and
associations, and cooperative corporations shall be given one (1) copy each "(3) Registration of electric cooperatives with the Authority shall not be
at cost. Thereafter, every newly registered cooperative shall be issued at cost considered as a transferred of ownership of its assets and liabilities nor shall
a copy of this Code and the regulations promulgated thereon together with its it constitute a change in the nature, structure, and status of the cooperative.
certificate of registration. Said registration shall not result in the revocation of the condoned loans
under Republic Act No. 9136, otherwise known as the Electric Power Industry
"ART. 142. Interpretation and Construction. – In case of doubt as to the Reform Act: Provided, That electric cooperatives with existing loans shall not
meaning of any provision of his Code or the regulations issued in pursuance be subject to the control and supervisions of its creditors and shall only be
thereof, the same shall be resolved liberally in favor of the cooperatives and limited to the fulfillment of each civil obligations.
their members.
"ART.145. Separabilty Clause. - Should any part of this code be declared
"ART. 143. Repealing Clause. – Except as expressly provided by this Code, unconstitutional, the validity of remaining provision hereof shall remain in full
Presidential Decree No. 175 and all other laws, or parts thereof, inconsistent and effect.
with any provision of this Code shall be deemed repealed: Provided, That the
provisions of Sections 3, 5, and 7 of Presidential Decree No. 1645, Executive "ART.146. Effectivity Clause. - This code shall take effect fifteen (15) days
Order No. 623, series of 2007. Revenue Regulation No. 20-2001, and all from its publication in a newspaper of general circulation.
laws, decrees, executive orders, implementing rules and regulations, BIR
circulars, memorandum orders, letters of instruction, local government Approved,
ordinances, or parts thereof inconsistent with any of the provisions of this Act
are hereby repealed, amended or modified accordingly. (Sgd.) PROSPERO C. NOGRALES (Sgd.) JUAN PONCE ENRILE
Speaker of the House of Representatives President of the Senate
"ART.144. Transitory Provisions.- (1) All cooperatives registered and
confirmed with the Authority under Republic Act No. 6938 and Republic Act This Act which is a consolidation of Senate Bill No. 2264 and House Bill No. 4312 was finally passed by
No. 6939, are hereby deemed registered under this code, and a new the Senate and the House of Representatives on December 16, 2008.
certificate of registration shall be issued by the authority: Provided, That such
cooperative shall submit to the nearest office of the authority a copy of their (Sgd.) MARILYN B. BARUA-YAP (Sgd.) EMMA LIRIO-REYES
Secretary General Secretary of Senate
certificate of registration or certificate of confirmation, the articles of
House of Represenatives
cooperation, their bylaws, and their latest audited financial statement within
one (1) year from the effectivity of this code, otherwise the shall be deemed
Approved: FEB 17, 2009
cancelled motu proprio.
(Sgd.) GLORIA MACAPAGAL-ARROYO
"(2) Following the issuance of the new certificate of registration, the President of the Philippines
registered cooperatives shall secured their certificate of tax exemption from
the nearest office of the Bureau of Internal Revenue (BIR): Provided, That
such exemptions shall be valid of five (5) years from the date of
issue: Provided, further, That all unpaid assessments of previously registered
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