SPECIAL LAWS

October 2020 CPALE

Andrew Gil B Ambray, CPA
 Table of Contents

● Cooperative Code of the Philippines (RA 9520)

● Banking Laws
○ Bank Secrecy ( RA 1405)
○ Foreign Currency Deposit Act (RA 6426)
○ PDIC Act (RA 3591)
○ Unclaimed Balances Law (Act no 3936, as amended)
○ Anti-Money Laundering Act (RA 9160, as amended)
○ Bouncing Checks (BP 22)
● Securities Regulation Code (RA 8799)
○ Code of Corporate Governance
● Foreign Investment Act (RA 7042)
 Table of Contents

● Intellectual Property Law (RA 8293)

● Data Privacy Act (RA 10173)
● Electronic Commerce Act (RA 8792)
● Ease of Doing Business (RA 11032)
COOPERATIVE CODE
OF THE PHILIPPINES
RA 9520
Cooperative Code of the Philippines

● aka Philippine Cooperative Code of 2008

What is a Cooperative?
- An autonomous and duly registered association of persons,
with a common bond of interest, who have voluntarily joined
together to achieve their social, economic, and cultural needs
and aspirations by making equitable contributions to the capital
required, patronizing their products and services and accepting
a fair share of risks and benefits of the undertaking in
accordance with universally accepted cooperative principles
 Cooperative Principles
Art. 4 - Every cooperative shall conduct its affairs in accordance with
Filipino Culture, good values and experience and the universally
accepted principles of cooperation

1. Voluntary and Open Membership - open to all persons able to

use their services, and willing to accept responsibilities, without
any kind of discrimination
2. Democrative Member Control - controlled by members who
actively participate in setting policies and making decisions.
Directors and officers are accountable to the membership In
primary cooperatives, members have equal voting rights of
one-member, one-vote.
 Cooperative Principles
3. Member Economic Participation - members contribute
equitably to, and democratically control, the capital of their
cooperatives
a. Common property
b. Members receive limited compensation/interest
c. Allocate surpluses
i. Reserves
ii. Member benefits
iii. Support other activities approved by the membership
4. Autonomy and Independence - autonomous, self-help
organizations controlled by the members
 Cooperative Principles

5. Education, Training, and Information - provide education and

training for their members, representatives, managers, and
employees so that they can contribute effectively and
efficiently to the development of their cooperatives
6. Cooperation - serve their members most effectively and
strengthen the cooperative movement by working through local,
national, regional, and international structures
7. Concern for community - works for the sustainable development
of their communities through policies approved by their
members
 Articles of Cooperation

Filed with the Cooperative Development Authority (AUTHORITY)

which shall be:

● Signed by the organizers (can be natural or juridical)

● Acknowledged by organizers (if natural); or by the
chairperson/secretary (if juridical) before a Notary Public
 Articles of Cooperation
What are the contents of the Articles of Cooperation?
● Name of the Cooperative (should include the word “Cooperative”)
● Purpose(s) and scope of business
● Term of existence
● Area of operation AND the postal addresses of its principal office
● Names, nationalities, and postal addresses of the registrants
● Common bond of membership
● List of names of the directors (initial) who shall manage the
cooperative
● The amount of share capital and names and residences of its
contributors
● Statement of whether the Cooperative is primary, secondary, or
tertiary
 Economic Survey
Every group of individuals or cooperatives intending to form a
cooperative shall:
● Submit to the CDA a general statement desciribing the structure
and purpose of the proposed cooperative
○ The staffing and structure shall be done by a bookkeeper
○ Not allowed to operate without the necessary personnel
(based on purpose)
○ Submit an economic survey indicating:
■ Area of operation
■ Size of membership
■ Other pertinent data in a format provided by the
Authority
 Organization of a Cooperative

1. Primary Cooperative
a. 15 or more natural persons
i. Filipino citizens
ii. Legal age
iii. Having a common bond of interest; and
iv. Actually residing or working within the intended area
of operation
b. Single-purpose cooperative as default
 Organization of a Cooperative

● A newly organized primary cooperative may be registered as a

multi-purpose cooperative only after compliance with minimum
requirements
○ Except for agricultural and agrarian reform cooperatives, only those
with minimum paid-up capital of P100,000 OR as required, whichever is
higher, may be allowed to transform to a multi-purpose cooperative
● A single-purpose cooperative may register as a multi-purpose
cooperative or create subsidiaries after at least 2 years of
operations
 Organization of a Cooperative

● Minimum subscription: 25% of authorized share capital (ASC)

○ Applies to common share only
○ Preferred (if provided by by-laws), shall not exceed 25% of
ASC
○ No fractional shares
● Minimum paid-up capital: 25% of total subscription but not less
than P15,000
○ Except for multi-purpose: P100,000 or required, whichever
is higher
 Organization of a Cooperative

● Registration
○ Acquires juridical personality upon issuance of a COR
○ Approval: within 60 days from filing, otherwise approved
■ Unless delay is caused by applicant
○ Denial: Appeal to Office of the President within 90 days
from receipt of denial
■ Failure of the Office of the President to act within 90
days → approved
 Organization of a Cooperative

● Rules on Cooperative Name

○ Include the name cooperative (Filipino, English, or Spanish)
○ No name shall be allowed if identical/confusingly similar
with any existing cooperative or contrary to L,M,PP
○ “Development” and “Integrated” shall be discouraged
○ Inc., Corp., Company, Partnership shall not be allowed
○ Federation and Union - prohibited except if part of
registered name of the members
○ Not written in all capital letters except if acronym. Acronym
shall be written after full name of cooperative
 Organization of a Cooperative

2. Secondary Cooperative

Minimum # of members Minimum paid-up capital

Federation 10 PRIMARY cooperative P500,000

Union 15 PRIMARY cooperative N/A

 Organization of a Cooperative

3. Tertiary Cooperative

Minimum # of members Minimum paid-up capital

Federation 10 SECONDARY P5,000,000 (x10) or as

cooperative required, higher

Union 15 SECONDARY N/A

cooperative

- Registration fee by both secondary and tertiary (if FEDERATION) shall be

1/10 of 1% of ASC or as prescribed by CDA, whichever is higher
 Organization of a Cooperative

● Amendment of Articles of Cooperation and By-laws

○ ⅔ vote of all members with voting rights
○ Dissenting members can still exercise their right to
withdraw membership
 Characteristics of a Cooperative

● Limited Liability
● Separate personality
● Term
○ not exceeding 50 years
○ may be extended for periods not exceeding 50 years
○ no extension can be made within 5 years prior to expiration
unless with justifiable reasons
 Division and Merger of
Cooperatives
● Division
○ dividing the cooperative into to two or more cooperatives
■ Voting: ¾ of all members with voting rights, with
quorum
■ As a result, new cooperatives formed shall comply with
requirements set by CDA (same organization
procedure)
■ No division shall be approved in fraud of creditors
 Division and Merger of
Cooperatives
● Merger and Consolidation
○ Voting: ¾ of all members with voting rights, with quorum of
EACH of constituents at SEPARATE general assembly
meetings
○ Dissenting members has right to withdraw
○ Effective upon issuance of Certificate of
Merger/Consolidation by the CDA
 Types of Cooperatives

● Currently, we have around 21 (usual) or more types of

cooperatives in the Philippines
● Common types of cooperatives:
1. Agriculture Cooperative - a primary cooperative whose members are
involved in raising/culture of living organisms
a. VAT exemption (Sec. 109 (L)) - sale of produce to members and non
members (original state/processed) and importation of direct
equipment and input to be used directly or exclusively in
production
 Types of Cooperatives

2. Cooperative Bank - primary purpose of providing a WIDE RANGE of financial

services to cooperatives and members (keyword: Wide range of Financial
Services)
3. Credit Cooperative - promotes and undertakes SAVINGS AND LENDING
services among its members. Generates a common pool of funds to provide
assistance to members (keyword: Savings and Lending)
a. VAT exemption (Sec. 109 (M)) - gross receipts from LENDING activities
are exempt. Hence, receipts from other services are VATABLE
4. Financial Service Cooperative - primary purpose of engaging in SAVINGS
AND CREDIT services and other financial services (keyword: Savings and
Credit)
 Types of Cooperatives

5. Multipurpose Cooperative - combines two or more business activities of

different types of cooperative
a. VAT exemption (Sec. 109 (M)) - Gross receipts from lending activities
are exempt
 Categories
1. Membership
a. Primary - natural persons except ELECTRIC, WATER
SERVICE, and other as may be implemented by the CDA
(Generally, public utilities can form a primary cooperative)
b. Secondary - members of which are primaries
c. Tertiary - members of which are secondary
2. Territory
a. In accordance to the AREA OF OPERATION which may or
may not coincide with the political subdivisions of the
country
 Categories
3. Group
a. Union - members are registered
COOPERATIVES/FEDERATIONS organized purposely to
represent the interest and welfare of all types of
cooperatives at the PROVINCIAL, CITY, REGIONAL AND
NATIONAL levels
b. Federation - members are primary cooperatives doing the
SAME LINE OF BUSINESS
● To differentiate a cooperative union and a federation, look at the
purpose. The former refers to all types while the latter pertains to
their type of business.
 Membership
Two kinds of membership
1. Regular member
a. Complied with all membership requirements
b. Entitled to all rights and privileges of membership
2. Associate member
a. No right to vote nor be voted upon
b. Entitled only to such rights and privileges as the by-laws
provided
● Provided, an associate who meets the minimum requirements of
regular membership AND continues to patronize the
cooperative for 2 years shall be a regular member
 Membership
Rules on Termination
1. Withdrawal for a valid reason and giving of a 60-day notice to
the BOD
a. Entitled to a refund of his share capital contribution and all
other interests in the cooperative
i. Exception: TA < TL, exclusive of his contribution
2. Valid grounds for termination
a. Primary cooperative - death or insanity of a member
(natural)
b. Secondary or tertiary - insolvency or dissolution of a
member (juridical)
 Membership

3. Termination by vote (Majority of all members of BOD) for the

following causes:
a. Did not patronize any services for an unreasonable period
of time
b. Continuously failed to comply with his/her obligations
c. Violation of by-laws and rules of the cooperative
d. Any act or omission injurious or prejudicial to the interest of
the cooperative
 Membership
A member which the BOD wishes to terminate shall observe the
following rules:
1. Member shall be informed in writing and be given an
opportunity to be heard before the decision
2. Decision of the BOD shall be in writing and communicated in
person or by mail
3. Decision of BOD is appealable within 30 days from receipt to the
General Assembly (Appeal and Grievance Committee)
4. A&G Committee (office term of 1 year) - 30 days to decide on the
appeal Inaction will be deemed in favor of the member
5. General Assembly’s decision shall be final
 Laboratory Cooperative

● A Cooperative organized by minors and MUST be affiliated with

a registered cooperative (Guardian Cooperative)
● Purpose
1. Training ground for members to prepare them in regular
cooperatives
2. Teach the values of saving mobilization
3. Instill cooperative values, principles, and financial discipline
4. Promote and advocate Filipino social and cultural values
 Laboratory Cooperative

● Affiliation
○ Must be affiliated with a registered (Guardian) Cooperative
○ Primarily composed of students from a particular school or
select a choice within its area of operation
○ If members are primarily composed of out-of-school youth,
it shall be affiliated with a Guardian of its own choice or
nearest within its area of operation
● Name
○ Shall include in its name “Laboratory Cooperative of (Name
of Guardian)”
 Laboratory Cooperative
● Rules Applicable
1. A COR issued to a laboratory coop does not bestow juridical
personality
2. Dissolution of the Guardian shall result in the revocation of
the COR of Laboratory
3. Guardian shall be liable for the violations committed by the
Laboratory
4. Any member who reaches the age of majority has the option
to:
a. Join the guardian
b. Leave the cooperative
5. Guardian may supervise more than one Laboratory
 Laboratory Cooperative

● Termination of Membership
1. Reaching age of majority
2. Such other causes provided in the by-laws of the Guardian
 General Assembly

● Definition
○ refers to the full membership of the cooperative duly
assembled for the purpose of exercising the rights and
performing the obligations pertaining to the cooperatives,
and is considered the highest policy-making body of the
cooperative
● Composition
○ all members entitled to vote
 General Assembly

● Exclusive powers (cannot be delegated)

1. Determine and approve amendments to Articles and
by-laws
2. Elect or appoint members of BOD, and remove them for
cause (Exception: Electric Cooperative)
3. Approve developmental plans of the cooperative
● Delegation of powers
○ ¾ vote of members with voting rights, with quorum
Meetings of the General Assembly

● Regular meeting
○ Annually on a date fixed in the by-laws
○ If not fixed, any date within 90 days after the close of each
fiscal year
■ BP 68: Any day in April
■ RCC: April 15
Meetings of the General Assembly
● Special meeting
○ called any time by a Majority vote of the BOD or as
provided in the by-laws
○ Notice shall be sent in writing within one (1) week prior to
meeting
1. In addition, may be called by BOD within one (1) month if
initiated by 10% of all members entitled to vote to transact
specific business
a. If the BOD fails to do so, the CDA, upon petition of the
10% shall issue an order to the BOD to call a meeting
 Meetings of the General Assembly

2. In case of a newly approved cooperative, a special meeting shall

be called within 90 days from approval (Same with regular
meeting)
3. CDA may call a special meeting to cover the results of any
examination or investigation made by them. This shall be done
in:
a. Writing
b. Publication through any means
 Quorum of the General Assembly

● Generally: 25% of all members entitled to vote

○ Exceptions:
1. Cooperative banks - ½ plus 1 (51%)
2. Electric - 5% or as otherwise provided in by-laws
 Voting System of the General
Assembly
Primary: one member, one vote

Secondary / Tertiary: one basic vote and additional incentive votes

but should not exceed five (5) votes

Delegates: Votes cast by delegates shall be deemed as votes cast by

members

Voting by proxy: If allowed in by-laws, except primary cooperative

(no proxy)
 Board of Directors

● Direction and management of affairs of the cooperative shall be

vested in a BOD
● Composition
○ 5 but not more than 15 elected by the GA (Same as a
corporation)
● Term
○ 2 years maximum
 Board of Directors
● Qualifications and Rules
1. Any member who has right to vote
2. Cooperative may admit one appointed by any financing
institution from which the cooperative received financial
assistance solely to provide technical knowledge not
available within its membership (can be not a member, no
right to vote, but only to provide technical assistance)
3. BOD shall not hold any other position involving the
day-to-day operations and management of the cooperative
4. Any person engaged in business similar to the cooperative is
likewise disqualified from being a member of the BOD
 Meeting of the BOD

● Regular meetings
○ at least once a month
● Special meetings
○ called upon by the chairperson or majority vote of the BOD
○ Provided, written notice within one (1) week specifying the
agenda has been given to all members of the BOD
● Quorum
○ Majority, unless otherwise provided by by-laws
● Proxy
○ No attendance or voting by proxy shall be allowed
 Vacancy in the BOD

Cause of the Vacancy Who shall fill up?

Expiration of term GA in a regular/special meeting

Other causes BOD, if still constituting a quorum

Note: Remember in RCC, (1) Removal, (2) Expiration, and (3) Increase
in seats are the causes which disqualified the BOD to fill up the
vacancy even if constituting a quorum. For Cooperatives, only
number (2) is the exception.
 Officers of the Cooperatives
● Rules
1. BOD shall elect among themselves a chairperson and
vice-chair, and elect other officers outside the BOD in
accordance with the by-laws
2. All should observe good behavior and shall not be removed
except for just causes after due hearing
3. Loss of confidence shall not be a valid ground for removal
UNLESS if due to dishonesty or loss of integrity
4. No two (2) or more persons with relationships up to the
third civil degree of consanguinity or affinity shall serve as
an officer
 Officers of the Cooperatives
● Committees
1. Executive Committee - may be created by the by-laws and
appointed by the BOD Powers shall be provided in the
by-laws or by majority vote of the BOD
2. Audit Committee
3. Election Committee

Summary:
GA appoints → BOD, Audit Committee, and Election Committee
BOD appoints → Officers and other committees
Liability of BOD, Officers, and Committee members: Jointly and
severally if due to bad faith or gross negligence
Compensation of the BOD, Officers,
and Committees
1. General rule: No compensation
2. Exceptions:
a. Provided in by-laws
b. Reasonable per diems, except:
i. Reported a net loss; or
ii. Dividend payout ratio is less than inflation rate
c. Majority vote of members with voting rights in a regular or
special meeting called for that purpose
3. No additional compensation other than per diems during the
first year of operations
Compensation of the BOD, Officers,
and Committees
4. Compensation of officers and committees may be fixed in the
by-laws
5. Compensation of all other employees shall be determined by the
BOD, unless otherwise fixed in the by-laws
6. Grant of compensation, other than per diem, to the BOD shall
be made only after the adoption of a GA resolution approving
such compensation
7. Resumption of grant of per diem after a period of suspension
shall not be compounded
 Self dealing Directors, Officers, or
Committee Members
Generally, voidable at the option of the cooperative.

Unless ALL the ff conditions are present:

1. Presence of such director is not necessary to constitute a quorum
2. Vote of such director is not necessary for approval of the contract
3. Contract is fair and reasonable under the circumstances; and
4. In case of an officer or committee member, the contract with the officer or
committee member has been previously authorized by the GA or the BOD

● If any of (1) and (2) above is absent, in case of a director, contract may be ratified by
¾ vote of all members with voting rights, with quorum. Provided, it has been made
with full disclosure and contract is fair and reasonable.
 Disloyalty of a Director

The director shall be liable for double the profits that otherwise
would have accrued to the cooperative, unless ratified by ¾ of all
members with voting rights, with quorum. This provision, however,
is still applicable even if the director utilized his own funds in the
venture.
 Removal of a Director

1. All complaints for removal shall be filed with the BOD

2. Such officer shall be given an opportunity to be heard at the
BOD
3. Majority of the BOD may place the concerned director under
preventive suspension pending the result of the investigation
4. Upon finding a prima facie evidence of guilt, the BOD shall
present its recommendation to the GA
5. An elected officer may be removed by ¾ vote of members with
voting rights, with quorum
6. Officer shall be given an opportunity to be heard at the GA
 Records and Reports of the
Cooperative
1. Accountant or bookkeeper - responsible for the maintenance of
cooperative reports. He shall also be responsible to produce the
same during audit or inspection.
2. Audit committee - responsible for continuous and periodic
review of the books and records of accounts. They shall also be
responsible to produce the same during audit or inspection.
3. The cooperative shall maintain a records of accounts containing
true and correct condition of the cooperative. The audited FS
shall be published annually and shall be kept posted in a
conspicuous place in the principal office (Note: FS is required to
be in accordance with the by-laws)
 Records and Reports of the
Cooperative
1. Every cooperative shall draw up regular reports of its activities
showing the progress and achievements at the end of every fiscal year
2. All records shall be made accessible to all members
3. Reports shall be filed with the CDA within 120 days from the end of
the calendar year
4. Failure to file shall be a ground for revocation of authority to operate
5. Like any other juridical person, the calendar year shall be default
unless otherwise provided in the by-laws
6. In case of failure to file, CDA shall issue a written notice within 15
days after the due date prescribing the penalties until the Cooperative
complies with the requirements
 Tax Exemptions of Cooperatives

1. Duly registered cooperatives which do not transact any business

with non-members or the public shall not be subject to ANY
taxes and fees imposed under the revenue laws
2. Cooperatives transacting with both members and non-members
shall not be subjected to tax on their transactions with
MEMBERS. In contrast, the transactions of members with the
cooperative shall not be subjected to any taxes and fees (e.g.
DST, Final withholding Taxes, etc.)
 Tax Exemptions of Cooperatives

3. Cooperatives dealing with non-members shall enjoy the ff. tax

exemptions:
a. Cooperatives with accumulated reserves and undivided net
savings of NOT MORE THAN P10 million shall be exempt
from ALL national and local taxes
i. Such cooperatives shall also be exempt from duties on
importation of machineries, equipment, and spare parts
which are not locally available as certified by the DTI.
All tax free importations shall NOT be sold within five
(5) years, otherwise, the buyer shall be SOLIDARILY
liable to pay TWICE the amount of duties.
 Tax Exemptions of Cooperatives
b. Cooperatives with accumulated reserves and divided net
savings of more than P10 million shall pay the ff. taxes at full
rate:
i. Income tax - on amount allocated for interest on capital
(others are exempt from income tax from the date of
registration with CDA)
ii. VAT - on transactions with non-members except for
those under Sec. 109 of NIRC
iii. All other taxes
4. All cooperatives, regardless of amount of accumulated reserves,
are exempt from local taxes and taxes on transactions with
banks and insurance companies
 Other Exemptions
1. In cases where there are no NOTARY PUBLIC, the judge, shall
render free service requiring administration of oath, articles of
cooperation, and instruments of loan not exceeding P500,000
2. For REGISTER OF DEEDS, render free of charge for any loan not
exceeding P250,000 or deeds of title of property acquired by the
cooperative
3. Cooperatives shall be exempt from payment of Court and
Sheriff’s fee payable to the Philippine Government, if in favor of
the Cooperative
4. Any security issued by cooperatives are exempt from the
provisions of the Securities Regulation Code provided such
security is NOT SPECULATIVE
 Privileges of a Cooperative

1. Privilege of depositing their sealed cash boxes and documents in

the safes of the municipal or city treasurer and other
government offices free of charge
2. If organized among government employees, they shall enjoy the
free use of any valuable space in their respective government
agency, whether owned or rented by the government
3. For Cooperatives and/or federations engaged in credit services,
they shall be entitled to loans credit lines, rediscounting of notes,
and other eligible papers with the Development Bank of the
Philippines, the Land Bank of the Philippines, and other financial
institutions except the BSP
 Privileges of a Cooperative
4. The PDIC, government agencies, GOCCs, and other GFIs shall
provide technical assistance with cooperatives which have
significant engagement in savings and credit operations
5. For those transacting with the Government, they shall be
exempt from pre-qualification bidding requirements
6. Enjoy the privilege of being represented by the Office of the
Solicitor General, free of charge, except when the adverse party
is the Republic of the Philippines
7. If organized by faculty members and employees of educational
institutions, they shall have the preferential right in the
management of the canteen and other services related to the
operation of the educational institution
 Capital, Property, and Funds

● Sources of Capital
1. From members
2. Loans and borrowings including deposits
3. Revolving capital (Deferred Payment of patronage funds +
Interest on share capital)
4. Subsidies, donations, legacies, etc. (shall not be divided into
individual share capital holdings but shall form part of the
donated capital fund)
a. Upon dissolution, shall be escheated in favor of the
government
 Capital, Property, and Funds

● Limitation on Share Capital Holdings

1. No member of a PRIMARY cooperative shall own or hold
more than 10% of the share capital of the cooperative
2. When a member of a cooperative dies, his heirs shall be
entitled to the shares of the decedent Provided,
a. Total shareholding of the heir does not exceed 10%
b. The heir qualifies and is admitted as a member
c. If the heir fails to meet (a) and (b) above, the excess
shares will revert to the cooperative upon payment to
the heir the value of such shares
 Capital, Property, and Funds

● Assignment of Share Capital Contribution or Interest

○ No member shall transfer his shares or interest in a
cooperative, unless:
1. He has held such share capital for 1 year or more
2. Assignment is made to the cooperative or a member or
to a person qualified
3. The BOD has approved such assignment
 Capital, Property, and Funds

● Continuing Subscription
○ Cooperatives are required:
1. To adopt a policy of continuing subscription upon full
payment of the initial subscription
2. To execute a subscription agreement upon admission of
members and whenever additional subscription shall
be made by members
Capital, Property, and Funds

3. Unless otherwise provided in the by-laws, the

cooperative shall issue share certificates at least every
end of the calendar year based on the number of shares
fully for each period
a. Cooperatives are prohibited from issuing multiple
types of CS and different par values
b. Cooperatives are prohibited from
increasing/decreasing the par value
 Audit, Inquiry and Members’ right
to examine
1. Financial Audit
a. Conducted by an independent external auditor
b. Member in Good Standing (MiGS) of PICPA and accredited
by the PRBOA and CDA
c. Report submitted to the BOD then to the GA by the BOD
2. Social Audit
a. Conducted by an independent social auditor
b. Accredited by the CDA
c. Report submitted to the BOD
3. Performance Audit
a. Report submitted to the BOD
Audit, Inquiry and Members’ right
to examine
● Limitation on auditors as to Familiarity threat
○ The external auditor may undertake the external audit of a
cooperative for not more than 5 years
○ Provided, he may undertake the external audit of the same
cooperative after a gap of 2 years
Audit, Inquiry and Members’ right
to examine
● Members’ right to examine (except for subsidiary ledgers and
records other than his personal records)
1. Have the right to examine the records required to be kept
during the reasonable hours on business days and he may
demand in writing a copy of the excerpts without any
charge, except for the cost of production
Audit, Inquiry and Members’ right
to examine
2. An officer who shall refuse the right of the member shall be
liable for damages and shall be guilty of an offense
punishable by this Code. Provided,
a. If such refusal is pursuant to a resolution by the BOD,
the liability shall be imposed upon the directors who
voted for the refusal
b. Defense of the BOD: If the member has improperly
used any information prior the request OR was acting
in bad faith OR for an illegitimate purpose
 Net Surplus

● Every cooperative shall determine its net surplus at the close of

every fiscal year and at such other times as prescribed in the
by-laws
● Net surplus is not construed as profit but as an (1) excess of
payments made by the members for the loans borrowed, (2)
goods or service availed by them, or the (3) difference of the
amount due to the members for the products sold to the
cooperative (including others as a result from operating
activities)
 Distribution of the Net Surplus
1. Reserve fund (required) - at least 10% of the net surplus. Provided,
in the first 5 years, it shall not be less than 50% of the net surplus.
2. Education and Training Fund (not required) - not more than 10% of
the net surplus. 5% spent for education & training, 5% remitted to
Federation/Union. Any unexpended amount will go to the
Federation/Union.
3. Community Development Fund (required) - Not less than 3% of the
net surplus
4. Optional fund (not required)- Not more than 7% of the net surplus
5. Remaining surplus - Not to exceed the normal rate of return on
investments and patronage funds. Any amount remaining after the
allowable interest and patronage refund shall be credited to the
reserve fund.
 Distribution of Net Surplus

Illustration: A cooperative operating for more than 5 years. The

Cooperative has a net surplus of P1,000,000 before reserves.

1. How much is the minimum amount of Net Surplus allocated as

Patronage refund to members?
2. How much is the Net Surplus after reserves?
 Distribution of Net Surplus

Net Surplus P1,000,000

Reserve Fund (10%) (100,000)

CDF (3%) (30,000)

Net Surplus after Required Reserves P870,000

Patronage Refund (30%) (261,000)

Net Surplus after reserves P609,000

 Dissolution
● Definition
○ termination of the juridical personality through appropriate
judicial proceedings, or by and order of the CDA, or through
its own initiative
● Modes
1. Voluntary
2. Involuntary
● Effect
○ terminates the right of the cooperative to continue business
and is bound to wind up its affairs within the period
prescribed by law
 Voluntary Dissolution
(No Creditors Affected)
1. Majority vote of BOD, affirmative vote of ¾ members with
voting rights, with quorum at a meeting held by the BOD
2. Notice of the meeting shall be published for 3 consecutive weeks
in a newspaper of general circulation
3. Notice of such meeting is sent to each member of record either
by mail or personal delivery at least 30 days prior to the meeting
4. A copy of the board resolution authorizing the BOD shall be
signed by the BOD
5. The CDA issues a certificate of dissolution
 Voluntary Dissolution
(Creditors Affected)
1. Same voting requirement
2. Petition shall be filed with the CDA (signed by maj. BOD, voted by ¾
members with voting rights, with quorum)
3. CDA shall issue an order reciting the purpose and shall fix a date not less
than 30 days nor more than 60 days after the entry of the order
4. Same publication in three public places where the office is located
5. Creditors are given a 5-day notice to file objections, after which the CDA
shall hear the petition and try any issue raised in the objection. It shall
also order the direction of disposition of the cooperatives’ assets.
6. The order shall contain the assets, claims, and number of members and
respective interests in the cooperative
 Involuntary Dissolution
1. By the court
a. For violation of any law, regulation, or provision of its by-laws
b. Insolvency
2. By order of the CDA
a. Having obtained its registration by Fraud
b. Existing with an illegal purpose
c. Willful violation despite notice by the CDA
d. Willful failure to operate on a cooperative basis
e. Failure to meet the required number of members
3. By Failure to organize and operate
a. Not commenced business within 2 years after issuance of COR
b. Not carried its business for two consecutive years
 Liquidation
1. After dissolution, the cooperative will continue to exist for 3
years for the purpose of prosecuting and defending suits by or
against it, settlement and closure of affairs, disposition,
conveyance and distribution of its properties and assets
2. Upon winding up of affairs, any asset distributable to a creditor
or member who is unknown or cannot be found shall be given to
the federation/union
3. A cooperative is only allowed to distribute its assets upon lawful
dissolution and after payment of all its debts and liabilities,
except in the case of decrease of share capital and as otherwise
allowed by this Code
 Voting requirements which require the
vote of the Members ONLY
Cooperative Act Voting Requirement

Amendment of Articles of Cooperation ⅔ vote of all members with voting, quorum

Amendment of by-laws ⅔ vote of all members with voting, quorum

Merger or Consolidation ¾ vote of all members with voting, quorum

Division of Cooperatives ¾ vote of all members with voting, quorum

Delegation of powers from GA to BOD ¾ vote of all members with voting, quorum

Ratification of contracts with self dealing ¾ vote of all members with voting, quorum

Ratification of disloyalty of a director ¾ vote of all members with voting, quorum

Removal of an officer upon recommendation of BOD ¾ vote of all members with voting, quorum (Maj. BOD
for recommendation to GA)

Filling up of vacancy - expiration Majority vote of members with voting, quorum

 Voting requirements which require
the vote of the BOD ONLY
Cooperative Act Voting Requirement

Allocation of interest on share capital Majority BOD with quorum

Filling up of vacancy in the Exec Majority BOD with quorum

Committee

Recommending to the GA the removal of Majority BOD with quorum (Approval of

an officer GA is necessary for decision of removal)

Removal of a member for valid cause Majority of all members of BOD

Delegation of power from BOD to EC Majority of all members of BOD

Placing an officer under preventive Majority of all members of BOD

suspension
 Voting requirements which require
the vote of the both BOD and
Members
Cooperative Act Voting Requirement

Voluntary dissolution (creditors affected) Maj. BOD, ¾ voting with quorum

Voluntary dissolution (no creditors Maj. BOD, ¾ voting with quorum

affected)

Filling up of vacancy in BOD - others Maj. BOD if with quorum, or Maj.

Members with voting, quorum

Deferment of payment of interest on Maj. BOD with quorum, Maj. Members

share capital with voting, quorum
BANKING LAWS
BANK SECRECY LAW
(RA 1405)
 Purpose

● Hopes to discourage private hoarding and at the same time

encourage the people to deposit their money in banking
institutions, so that it may be utilized by way of authorized loans
and thereby assist in economic development
 Deposits covered

● Peso deposits
○ All deposits of whatever nature with banks or banking
institutions in the Philippines including:
1. Bank deposits
2. Investment in Government Bonds
3. Trust Accounts
 Exceptions

● Classified exceptions according to (1) General exceptions, (2) By

order of a competent court, and (3) By Government Agencies

1. General exceptions
a. A written waiver by the depositor
b. Impeachment of high officials for reason of high crimes
and betrayal of public trust
 Exceptions
2. By order of a competent court
a. Bribery and dereliction of duty of public officials
b. Money is the direct subject matter of litigation
c. Unexplained wealth under the Anti-Graft and Corrupt
Practices Act (RA 3019)
d. Probable cause of money laundering (may be without a
court order - KDMATH)
e. Disclosure by a bank officer in connection with a deposit in a
closed bank that was used in the perpetration of anomalies
f. Inquiry of the Ombudsman
 Exceptions
3. By Government Agencies
a. BIR in cases of:
i. To investigate the net estate of the decedent
ii. Those requesting a compromise of tax liability on
grounds of financial incapacity
iii. Order of a foreign tax authority pursuant to a tax
treaty
b. BSP in cases of:
i. A periodic examination to ensure compliance with
AMLA (RA 9160)
ii. Annual testing (sampling) of identities of bank accounts
 Exceptions

c. PDIC and BSP in cases of:

i. Examining unsafe or unsound banking practices
d. COA in cases of:
i. Examining deposits of revenue/receipts & expenditures
of the government
e. PCGG in cases of:
i. Investigation of Marcos’ family ill-gotten wealth
f. Court of Appeals in cases of:
i. Anti-terrorism
FOREIGN CURRENCY
DEPOSIT ACT
(RA 6426)
 Deposits covered

● All foreign currency deposits whether bank deposits, trust, and

investment in government securities
● Exempt from garnishment
 Exceptions

● Only one exception is provided under RA 6426

○ Written waiver by the depositor
● Other exceptions for RA 6426 is the same with the exceptions
listed by Government Agencies
 Exceptions
3. By Government Agencies
a. BIR in cases of:
i. To investigate the net estate of the decedent
ii. Those requesting a compromise of tax liability on
grounds of financial incapacity
iii. Order of a foreign tax authority pursuant to a tax
treaty
b. BSP in cases of:
i. A periodic examination to ensure compliance with
AMLA (RA 9160)
ii. Annual testing (sampling) of identities of bank accounts
 Exceptions

c. PDIC and BSP in cases of:

i. Examining unsafe or unsound banking practices
d. COA in cases of:
i. Examining deposits of revenue/receipts & expenditures
of the government
e. PCGG in cases of:
i. Investigation of Marcos’ family ill-gotten wealth
f. Court of Appeals in cases of:
i. Anti-terrorism
PDIC ACT
(RA 3591)
 Primary functions

● To act as a:
1. Deposit insurer
2. Co-regulator of banks
3. Receiver and liquidator of closed banks
 Insured Deposits

Amount due to any bona fide depositor for legitimate deposits in an

insured bank net of any obligation of the depositor to the insured
bank as of the date of closure, but not to exceed P500,000

1. Savings Deposit
2. Special Savings
3. Demand/Checking account
4. Negotiable Order of Withdrawal
5. Certificate of Time Deposits
6. Foreign Currency Deposits
 Deposits not covered

1. Investment products such as bonds and securities, trust

accounts and other similar instruments
2. Unfunded or fictitious/fraudulent deposit accounts
3. Deposits emanating from unsafe and unsound banking practices
4. Deposit proceeds of which emanate from unlawful activities
5. Deposits payable OUTSIDE the Philippines
6. Deposit products that resulted from splitting of deposit
 Determination of the amount due

Per Depositor, Per Capacity Rule - all deposits in the bank maintained
in the same right and capacity for his benefit either in his own name
or in the name of others shall be added together in determining the
insured amount
 Deposit Accounts
1. Single accounts - individually owned accounts held under one name,
either as a natural or juridical person
2. Joint Accounts - accounts held under more than one name
a. Regardless of “and”, “or”, “and/or”, it is assumed that the depositors are
separate from one another
b. Equally divided, unless otherwise stipulated
c. Joint accounts held under the names of a juridical entity and a natural
person shall be presumed solely to the juridical entity
3. Account “By”, “ITF”, and “FAO”
a. A by B - Galing lang kay B
b. A ITF B - Para kay B
c. A FAO B - Para kay B
4. Negotiable Certificate of Deposit - The holder is not recognized as
the depositor unless his name is registered in the books of the bank
Illustration 1
Illustration 2
Illustration 3
Illustration 4
Illustration 5
 Procedures
1. PDIC shall commence the determination of insured deposits due
to the depositors of a closed bank upon its actual takeover
2. PDIC shall give notice to the depositors by whatever means
appropriate
3. PDIC shall publish a notice once a week for at least 3
consecutive weeks in a newspaper of general circulation
4. Mode of payment:
a. Cash
b. Transferred deposit in another insured bank of the
depositor
 Requirement for Claims
When are claims filed?
● Within 2 years from actual takeover of PDIC

Who are required to file claims?

● Deposit accounts with balances of more than P100,000
● Deposit accounts with obligations with the bank, regardless of
amount
● Deposit accounts with balances of less than P100,000 who have
no updated addresses in the bank records or did not update
“Mailing Address Update Form” (MAUF)
● Depositors with accounts under the name of business entities,
regardless of amount
● Depositors not eligible for early payment, regardless of amount
 Requirement for Claims

Who are not required to file claims?

● Account balances with P100,000 and below,
● No obligation with bank; AND
● Have updated their address or MAUF
 Failure of depositor to file claims

● If the depositor fails to file his claim within 2 years from actual
takeover by PDIC:
○ All rights of the depositor against the PDIC shall be barred
○ Rights of the depositor against the bank subsists
 Effect of payment

● Upon payment to the insured depositor:

○ PDIC is subrogated to all the rights of the depositor against
the closed bank up to the extent of payment
○ Depositor shall retain his/her rights up to the extent of any
uninsured portion of his/her claim
 Failure to settle claim of insured
depositor
● PDIC fails to pay the insured depositor within 6 months from
filing of the claim:
○ If due to grave abuse or bad faith, the directors or officers of
the PDIC shall be responsible for the delay
○ Imprisonment of 6 months to one year
 UNCLAIMED
BALANCES LAW
(RA 3936, as amended)
 Inclusions
1. Credits or deposits of money
2. Bullion
3. Securities
4. Other evidence of indebtedness
5. Interests with BLTBPI

Of any person known to be dead or who has not made further

deposits or withdrawals during the preceding 10 years or more

● The bank has the obligation, in a sworn statement, to report to

the National Treasury
Information in the sworn statement
(Affidavit of undertaking)
1. Names and last known place of residence of the persons in
whose favor such unclaimed balances stand
2. The amount, nature, and the date of the outstanding unclaimed
balance
3. The date when the person in whose favor the unclaimed balance
stands died, if known, or the date of last transaction
4. Interest due on such unclaimed balance, if any

● The sworn statement shall be posted in a conspicuous place in

the premises of the bank for at least 60 days from date of filing
 Procedures

1. A notice to the depositor will be given

2. The bank reports to the Treasurer
3. Solicitor General will initiate escheat proceedings in court
4. A copy of the complaint and summons shall be served upon the
president, cashier or managing officer of each defendant BLTBPI
and a publication of such in a newspaper of general circulation
5. After trial, court shall render judgment declaring the balances in
favor of whoever
6. If unclaimed, such balance will be deposited in the Treasury
 ANTI-MONEY
LAUNDERING ACT
(RA 9160, as amended)
 Definition

Money Laundering - a crime committed by any person knowing that

any monetary instrument or property represents, involves or relates
to, the proceeds of any unlawful activity
 What constitutes money
laundering?
1. Transacts or attempts to transact said monetary instrument or
property
2. Converts, transfers, disposes of, moves, acquires, possesses or
uses said monetary instrument or property
3. Conceals or disguises the true nature
4. Attempts or conspires to commit acts above
5. Aids, abets, or assists in commissioning the acts above
6. Performs or fails to perform any act as a result of which he
facilitates the offenses above
7. Failure of AMLC or any covered person to report under the
AMLA
 Covered transaction

● A transaction in cash or other monetary equivalent involving a

total amount in excess of P500,000 within one banking day
○ For casinos, a transaction exceeding P5,000,000
○ For jewelry stores, a transaction exceeding P1,000,000
 Suspicious transaction
● Transactions with covered institutions where any of the
following circumstances exist:
1. No underlying legal or trade obligation, purpose or
economic justification
2. Client is not properly identified
3. Amount involved is not commensurate with the business or
financial capacity of the client
4. If it is perceived that the transaction is structured in order
to avoid falling under a covered transaction
5. Any circumstance which is observed to deviate from the
profile of the client
 Covered Entities
1. Banks, OBUs, Trust entities, NSSLA, Pawnshops and those
regulated by the BSP
2. Insurance companies or those under the supervision of the
Insurance Commission
3. Securities dealers and brokers, investment houses and agents
and those managing securities or similar services
4. Jewelry dealers
5. Mutual funds or open-end investment houses
6. Forex corporations, money changers, and the like
7. Entities administering derivative instruments, commodities, and
the like
8. Casinos, including internet and ship-based for cash transactions
 Covered Entities

● Lawyers and Accountants

○ If independent, not covered by AMLC
○ If related, covered by AMLC
 Reportorial Requirements

● Covered transaction → 5-15 WORKING days

Suspicious transaction → within 10 CALENDAR days

● Safe Harbor Provision: No administrative, civil, or criminal

proceedings shall lie against any person for having made a
covered transaction report in the regular performance of his
duties and in good faith
 Anti-Money Laundering Council
(AMLC)
● Composed of:
1. Chairman - BSP Governor
2. Members
a. Insurance Commissioner
b. Chairman of the SEC
 Freeze order and inquiry of bank
deposits
● Freeze order: Upon recommendation by the AMLC, the Court of
Appeals may issue a freeze order which shall be effective for a
period of 20 days
● Inquiry of bank deposits: The AMLC may inquire upon order of
the court when there is a probable cause that deposits emanate
from unlawful activities
● Exception: KDMATH
BOUNCING CHECKS
(BP 22)
 Punishable Acts

1. A person who makes or draws and issues any check to apply on

account or for value; and
2. Has knowledge at the time of issue that he does not have
sufficient funds in or credit with the drawee bank
3. Which check is subsequently dishonored by the drawee bank or
would have been dishonored had the drawer not ordered the
bank to stop payment
4. If depositor failed to maintain sufficient funds if check is
presented within a period of 90 days from the date of the check
 Elements of Criminal Violation

1. Making, drawing or issuance

2. Knowledge of the maker or drawer
3. Subsequent dishonor of the drawee bank or drawer did not
ordered the bank to stop payment
 Evidence and Defense

Prima Facie Evidence: if presented within 90 days and the drawee

bank refused payment because of insufficiency of funds

Defense: If maker or drawer paid the holder within 5 banking days

after receiving notice
 The End
Thank you for listening!