Module X

Philippine Cooperative Code OF 2008

Regulatory Framework for Business Transactions

I. Cooperatives (Republic Act No. 9520 a.k.a. Philippine Cooperative Code of 2008)

a. Definition of Cooperative – A Cooperative is 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 the risks and benefits of the
undertaking in accordance with universally accepted cooperative principles.

b. Cooperative Principles - Every cooperative shall conduct its affairs in accordance with Filipino culture,
good values and experience and the universally accepted principles of cooperation which include, but are
not limited to, the following:

i. Voluntary and Open Membership - Cooperatives are voluntary organizations, open to all
persons able to use their services and willing to accept the responsibilities of membership,
without gender, social, racial, cultural, political or religious discrimination.
ii. Democrative Member Control - Cooperatives are democratic organizations that are controlled
by their members who actively participate in setting their policies and making decisions. Men
and women serving as elected representatives, directors or officers are accountable to the
membership. In primary cooperatives, members have equal voting rights of one-member, one-
vote. Cooperatives at other levels are organized in the same democratic manner.
iii. Member Economic Participation - Members contribute equitably to, and democratically
control, the capital of their cooperatives. At least part of that capital is the common property of
the cooperative. They shall receive limited compensation or limited interest, if any, on capital
subscribed and paid as a condition of membership. Members allocate surpluses for any or all of
the following purposes: developing the cooperative by setting up reserves, part of which should
at least be indivisible; benefitting members in proportion to their patronage of the cooperative's
business; and, supporting other activities approved by the membership.
iv. Autonomy and Independence - Cooperatives are autonomous, self-help organizations
controlled by their members. If they enter into agreements with other organizations, including
government, or raise capital from external sources, they shall do so on terms that ensure
democratic control of their members and maintain their cooperative autonomy.
v. Education, Training and Information - Cooperatives shall provide education and training for
their members, elected and appointed representatives, managers, and employees, so that they
can contribute effectively and efficiently to the development of their cooperatives.
vi. Cooperation Among Cooperatives - Cooperatives serve their members most effectively and
strengthen the cooperative movement by working together through local, national, regional and
international structures.
vii. Concern for Community - Cooperatives work for the sustainable development of their
communities through policies approved by their members.
viii. Principle of Subsidiarity under which the cooperative sector will initiate and regulate within its
own ranks the promotion and organization, training and research, audit and support services
relative to cooperatives with government assistance where necessary.

a. Definition of Terms.

i. Member includes a person either natural or juridical who adhering to the principles set forth in
this Code and in the Articles of Cooperative, has been admitted by the cooperative as member;
ii. General Assembly shall mean the full membership of the cooperative duly assembled for the
purpose of exercising all the rights and performing all the obligations pertaining to cooperatives,
as provided by this Code, its articles of cooperation and bylaws: Provided, That for cooperatives
with numerous and dispersed membership, the general assembly may be composed of delegates
elected by each sector, chapter or district of the cooperative in accordance with the rules and
regulations of the Cooperative Development Authority;
iii. Board of Directors shall mean that body entrusted with the management of the affairs of the
cooperative under its articles of cooperation and bylaws;
iv. Committee shall refer to any body entrusted with specific functions and responsibilities under the
bylaws or resolution of the general assembly or the board of directors;
v. Articles of Cooperation means the articles of cooperation registered under this Code and
includes a registered amendment thereof;
vi. Bylaws means the bylaws registered under this Code and includes any registered amendment
thereof;
vii. Registration means the operative act granting juridical personality to a proposed cooperative
and is evidenced by a certificate of registration;
viii. Cooperative Development Authority as such hereinafter referred to s the Authority;

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 ix. Universally Accepted Principles means that body of cooperative principles adhered to
worldwide by cooperatives;
x. Representative Assembly means the full membership of a body of representatives elected by
each of the sectors, chapter or district o the cooperative duly assembled for the purpose of
exercising such powers lawfully delegated unto them by the general assembly in accordance with
its bylaws;
xi. Officers of the Cooperative shall include the members of the board of directors, members of the
different committee created by the general assembly, general manager or chief executive officer,
secretary, treasurer and members holding other positions as may be provided for in their bylaws;
xii. Social Audit is a procedure wherein the cooperative assesses its social impact and ethical
performance vis-à-vis its stated mission, vision, goals and code of social responsibility for
cooperatives to be established by the Authority in consultation with the cooperative sector. It
enables the cooperative to develop a process whereby it can account for its social performance
and evaluate its impact in the community and be accountable for its decisions and actions to its
regular members;
xiii. Performance Audit shall refer to an audit on the efficiency and effectiveness of the cooperative
as a whole; its management and officers; and its various responsibility centers as basis for
improving individual team or overall performance and for objectively informing the general
membership on such performance;
xiv. Single-Line or Single-Purpose Cooperative shall include cooperative undertaking activities
which are related to its main line of business or purpose;
xv. Service Cooperatives are those which provide any type of service to its members, including but
not limited to, transport, information and communication, insurance, housing, electric, health
services, education, banking, and savings and credit;
xvi. 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
economic zones created by law, registered with the Authority to undertake business activities in
support of its member-cooperatives.

b. Purposes of Cooperatives
i. To encourage thrift and savings mobilization among the members;
ii. To generate funds and extend credit to the members for productive and provident purposes;
iii. To encourage among members systematic production and marketing;
iv. To provide goods and services and other requirements to the members;
v. To develop expertise and skills among its members;
vi. To acquire lands and provide housing benefits for the members;
vii. To insure against losses of the members;
viii. To promote and advance the economic, social and educational status of the members;
ix. To establish, own, lease or operate cooperative banks, cooperative wholesale and retail
complexes, insurance and agricultural/industrial processing enterprises, and public markets;
x. To coordinate and facilitate the activities of cooperatives;
xi. To advocate for the cause of the cooperative movements;
xii. To ensure the viability of cooperatives through the utilization of new technologies;
xiii. To encourage and promote self-help or self-employment as an engine for economic growth and
poverty alleviation; and
xiv. To undertake any and all other activities for the effective and efficient implementation of the
provisions of this Code.

c. Objectives and Goals of a Cooperative.

i. Provide goods and services to its members to enable them to attain increased income, savings,
investments, productivity, and purchasing power, and promote among themselves equitable
distribution of net surplus through maximum utilization of economies of scale, cost-sharing and
risk-sharing;
ii. Provide optimum social and economic benefits to its members;
iii. Teach them efficient ways of doing things in a cooperative manner;
iv. Propagate cooperative practices and new ideas in business and management;
v. Allow the lower income and less privileged groups to increase their ownership in the wealth of the
nation; and
vi. Cooperate with the government, other cooperatives and people-oriented organizations to further
the attainment of any of the foregoing objectives.

d. Powers and Capacities of Cooperative

i. To the exclusive use of its registered name, to sue and be sued;
ii. Of succession
iii. To amend its articles of cooperation in accordance with the provisions of this Code
iv. To adopt bylaws not contrary to law, morals or public policy, and to amend and repeal the same
in accordance with Cooperative Code;
v. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage, and otherwise
deal with such real and personal property as the transaction of the lawful affairs of the
cooperative may reasonably and necessarily require, subject to the limitations prescribed by law
and the Constitution;

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 vi. To enter into division, merger or consolidation, as provided in Cooperative Code;
vii. To form subsidiary cooperatives and join federations or unions, as provided in Cooperative Code;
viii. To avail of loans, be entitled to credit and to accept and receive grants, donations and assistance
from foreign and domestic sources, subject to the conditions of said loans, credits, grants,
donations or assistance that will not undermine the autonomy of the cooperative. The Authority,
upon written request, shall provide necessary assistance in the documentary requirements for the
loans, credit, grants, donations and other financial support;
ix. To avail of preferential rights granted to cooperatives under Republic Act No. 7160, otherwise
known as the Local Government Code, and other laws, particularly those in the grant of
franchises to establish, construct, operate and maintain ferries, wharves, markets or
slaughterhouses and to lease public utilities, including access to extension and on-site research
services and facilities related to agriculture and fishery activities;
x. To organize and operate schools in accordance with Republic Act No. 9155, Governance of Basic
Education Act of 2001 and other pertinent laws; and
xi. To exercise such other powers granted by Cooperative Code or necessary to carry out its
purpose or purposes as stated in its Articles of cooperation.

e. Types and Categories of Cooperatives

i. Single-Line or Single-Purpose Cooperative shall include cooperative undertaking activities

which are related to its main line of business or purpose;
ii. Service Cooperatives are those which provide any type of service to its members, including but
not limited to, transport, information and communication, insurance, housing, electric, health
services, education, banking, and savings and credit;
iii. Credit Cooperative is one that promotes and undertakes savings and lending services among its
members. It generates a common pool of funds in order to provide financial assistance to its
members for productive and provident purposes;
1. Objectives of Credit Cooperative
a. To encourage savings among its members;
b. To create a pool of such savings for which loans for productive or provident
purpose may be granted to its members; and
c. To provide related services to enable its members to maximize the benefit from
such loans.
iv. Consumers Cooperative is one of the primary purpose of which is to procure and distribute
commodities to members and non-members;
v. Producers Cooperative is one that undertakes joint production whether agricultural or industrial.
It is formed and operated by its members to undertake the production and processing of raw
materials or goods produced by its members into finished or processed products for sale by the
cooperative to its members and non-members. Any end product or its derivative arising from the
raw materials produced by its members, sold in the name and for the account of the cooperative,
shall be deemed a product of the cooperative and its members;
vi. Marketing Cooperative is one which engages in the supply of production inputs to members and
markets their products;
vii. Multipurpose Cooperative is one which combines two (2) or more of the business activities of
these different types of cooperatives;
viii. Advocacy Cooperative is a primary cooperative which promotes and advocates cooperativism
among its members and the public through socially-oriented projects, education and training,
research and communication, and other similar activities to reach out to its intended beneficiaries;
ix. Agrarian Reform Cooperative is one organized by marginal farmers majority of which are
agrarian reform beneficiaries for the purpose of developing an appropriate system of land tenure,
land development, land consolidation or land management in areas covered by agrarian reform;
x. Cooperative Bank is one organized for the primary purpose of providing a wide range of
financial services to cooperatives and their members;
xi. Dairy Cooperative is one whose members are engaged in the production of fresh milk which
may be processed and/or marketed as dairy products;
xii. Education Cooperative is one organized for the primary purpose of owning and operating
licensed educational institutions notwithstanding the provisions of Republic Act No. 9155,
otherwise known as the Governance of Basic Education Act of 2001;
xiii. Electric Cooperative is one organized for the primary purposed of undertaking power
generations, utilizing renewable energy sources, including hybrid systems, acquisition and
operation of subtransmission or distribution to its household members;

xiv. Financial Service Cooperative is one organized for the primary purpose of engaging in savings
and credit services and other financial services;
1. Services of Financial Service Cooperative
a. The functions of credit cooperatives and other cooperatives, including
multipurpose cooperatives, that provide savings and credit to their members,
and"
b. Other financial services subject to regulation by the BSP.

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 xv. Fishermen Cooperative is one organized by marginalized fishermen in localities whose products
are marketed either as fresh or processed products;
xvi. Health Services Cooperative is one organized for the primary purpose of providing medical,
dental and other health services;
xvii. Housing Cooperative is one organized to assist or provide access to housing for the benefit of
its regular members who actively participate in the savings program for housing. It is co-owned
and controlled by its members;
xviii. Insurance Cooperative is one engaged in the business of insuring life and poverty of
cooperatives and their members;
xix. Transport Cooperative is one which includes land and sea transportation, limited to small
vessels, as defined or classified under the Philippine maritime laws, organized under the
provisions of this Code;
xx. Water Service Cooperative is one organized to own, operate and manage waters systems for
the provision and distribution of potable water for its members and their households;
xxi. Workers Cooperative is one organized by workers, including the self-employed, who are at
same time the members and owners of the enterprise. Its principal purpose is to provide
employment and business opportunities to its members and manage it in accordance with
cooperative principles
xxii. Laboratory Cooperative - shall refer to a cooperative duly recognized by the Authority, formed
and managed principally by minors and is affiliated with another registered cooperative which is
called the guardian cooperative. Fifteen (15) or more minors who are Filipino citizens, actually
residing in the community or enrolled in an educational institution within or near the area of
operation of the Guardian Cooperative or out of school minor actually residing in the community,
may organize a Laboratory Cooperative composed of minors, which shall be seven (7) years old
but below eighteen (18) years of age. Purposes of Laboratory Cooperatives. A Laboratory
Cooperative shall be organized for any or all of the following purposes:
1. To serve as a training ground for its members to prepare them for membership in regular
cooperatives;
2. To teach the value of thrift and saving mobilization among its members;
3. To instil cooperative values, principles, financial discipline and leadership skills among its
members;
4. To promote and advance Filipino social and cultural values, ecological awareness and
sustainable development.
xxiii. Guardian Cooperative - shall refer to duly registered cooperative to which a laboratory
cooperative is affiliated with.
xxiv. Primary Cooperative – The members of which are natural persons.
xxv. Secondary Cooperative – The members of which are primary cooperatives.
xxvi. Tertiary Cooperative – The members of which are secondary cooperatives.

f. Functions of a Federation of Cooperatives (Organization of Cooperatives) – A federation of

cooperatives shall undertake the following functions:
i. To carry on any cooperative enterprise authorized under Article 6 of Cooperative Code that
complements augments, or supplements but does not conflict, compete with, nor supplant the
business or economic activities of its member cooperatives;
ii. To carry on, encourage, and assist educational and advisory work relating to its member
cooperatives;
iii. To render services designed to encourage simplicity, efficiency, and economy in the conduct of
the business of its member cooperatives and to facilitate the implementation of their bookkeeping,
accounting, and other systems and procedures;
iv. To print, publish, and circulate any newspaper or other publication in the interest of its member
cooperatives and enterprises;
v. To coordinate and facilitate the activities of its member cooperatives;
vi. To enter into joint ventures with national or international cooperatives of other countries in the
manufacture and sale of products and/or services in the Philippines and abroad; and
vii. To perform such other functions as may be necessary to attain its objectives.
1. A federation of cooperatives may be registered by carrying out the formalities for
registration of a cooperative.
2. Registered cooperatives may organize a federation according to the type of business
activity engaged in by the cooperatives.

g. Purposes of Cooperative Unions (Organization of cooperatives and federations of cooperatives) –

Registered cooperatives and federations at the appropriate levels may organize or join cooperative
unions to represent the interest and welfare of all types of cooperatives at the provincial, city, regional,
and national levels. Cooperative unions may have the following purposes:
i. To represent its member organizations;
ii. To acquire, analyze, and disseminate, economic, statistical, and other information relating to its
members and to all types of cooperatives within its area of operation;
iii. To sponsor studies in the economic, legal, financial, social and other phases of cooperation, and
publish the results thereof;
iv. To promote the knowledge of cooperative principles and practices;
v. To develop the cooperative movement in their respective jurisdictions;
vi. To advise the appropriate authorities on all questions relating to cooperatives;

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 vii. To raise funds through membership fees, dues and contributions, donations, and subsidies from
local and foreign sources whether private or government; and
viii. To do and perform such other non-business activities as may be necessary to attain the foregoing
objectives.
1. Cooperative unions may assist the national and local governments in the latter’s
development activities in their respective jurisdictions.

h. Cooperatives Not in Restraint of Trade. – No cooperative or method or act thereof which complies with
this Code shall be deemed a conspiracy or combination in restraint of trade or an illegal monopoly, or an
attempt to lessen competition or fix prices arbitrarily in violation of any laws of the Philippines.

i. Organization of Primary Cooperative

i. Ordinary Cooperative - Fifteen (15) or more natural persons who are Filipino citizens, of legal
age, having a common bond of interest and are actually residing or working in the intended area
of operation, may organize a primary cooperative under this Code: Provided, That a prospective
member of a primary cooperative must have completed a Pre-Membership Education Seminar
(PMES).
ii. Any newly organized primary cooperative may be registered as multipurpose cooperative only
after compliance with the minimum requirements for multipurpose cooperatives to be set by the
Authority. A single-purpose cooperative may transform into a multipurpose or may create
subsidiaries only after at least two (2) years of operations.
iii. Voting Requirement for Registration of Electric Cooperative. – In compliance with the
referendum as a voting procedure, the required number of votes for registration of electric
cooperative with the CDA shall be twenty percent (20%) of all members in good standing

j. Economic Survey before Formation of a Proposed Cooperative - Every group of individuals or

cooperatives intending to form a cooperative under Cooperative Code shall submit to the Cooperative
Development Authority a general statement describing, among others the structure and purposes of the
proposed cooperative: Provided, That the structure and actual staffing pattern of the cooperative shall
include a bookkeeper; Provided, further, That they shall not be allowed to operate without the necessary
personnel and shall also submit an economic survey, indicating therein the area of operation, the size of
membership, and other pertinent data in a format provided by the Cooperative Development Authority.

k. Liability of Cooperative duly registered under this Code - A cooperative duly registered under this
Code shall have limited liability.

l. Term of Cooperative - A cooperative shall exist for a period not exceeding fifty (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 cooperation, may be extended for periods not exceeding fifty (50) years
in any single instance by an amendment of the articles of cooperation, in accordance with this
Code: Provided, That no extension can be made earlier than five (5) years prior to the original or
subsequent expiry date/dates unless there are justifiable reasons for an earlier extension as may be
determined by the Authority.
m. Articles of Cooperation - All cooperatives applying for registration shall file with the CDA the articles of
cooperation which shall be signed by each of the organizers and acknowledged by them if natural
persons, and by the chairpersons or secretaries, if juridical persons, before a notary public. Each
cooperative to be registered under this Code 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.

i. Contents of Articles of Cooperation

1. The name of the cooperative which shall include the word cooperative;
2. The purpose or purposes and scope of business for which the cooperative is to be
registered;
3. The term of existence of the cooperative;
4. The area of operation and the postal addresses of its principal office;
5. The names, nationality, and the postal addresses of the registrants;
6. The common bond of membership;
7. The list of names of the directors who shall manage the cooperative; and
8. The amount of its share capital, the names and residences of its contributors and a
statement of whether the cooperative is primary, secondary or tertiary in accordance with
Article 23 hereof.
Note: The articles of cooperation may also contain any other provisions not inconsistent with this
Code or any related law.

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 ii. Contents of Cooperative By-Laws - Each cooperative to be registered under this Code shall
adopt bylaws not inconsistent with the provisions of Cooperative Code. The bylaws shall be filed
at the same time as the articles of cooperation.
1. The qualifications for admission to membership and the payment to be made or interest
to be acquired as a conditions for the exercise of the right of membership;
2. The rights and liabilities of membership;
3. The circumstances under which membership is acquired, maintained and lost;
4. The procedure to be followed in cases of termination of membership;
5. The conditions under which the transfer of a share or interest of the members shall be
permitted;
6. The rules and procedures on the agenda, time, place and manner of calling, convening,
conducting meetings, quorum requirements, voting systems, and other matters relative to
the business affairs of the general assembly, board of directors, and committees;
7. The general conduct of the affairs of the cooperative, including the powers and duties of
the general assembly, the board of directors, committees and the officers, and their
qualifications and disqualifications;
8. The manner in which the capital, may be raised and the purposes for which it can be
utilized;
9. The mode of custody and of investment of net surplus;
10. The accounting and auditing systems;
11. The manner of loaning and borrowing including the limitations thereof;
12. The method of distribution of net surplus;
13. The manner of adopting, amending, repealing, and abrogating bylaws;
14. A conciliation or mediation mechanism for the amicable settlement of disputes among
members, directors, officers and committee members of the cooperative; and
15. Other matters incident to the purposes and activities of the cooperative.

iii. Requirement for Registration with CDA

1. No cooperative, other than a cooperative union as described under Article 25 hereof,
shall be registered unless the articles of cooperation is accompanied with the bonds of
the accountable officers and a sworn statements of the treasurer elected by the
subscribers showing that at least twenty-five per centum (25%) of the authorized share
capital has been 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
less than Fifteen thousand pesos (P15,000.00).
2. The Cooperative Development Authority shall periodically assess the required paid-up
share capital and may increase it every five (5) years when necessary upon consultation
with the cooperative sector and the National Economic and Development Authority
(NEDA).

n. Juridical Personality of Cooperative - A cooperative formed and organized under Cooperative Code
acquires juridical personality from the date the CDA issues a certificate of registration under its official
seal. All applications for registration shall be finally disposed of by the CDA within a period of sixty (60)
days from the filing thereof, otherwise the application is deemed approved, unless 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 of the President within ninety (90) days from receipt of notice of such
denial: Provided, further, That failure of the Office of the President to act on the appeal within ninety (90)
days from the filing thereof shall mean approval of said application.

o. Evidence of juridical personality of cooperative A certificate of registration issued by the CDA under
its official seal shall be conclusive evidence that the cooperative therein mentioned is duly registered
unless it is proved that the registration thereof has been cancelled.

p. Amendment of Articles of Cooperation and By-laws - Unless otherwise prescribed by this Code and
for legitimate purposes, any provision or matter stated in the articles of cooperation and by laws may be
amended by two-thirds (2/3) vote of all the members with voting rights, without prejudice to the right of the
dissenting members to exercise their right to withdraw their membership under Article 30. The
amendments shall take effect upon (1) its approval by the CDA or (2) within thirty (30) days from the date
of filing thereof if not acted upon by the Authority for a cause not attributable to the cooperative

q. Types of Membership in cooperatives

i. A regular member is one who has complied with all the membership requirements and entitled to
all the rights and privileges of membership.
ii. An associate member is one who has no right to vote nor be voted upon and shall be entitled only
to such rights and privileges as the bylaws may provide: Provided, That an associate who meets
the minimum requirements of regular membership, continues to patronize the cooperative for two
(2) years, and signifies his/her intention to remain a member shall be considered a regular
member.

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r. Liability of Members - A member shall be liable for the debts of the cooperative to the extent of his
contribution to the share capital of the cooperative.

s. Termination of Membership

i. A member of a cooperative may, for any valid reason, withdraw his membership from the
cooperative by giving a sixty (60) day notice to the board of directors. Subject to the bylaws of the
cooperative, the withdrawing member shall be entitled to a refund of his share capital contribution
and all other interests in the cooperative: Provided, That such fund shall not be made if upon
such payment the value of the assets of the cooperative would be less than the aggregate
amount of its debts and liabilities exclusive of his share capital contribution.

ii. The death or insanity of a member in a primary cooperative, and the insolvency or dissolution of a
member in a secondary or tertiary cooperative may be considered valid grounds for termination of
membership: Provided, That in case of death or insanity of an agrarian reform beneficiary-
member of a cooperative, the next-of-kin may assume the duties and responsibilities of the
original member

iii. Required Vote for Termination of Membership in a Cooperative - Membership in the

cooperative may be terminated by a vote of the majority of all the members of the board of
directors for causes provided by law.
iv. Grounds for Membership Termination in a Cooperative

1. When a member has not patronized any of the services of the cooperative for an
unreasonable period of time as may be previously determined by the board of directors;
2. When a member has continuously failed to comply with his obligations;
3. When a member has acted in violation of the bylaws and the rules of the cooperative;
and
4. For any act or omission injurious or prejudicial to the interest or the welfare of the
cooperative.

v. Procedures for Termination of Membership in a Cooperative - Member whose membership

the board of directors may wish to terminate 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
decision of the board shall be in writing and shall be communicated in person or by registered
mail to said member and shall be appealable within thirty (30) days from receipt thereof to the
general assembly whose decision shall be final. The general assembly may create an appeal and
grievance committee whose members shall serve for a period of one (1) year and shall decide
appeals on membership termination. The committee is given thirty (30) days from receipt thereof
to decide on the appeal. Failure to decide within the prescribed period, the appeal is deemed
approved in favor of the member. Pending a decision by the general assembly, the membership
remains in force.

t. 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 either by the cooperative or by the approved transferee, as the
case may be, in accordance with Cooperative Code.

u. Administration of Cooperative

i. Composition of the General Assembly – The general assembly shall be composed of such
members who are entitled to vote under the articles of cooperation and bylaws of the cooperative.

ii. Power and Definition of the General Assembly – The general assembly shall be the highest
policy-making body of the cooperative and shall exercise such powers as are stated in this Code,
in the articles of cooperation and in the bylaws of the cooperative.

iii. Nondelegable Powers of General Assembly

1. To determine and approve amendments to the articles of cooperation and bylaws;
2. To elect or appoint the members of the board of directors, and to remove them for cause.
However, in the case of the electric cooperatives registered under this Code, election of
the members of the board shall be held in accordance with its bylaws or election
guideline of such electric cooperative; and
3. To approve developmental plans of the cooperative.

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iv. Procedure and Required Vote for Delegation of Powers of General Assembly to Board of
Directors or Smaller Body of the Cooperative - Subject to such other provisions of this Code
and only for purposes of prompt and intelligent decision-making, the general assembly may by a
three-fourths (3/4) vote of all its members with voting rights, present and constituting a quorum,
delegate some of its powers to a smaller body of the cooperative. These powers shall be
enumerated under the bylaws of the cooperative.

v. Cooperative Meetings. – 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 dated within ninety (90) days after the close of
each fiscal year: Provided, That notice of regular meetings shall be sent in writing, by posting or
publication, or through other electronic means to all members of record.
1. Whenever necessary, a special meeting of the general assembly may be called at any
time by a majority vote of the board of directors or as provided 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 special meeting shall be called by
the board of directors after compliance with the required notice within from at least
ten per centum (10%) of the total members who re entitled to vote to transact specific
business covered by the call.
2. If the board fails to call a regular or a special meeting within the given period, the
Authority, upon petition of ten per centum (10%) of all the members of the cooperative
who are entitled to vote, and for good cause shown, shall issue 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;
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 approval;
4. The Authority may call a special meeting of the cooperative for the purpose of reporting
to the members the result of any examination or other investigation of the cooperative
affairs; and
5. Notice of any meeting may be waived, expressly or impliedly, by any member.

vi. Quorum in General Assembly of Cooperative

1. Ordinary Cooperative - A quorum shall consist of at least twenty-five per centum (25%)
of all the members entitled to vote.
2. Electric cooperatives registered under this Code - A quorum, unless otherwise
provided in the bylaws, shall consist of five per centum (5%) of all the members entitled
to vote.
3. Cooperative Bank - As a general rule, the quorum in the regular or special meeting of
general assembly is at least one half plus one of the number of voting shares of all the
members in good standing. However, as an exception to general rule, the quorum in the
meeting of general assembly of a cooperative bank for the amendment of its articles of
cooperation or by-laws is at least 3/4 of all members with voting rights present and
constituting a quorum.

vii. Voting System. – Each member of a primary cooperative shall have only one (1) vote. In the
case of members of secondary or tertiary cooperatives, they shall have one (1) basic vote and as
many incentive votes 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.
1. However, the bylaws of a cooperative other than a primary may provide for voting by
proxy. Voting by proxy means allowing a delegate of a cooperative to represent or vote in
behalf of another delegate of the same cooperative.

viii. Composition and Term of the Board of Directors. – Unless otherwise provided in the bylaws,
the direction and management of the affairs of a cooperative shall be vested in a board of
directors which shall be composed of not less than five (5) nor more than fifteen (15) members
elected by the general assembly for a term of two (2) years and shall hold office until their
successors are duly elected an qualified, or until duly removed for caused.

ix. Powers of the Board of Directors. – The board of directors shall be responsible for the strategic
planning, direction-setting and policy-formulation activities of the cooperatives.

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 x. Directors (Qualifications of Directors in a Cooperative)

1. Any member of a cooperative who under the bylaws of the cooperative, has the right to
vote and who possesses all the qualifications and none of the disqualifications provided
in the laws or bylaws shall be eligible for election as director.
2. The cooperative may, by resolution of its board of directors, admit as directors, or
committee member one appointed by any financing institution from which the cooperative
received financial assistance solely to provide technical knowledge not available within its
membership. Such director or committee member not be a member of the cooperative
and shall have no powers, rights, nor responsibilities except to provided technical
assistance as required by the cooperative.
3. The members of the board of directors shall not hold any other position directly involved
in the day to day operation and management of the cooperative.
a. Note: The members of the board of directors may hold the position of chairman
and vice-chairman of the board but are not allowed to hold other official positions
which shall be given to persons outside the board.
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 a director of said
cooperative.

xi. Meeting of the Cooperative Board and Quorum Requirement

1. In the case of primary cooperatives, regular meetings of the board of directors shall be
held at least once a month.
2. Special meetings of the board of directors may be held at any time upon the call of the
chairperson or a majority of the members of the board: Provided, That written notices of
the meeting specifying the agenda of the special meeting shall be given to all members of
the board at least one (1) week before the said meeting.
3. Directors cannot attend or vote by proxy at board meetings.

xii. Quorum in Board of Directors of Cooperative

1. Ordinary Cooperative - At least majority of the members of the Board unless the bylaws
provide otherwise.
2. Cooperative Bank - One-half plus one of all the members of the board of directors.

xiii. Vacancy in the Board of Directors. – Any vacancy in the board of directors, other than by
expiration of term, may be filled by the vote of at least a majority of the remaining directors, if still
constituting a quorum; otherwise, the vacancy must be filled by the general assembly in a regular
or special meeting called for the purpose. A director so elected to fill a vacancy shall serve only
the unexpired term of his predecessor in office.

xiv. Officers of the Cooperative. – The board of directors shall elect from among themselves the
chairperson and vice-chairperson, and elect or appoint other officers of the cooperative from
outside of the board in accordance with their bylaws. All officers shall serve during good behavior
and shall not be removed except for cause after due hearing. Loss of 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 officer. No two (2) or more persons with relationships up to the third
civil degree of consanguinity or affinity nor shall any person engaged in a 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.

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 xv. Committees of Cooperatives

1. The bylaws may create an executive committee to be appointed by the board of directors
with such powers and duties as may be delegated to it in the bylaws or by a majority vote
of all the members of the board of directors.
2. The bylaws shall provide for the creation of an audit, election, mediation and conciliation,
ethics, and such other committees as may be necessary for the conduct of the affairs of
the cooperative. The members of both the audit and election committee shall be elected
by the general assembly and the rest shall be appointed by the board. The audit
committee shall be directly accountable and responsible to the general assembly. It shall
have the power and duty to continuously monitor the adequacy and effectiveness of the
cooperative’s management control system and audit the performance of the cooperative
and its various responsibility centers.
3. Unless otherwise provided in the bylaws, the board, in case of a vacancy in the
committees, may call an election to fill the vacancy or appoint a person to fill the same
subject to the provision that the person elected or appointed shall serve only for the
unexpired portion of the term.

xvi. Functions, Responsibilities and Training Requirements of Directors, Officers and

Committee Members. – the functions and responsibilities of directors, officers and committee
members, as well as their training requirements, shall be in accordance with the rules and
regulations issued by the Authority.

xvii. Liability of Directors, Officers and Committee Members. – Directors, officers and committee
members, who are willfully and knowingly vote for or assent to patently unlawful acts or who are
guilty of gross negligence or bad faith in directing the affairs of the cooperative or acquire any
personal or pecuniary interest in conflict with their duty as such directors, officers or committee
members shall be liable jointly and severally for all damages or profits resulting therefrom to the
cooperative, members, and other persons.
1. When a director, officer or committee member attempts to acquire or acquires, in
violation of his duty, any interest or equity adverse to the cooperative in respect to any
matter which has been reposed in him in confidence, he shall, as a trustee for the
cooperative, be liable for damages and shall be accountable for double the profits which
otherwise would have accrued to the cooperative.

xviii. Compensation of Directors of Cooperative

1. In the absence of any provisions in the bylaws fixing their compensation, the directors
shall not receive any compensation except for reasonable per diems: Provided however,
That the directors and officers shall not be entitled to any per diem when, in the
preceding calendar year, the cooperative reported a net loss or had a dividend rate less
than the official inflation rate for the same year. Any compensation other than per
diems may be granted to directors by a majority vote of the members with voting rights at
a regular or special general assembly meeting specifically called for the
purpose: Provided, that no additional compensation other than per diems shall be paid
during the first year of existence of any cooperative.
2. The compensation of officers of the cooperative as well as the members of the committee
as well as the members of the committees created pursuant to this Code or its bylaws
may be fixed in the bylaws.
3. Unless already fixed in the bylaws, the compensation of all other employee shall be
determined by the board of directors.

xix. Dealings of Directors, Officers, or Committee Members – A contract entered into by the
cooperative with one (1) or more of its directors, officers, and committee members is voidable, at
the option of the cooperative, unless all the following conditions are present.
1. That the presence of such director in the board meeting wherein contract was approved
was not necessary to constitute a quorum for such meeting;
2. That the vote of such director was not necessary for the approval of the contract;
3. That the contract is fair and reasonable under the circumstances; and
4. That in the case of an officer or committee member, the contract with the officer or
committee member has been previously authorized by the general assembly or by the
board of directors.
5. Where any of the first two conditions set forth in the preceding paragraph is absent, in the
case of a contract with a director, such contract may be ratified by a 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 full disclosure of the adverse interest of the
directors involved is made at such meeting, and that the contract is fair and reasonable
under the circumstances.

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 xx. Disloyalty of a Director. – A director who, by virtue of his office, acquires for himself an
opportunity which should belong to the cooperative shall be liable for damages and must account
for double the profits that otherwise would have accrued to the cooperative by refunding the
same, unless his act has been ratified by a three-fourths (3/4) vote of all the members with voting
rights, present and constituting a quorum. This provision shall be applicable, notwithstanding the
fact that the director used his own funds in the venture.

xxi. Illegal Use of Confidential Information. – A director or officer, or an associate of a director or

officer, who, for his benefit or advantage or that of an associate, makes use of confidential
information that, if generally known, might reasonably be expected to adversely affect the
operation and viability of the cooperative, shall be held:
1. Liable to compensate the cooperative for the direct losses suffered by the cooperative as
a result of the illegal use of information; and
2. 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 the transaction.
3. The cooperative shall take the necessary steps to enforce the liabilities described in
subsection (a)

xxii. Removal of Elected Officer or Director. – All complaints for the removal of any elected officer
shall be filed with the board of directors. Such officer shall be given the opportunity to be heard.
Majority of the board of directors may place the officer concerned under preventive suspension
pending the resolution of the investigation. Upon finding of a prima facie evidence of guilt, the
board shall present its recommendation for removal to the general assembly.
1. An elective officer may be removed by three fourths (3/4) votes of the regular members
present and constituting a quorum, in a regular or special general assembly meeting
called for the purpose. The officer concerned shall be given an opportunity to be heard at
said assembly.

v. Privileges of Cooperative from Taxes

i. Tax Treatment of Cooperative. - Duly registered cooperatives under this Code which do not
transact any business with non-members or the 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 article shall be governed by the succeeding section.

ii. Tax and Other Exemptions. Cooperatives transacting business with both members and non-
members shall not be subjected to tax on their transactions with members. In relation to this, the
transactions of members with the cooperative shall not be subject to any taxes and fees,
including not limited to final taxes on members’ deposits and documentary tax. Notwithstanding
the provisions of any law or regulation to the contrary, such cooperatives dealing with
nonmembers shall enjoy the following tax exemptions:

1. Cooperatives with accumulated reserves and undivided net savings of not more than Ten
million pesos (P10,000,000.00) shall be exempt from all national, city, provincial,
municipal or barangay taxes of whatever name and nature. Such cooperatives shall be
exempt from customs duties, advance sales or compensating taxes on their importation
of machineries, equipment and spare parts used by them and which are not available
locally a certified by the department of trade and industry (DTI). All tax free importations
shall not be sold nor the beneficial ownership thereof be transferred to any person until
after five (5) years, otherwise, the cooperative and the transferee or assignee shall be
solidarily liable to pay twice the amount of the imposed tax and / or duties.

2. Cooperatives with accumulated reserves and divided net savings of more than Ten
million pesos (P10,000,000.00) shall pay the following taxes at the full rate:
a. Income Tax - On the amount allocated for interest on capitals: Provided, That the
same tax is not consequently imposed on interest individually received by
members: Provided, further, That cooperatives regardless of classification, are
exempt income tax from the date of registration with the Authority;

b. Value-Added Tax – On transactions with non-members: Provided, however, That

cooperatives duly registered with the Authority; are exempt from the payment of
value-added tax; subject to Section 109, sub-sections L, M and N of Republic Act
No. 9337, the National Internal Revenue Code, as amended: Provided, That the
exempt transaction under Section 109 (L) shall include sales made by
cooperatives duly registered with the Authority organized and operated by its
member to undertake the production and processing of raw materials or of goods

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 produced by its members into finished or process products for sale by the
cooperative to its members and non-members: Provided, further, That any
processed product or its derivative arising from the raw materials produced by its
members, sold in then name and for the account of the
cooperative: Provided , finally, That at least twenty-five per centum (25%) of the
net income of the cooperatives is returned to the members in the form of interest
and/or patronage refunds;
c. All other taxes unless otherwise provided herein; and
d. Donations to charitable, research and educational institutions and reinvestment
to socioeconomic projects within the area of operation of the cooperative may be
tax deductible.

3. All cooperatives, regardless of the amount of accumulated reserves and undivided net
savings shall be exempt from payment of local taxes and taxes on transactions with
banks and insurance companies: Provided, That all sales or services rendered for non-
members shall be subject to the applicable percentage taxes sales made by producers,
marketing or service cooperatives: Provided further, That nothing in this article shall
preclude the examination of the books of accounts or other accounting records of the
cooperative by duly authorized internal revenue officers for internal revenue tax purposes
only, after previous authorization by the Authority.

iii. Other Privileges of a Cooperative

1. In areas where there are no available notaries public, the judge, exercising his ex
officio capacity as notary public, shall render service, free of charge, to any person or
group of persons requiring the administration of oath or the acknowledgment of articles of
cooperation and instruments of loan from cooperatives not exceeding Five Hundred
Thousand Pesos (P500,000.00).
2. Any register of deeds shall accept for registration, free of charge, any instrument relative
to a loan made under this Code which does not exceed Two Hundred Fifty Thousand
Pesos (P250,000.00) or the deeds of title of any property acquired by the cooperative or
any paper or document drawn in connection with any action brought by the cooperative
or with any court judgment rendered in its favor or any instrument relative to a bond of
any accountable officer of a cooperative for the faithful performance of his duties and
obligations.
3. Cooperatives shall be exempt from the payment of all court and sheriff’s fees payable to
the Philippine Government for and in connection with all actions brought under this Code,
or where such actions is brought by the Authority before the court, to enforce the
payment of obligations contracted in favor of the cooperative.
4. 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 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 required by the court in similar cases shall be accepted
by the court as a sufficient bond.
5. Cooperatives shall enjoy the privilege of depositing their sealed cash boxes or
containers, documents or any valuable papers in the safes of the municipal or city
treasurers and other government offices free of charge, and the custodian of such articles
shall issue a receipt acknowledging the articles received duly witnessed by another
person;
6. Cooperatives organized among government employees, notwithstanding any law or
regulation to the contrary, shall enjoy the free use of any available space in their agency,
whether owned or rented by the Government;
7. Cooperatives rendering special types of services and facilities such as cold storage, ice
plant, electricity, transportation, and similar services and facilities shall secure a franchise
therefore, and such cooperatives shall open their membership to all persons qualified in
their areas of operation;
8. In areas where appropriate cooperatives exist, the preferential right to supply government
institutions and agencies rice, corn and other grains, fish and other marine products,
meat, eggs, milk, vegetables, tobacco and other agricultural commodities produced by
their members shall be granted to the cooperatives concerned;
9. Preferential treatment in the allocation of fertilizers, including seeds and other agricultural
inputs and implements, and in rice distribution shall be granted to cooperatives by the
appropriate government agencies;
10. Preferential and equitable treatment in the allocation or control of bottomries of
commercial shipping vessels in connection with the shipment of goods and products of
cooperatives;
11. Cooperatives and their federations, such as farm and fishery producers and suppliers,
market vendors and such other cooperatives, which have for their primary purpose the
production and/or the marketing of products from agriculture, fisheries and small
entrepreneurial industries and federations thereof, shall have preferential rights in the
management of public markets and/or lease of public market facilities, stalls or
spaces: Provided, That these rights shall only be utilized exclusively by

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 cooperatives: Provided, further, That no cooperative forming a joint venture, partnership
or any other similar arrangement with a non-cooperative entity can utilize these rights;
12. Cooperatives engaged in credit services and/or federations shall be entitled to loans
credit lines, rediscounting of their loan notes, and other eligible papers with the
Development Bank of the Philippines, the Land Bank of the Philippines and other
financial institutions except the Bangko Sentral ng Pilipinas (BSP);
13. The Philippine Deposit Insurance Corporation (PDIC) and other government agencies,
government-owned and controlled corporations and government financial institutions
shall provide technical assistance to registered national federations and unions of
cooperatives which have significant engagement in savings and credit operations in order
for these federations and unions to establish and/or strengthen their own autonomous
cooperative deposit insurance systems;
14. A public transport service cooperative may be entitled to financing support for the
acquisition and/or maintenance of land and sea transport equipment, facilities and parts
through the program of the government financial institutions. It shall have the preferential
right to the management and operation of public terminals and ports whether land or sea
transport where the cooperative operates and on securing a franchise for active or
potential routes for the public transport;
15. Cooperatives transacting business with the Government of the Philippines or any of its
political subdivisions or any of its agencies or instrumentalities, including government-
owned and controlled corporations shall be exempt from prequalification bidding
requirements notwithstanding the provisions of Republic Act No.9184, otherwise known
as, the Government Procurement Act;
16. Cooperative shall enjoy the privilege of being represented by the provincial or city fiscal
or the Office of the Solicitor General, free of charge, except when the adverse party is the
Republic of the Philippines;
17. Cooperatives organized by faculty members and employees of educational institutions
shall have the preferential right in the management of the canteen and other services
related to the operation of the educational institution where they are employed: Provided,
That such services are operated within the premises of the said educational institution;
and
18. The appropriate housing agencies and government financial institutions shall create a
special window for financing housing projects undertaken by cooperatives, with interest
rates and terms equal to, or better than those given for socialized housing projects. This
financing shall be in the form of blanket loans or long-term wholesale loans to qualified
cooperatives, without need for individual processing.
19. The Authority, in consultation with the appropriate government agencies and concerned
cooperative sector, shall issue rules and regulations on all matters concerning housing
cooperatives.

w. Dissolution of a Cooperative

i. Voluntary Dissolution Where no Creditors are Affected. – If the dissolution of a cooperative

does not prejudice the rights of any creditor having a claim against it, the dissolution may be
affected by a majority vote of 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, present and
constituting a quorum at a meeting to be held upon call of the directors: Provided, That the notice
of time, place and object of the meeting shall be published for three (3) consecutive weeks in a
newspaper published in the place where the principal office of said cooperative is located, or if no
newspaper is published in such place, in a newspaper of general circulation in the
Philippines: Provided, further, That the notice of such meeting is sent to 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 authorizing the dissolution shall be certified to by a majority of the board of
directors and countersigned by the board secretary. The Authority shall thereupon issue the
certificate of dissolution.

ii. Voluntary Dissolution Where Creditors Are Affected. – Where the dissolution of a cooperative
may prejudice the rights of any creditor, the petition for dissolution shall be filed with the CDA.
The petition shall be signed by a majority of its board or directors or other officers managing its
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 was resolved upon by the affirmative vote
of at least three-fourths (3/4) of all the members with voting rights, present and constituting a
quorum at a meeting called for that purpose.

iii. Grounds for Involuntary Dissolution of a Cooperative by order of a competent court after
due hearing
1. Violation of any law, regulation or provisions of its bylaws; or
2. Insolvency.

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 iv. Grounds for suspension or revocation, after due notice and hearing, of certificate of
registration of a cooperative by Cooperative Development Authority
1. Having obtained its registration by fraud;
2. Existing for an illegal purpose;
3. Wilful violation, despite notice by the Authority, of the provisions of this Code or its
bylaws;
4. Wilful failure to operate on a cooperative basis; and
5. Failure to meet the required minimum number of members in the cooperative.

x. Liquidation of Cooperative
i. Every cooperative whose charter expires by its own limitation or whose existence is terminated by
voluntary dissolution or through an appropriate judicial proceeding shall nevertheless continue to
exist for three (3) years after the time it is dissolved; not to continue the business for which it was
established but for the purpose of prosecuting and defending suits by or against it; settlement and
closure of its affairs; disposition, conveyance and distribution of its properties and assets.
ii. 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 members, creditors and other persons
in interest. From and after any such conveyance, all interests which the cooperative had in the
properties are terminated.
iii. 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 of decrease of share capital of the
cooperative and as otherwise allowed by Cooperative Code.
iv. Upon the winding up of the cooperative affairs, any asset distributable to any creditor,
shareholder or member who is unknown or cannot be found shall be given to the federation or
union to which the cooperative is affiliated with.
v. Upon dissolution and liquidation, subsidies, donations, legacies, grants, aids and such other
assistance from any local or foreign institution whether public or private given to a cooperative
which form part of the donated capital or fund of the cooperative shall be escheated in favor of
the Republic of the Philippines.

y. Merger or Consolidation of Cooperatives and Division of Cooperative

i. Definition of Merger - shall refer to a union of two or more existing cooperatives belonging to the
same category whereby the surviving cooperative, retaining its identity, absorbs one or more
constituent cooperatives.

ii. Definition of Consolidation - shall refer to a union of two or more existing cooperatives
belonging to the same category to a form a new cooperative called the consolidated cooperative.

iii. Procedures for Merger or Consolidation of Cooperatives

1. Two (2) or more cooperatives may merge or consolidate into a single cooperative which
shall either be one of the constituent cooperatives or the consolidated cooperative.

iv. Required vote for merger of cooperatives - No merger or consolidation shall be valid unless
approved by three-fourths (3/4) vote of all the members with voting rights, present and
constituting a quorum of each of the constituent cooperatives at separate general assembly
meetings. The dissenting members shall have the right to exercise their right to withdraw their
membership pursuant to Article 30.

v. Effects of merger of cooperatives

1. The constituent cooperatives shall become a single cooperative which, in case of merger,
shall be the surviving cooperative, and, in case of consolidation, shall be the consolidated
cooperative;
2. The separate existence of the constituent cooperatives shall cease, except that of the
surviving or the consolidated cooperative;
3. The surviving or the consolidated cooperative shall possess al the assets, rights,
privileges, immunities and franchises of each of the constituent cooperatives;
4. The surviving or the consolidated cooperative shall possess all the assets, rights,
privileges, immunities and franchises of each of the constituent cooperatives; and
5. The surviving or the consolidated cooperative shall be responsible for all the liabilities
and obligation of each of the constituent cooperatives in the same manner as if such
surviving or consolidated cooperative had itself incurred such liabilities or obligations. Any
claim, action or proceeding pending by or against any such constituent cooperatives may
be prosecuted by or against the surviving or consolidated cooperative, as the case may
be. Neither the rights of creditors nor any lien upon the property of any such constituent
cooperatives shall be impaired by such merger or consolidation.

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 vi. Division of Cooperatives - Any registered cooperative may, by a resolution approved by a vote
of three-fourths (3/4) of all the members with voting rights, present and constituting a quorum,
resolve to divide itself into the two (2) or more cooperatives. The procedure for such division shall
be prescribed in the regulations of the Authority: Provided, That all the requirements set forth in
this Code have been complied with by the new cooperatives: Provided, further, That no division of
a cooperative in fraud of creditors shall be valid.

z. Capital, Property, and Funds of Cooperative

i. Sources of Capital of Cooperative
1. Member’s share capital;
a. Common Share Capital shall be issued only to regular members. Its holders
shall be entitled to vote and be voted under the principle of one-man, one vote
principle, and shall receive interest, the rate which should not exceeded the
normal rate on investment.
b. Preferred Share Capital may be issued to regular and associate
members. Issuance and limitation on Preferred Share Capital shall be
prescribed in the By-laws of the cooperative. However, associate Members shall
not be eligible to vote nor be voted on account of such shareholdings but shall be
entitled to, among others the following:
i. Preference in the payment of interest as provided for in the Bylaws of the
cooperative; and
ii. In case of liquidation, priority in the distribution on Preferred Share
Capital shall be prescribed in the By-laws of the cooperative.
2. Loans and barrowings including deposits;
3. Revolving capital which consists of the deferred payment of patronage refunds, or
interest on share capital. Revolving Capital - shall refer to the amount available out of
the deferred payment of the patronage refund and interest on share capital of the
members or by authorized deduction of a percentage from the product sold or per unit of
product handled by the cooperative. The Board of Director shall issue revolving capital
certificates with serial number, name, amount, and rate of interest to be paid and shall
distinctly set forth the time of retirement of such certificates and the amounts to be
returned.; and
4. Subsidies, donations, legacies, grants, aids and such other assistance from any local or
foreign institution whether public or private: Provided, That capital coming from such
subsides, donations, legacies, grants, aids and other assistance shall not be divided into
individual share capital holdings at any time but shall instead form part of the donated
capital or fund of the cooperative. Upon dissolution, such donated capital shall be subject
to escheat or forfeiture in favor of the government of the Republic of the Philippines.

ii. Maximum limitation on Share on Share Capital Holdings of a member - No member of

primary cooperative other than cooperative itself shall own or hold more than ten per
centum (10%) of the share capital of the cooperative. . The share capital contribution of the
members shall be considered as equity. Provided, that it shall not be withdrawn and should not
be used in offsetting obligations whether past due or current while the membership subsists.

iii. Maximum limit on the amount of “par value” of share of a cooperative

1. The term "share" refers to a unit of capital in a primary cooperative the par value of which
may be fixed to any figure not more than One thousand pesos (P1,000.00). The IRR of
Cooperative Code provides that the minimum “par value” of share in a cooperative is
P100.00.

iv. Interest on Share Capital. Interest on Share Capital shall not exceed the Rate of Return on
Investment. Unless otherwise provided for in the By-laws of the cooperative, share capital shall
earn interest; the Rate of Interest shall be computed as follows:
Rate of Interest = X (Net Surplus less Statutory Reserves)/Total Average Share Month Where:
X shall be a percentage to be determined by the Board of Directors allocated for interest on share
capital.

1. Required vote for allocation of interest on share capital - No allocation of

interest on share capital shall be made without the approval of the Board of
Directors which may increase or decrease any or both. The required vote for
allocation of interest on share capital is at least majority of all members of the
board of directors present and constituting a quorum.
2. Requirement vote for deferment of payment of interest on share capital -
Payment of interest, unless otherwise provided for in the By-laws, must be made
on such date as may be determined by the Board of Directors. The
General/Representative Assembly may defer the payment of such interest
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 including Patronage Refund to raise Revolving Capital. No cumulative interest
shall be allowed for any kind or class of share issued by the cooperative. Share
Capital shall receive a strictly limited Rate of Interest. The required vote for
determent of payment of interest on share capital is at least majority of all
members of General Assembly present and constituting a quorum but only upon
the recommendation of the Board of Directors with a required vote of at least
majority of all members of the board of directors present and constituting a
quorum.

v. Fines on unpaid subscribed share capital in a cooperative - The bylaws of a cooperative may
prescribe a fine on unpaid subscribed share capital. Provided, that such fine is fair and
reasonable under the circumstances.

vi. Assignment of Share Capital Contribution or Interest in a cooperative - Subject to the

provisions of Cooperative Code, no member shall transfer his shares or interest in the
cooperative or any part thereof unless: (Essential requisites before a member may assign his
share capital or interest in a cooperative to another person)
1. He has held such share capital contribution or interest for not less than one (1) year.
2. The assignment is made to the cooperative or to a member of the cooperative or to a
person who falls within the field of the membership of the cooperative; and
3. The board of directors has approved such assignment.

vii. Capital Build-up of a cooperative - The by-laws of every cooperative shall provide for a
reasonable and realistic member capital build-up program to allow the continuing growth of the
members’ investment in their cooperative as their economic conditions continue to improve.

viii. Revolving Capital of a cooperative - The general assembly of any cooperative may authorize
the board of directors to raise a revolving capital to strengthen its capital structure by deferring
the payment of patronage refunds and interest on share capital or by the authorized deduction of
a percentage from the proceeds of products sold or services rendered, or per unit of product or
services handled. The board of directors shall issue revolving capital certificates with serial
number, name, amount, and rate of interest to be paid and shall distinctly set forth the time of
retirement of such certificates and the amounts to be returned.

ix. Investment of Capital by a Cooperative - A cooperative may invest its capital in any of the
following:
1. In shares or debentures or securities of any other cooperative;
2. In any reputable bank in the locality, or any cooperative;
3. In securities issued or guaranteed by the Government;
4. In real state primarily for the use of the cooperative or its members; or
5. In any other manner authorized in the bylaws.

x. Annual Audit. – Cooperatives registered under this Code shall be subject to an annual financial,
performance and social audit.
1. The financial audit shall be conducted by an external auditor who satisfies all the
following qualifications:
a. He is independent of the cooperative or any of its subsidiary that he is auditing;
and
b. He is a member in good standing of the Philippine Institute of Certified Public
Accountants (PICPA) and is accredited by both the Board and Accountancy and
the Authority.
2. The social audit shall be conducted by an independent social auditor accredited by the
Authority.
3. Performance and social audit reports which contain the findings and recommendations of
the auditor shall be submitted to the board of directors.
4. Audit Report. – The auditor shall submit to the board of directors and to the audit
committee the financial audit report which shall be in accordance with the generally
accepted auditing standards for cooperatives as jointly promulgated by the Philippine
Institute of Certified Public Accountants (PICPA) and the Authority. "Thereafter, the board
of directors shall present the complete audit report to the general assembly in its next
meeting.

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 xi. Member’s Right to Examine - A member shall have the right to examine the 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, for a copy of excerpts from said records without charge
except the cost of production. 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 such
member for damages and shall be guilty of an offense which shall be 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 this article shall be imposed upon the directors who voted for such
refusal: Provided, further, That it shall be a defense to any action under this article that the
member demanding to examine and copy excerpts from the cooperative records has improperly
used any information secured through any prior examination of the records of such cooperative or
was not acting in good faith or for a legitimate purpose in making his demand.

aa. Capital, Property, and Funds of Cooperative

i. Net Surplus. – Notwithstanding the provisions of existing laws, the net surplus of cooperatives
shall be determined in accordance with its bylaws. Every cooperative shall determine its net
surplus at the close of every fiscal year and at such other times as may be prescribed by the
bylaws. 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 for the loans borrowed,
or the goods and services availed by them from the cooperative or the difference of the rightful
amount due to the members for their products sold or services rendered to the cooperative
including other inflows of assets resulting from its other operating activities and which shall be
deemed to have been returned to them if the same is distributed as prescribed herein.

ii. Order of Distribution. – The net surplus of every cooperative shall be distributed as follows:

1. An amount for the reserve fund which shall be at least ten per centum (10%) of net
surplus: Provided, That, in the first five (5) years of operation after registration, this
amount shall not be less than fifty per centum (50%) of the net surplus:
a. The reserve fund shall be used for the stability of the cooperative and to meet net
losses in its operations. The general assembly may decrease the amount
allocated to the reserve fund when the reserve fund already exceeds the share
capital. Any sum recovered on items previously charged to the reserve fund shall
be credited to such fund.
b. The reserve fund shall not be utilized for investment, other than those allowed in
this Code. Such sum of the reserve fund in excess of the share capital may be
used at anytime for any project that would expand the operations of the
cooperative upon the resolution of the general assembly.
c. Upon the dissolution of the cooperative, the reserve fund shall not be distributed
among the members. The general assembly may resolves:
i. To establish a usufructuary trust fund for the benefit of any federation or
union to which the cooperative is affiliated; and
ii. To donate, contribute, or otherwise dispose of the amount for the benefit
of the community where the cooperative operates. If the members cannot
decide upon the disposal of the reserve fund, the same shall go to the
federation or union to which the cooperative is affiliated.

2. An amount for the education and training fund, shall not be more than ten per
centum (10%) of the net surplus. The bylaws may provide that certain fees or a portion
thereof be credited to such fund. The fund shall provide for the training, development and
similar other cooperative activities geared towards the growth of the cooperative
movement:
a. Half of the amounts transferred to the education and training fund annually under
this subsection shall be spent by the cooperative for education and training
purposes; while the other half may be remitted to a union or federation chosen by
the cooperative or of which it is a member. The said union or federation shall
submit to the Authority and to its contributing cooperatives the following
schedules:
i. List of cooperatives which have remitted their respective Cooperative
Education and Training Funds (CETF);
ii. Business consultancy assistance to include the nature and cost; and
iii. Other training activities undertaken specifying therein the nature,
participants and cost of each activity.
b. Upon the dissolution of the cooperative, the unexpended balance of the
education and training fund appertaining to the cooperative shall be credited to
the cooperative education and training fund of the chosen union or federation.

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 3. An amount for the community development fund, which shall not be less than three per
centum(3%) of the net surplus. The community development fund shall be used for
projects or activities that will benefit the community where the cooperative operates.

4. An optional fund, a land and building, and any other necessary fund the total of which
shall not exceed seven per centum (7%).

5. The remaining net surplus shall be made available to the members in the form of interest
on share capital not to exceed the normal rate of return our investments and
patronage refunds: Provided, That any amount remaining after the allowable interest
and the patronage refund have been deducted shall be credited to the reserve fund."The
sum allocated for patronage refunds shall be made available at the same rate to all
patrons of the cooperative in proportion to their individual patronage: Provided, That:
a. In the case of a member patron with paid-up share capital contribution, his
proportionate amount of patronage refund shall be paid to him unless he agrees
to credit the amount to his account as additional share capital contribution;
b. In the case of a member patron with unpaid share capital contribution, his
proportionate amount of patronage refund shall be credited to his account until
his account until his share capital contribution has been fully paid;

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 and shall be allocated
to individual non-member patrons only upon request and presentation of
evidence of the amount of his patronage. The amount so allocated shall be
credited to such patron toward payment of the minimum capital contribution for
membership. When a sum equal to this amount has accumulated at any time
within a period specified in the bylaws, such patron shall be deemed and become
a member of the cooperative if he so agrees or requests and complies with the
provisions of the bylaws for admission to membership; and

d. If within any period of time specified in the bylaws, any subscriber who has not
fully paid his subscribed share capital or any non-member patron who has
accumulated the sum necessary for membership but who does not request nor
agree to become a member or fails to comply with the provisions of the bylaws
for admission to membership, the amount so accumulated or credited to their
account together with any part of the general fund for nonmember patrons shall
be credited to the reserve fund or to the education and training fund of the
cooperative, at the option of the cooperative."

bb. Responsibilities of a Cooperative

i. Address - Every cooperative shall have an official postal address to which all notices and
communications shall be sent. Such address and every change thereof shall be registered with
the Cooperative Development Authority.

ii. Cooperative Books

1. Every cooperative shall have the following documents ready and accessible to its
members and representatives of the Authority for inspection during reasonable office
hours at its official address:
a. A copy of this Code and all other laws pertaining to cooperatives;
b. A copy of the regulations of the Authority;
c. A copy of the articles of cooperation and bylaws of the cooperative;
d. A register of members;
e. The books of the minutes of the meetings of the general assembly, board of
directors and committee;
f. Share books, where applicable;
g. Financial statement; and
h. Such other documents as may be prescribed by laws or the bylaws.

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 2. The accountant or the bookkeeper of the cooperative shall be responsible for the
maintenance of the cooperative in accordance with generally accepted accounting
practices. He shall also be responsible for the production of the same at the time of audit
or inspection.

3. The audit committee shall be responsible for the continuous and periodic review of the
books and records of account to ensure that these are in accordance with generally
accepted accounting practices. He shall also be responsible for the production of the
same at the time of audit or inspection.

4. Each cooperative shall maintain records of accounts such that the true and correct
condition and the results of the operation of the cooperative may be ascertained
therefrom at any time. The financial statements, audited according to generally accepted
auditing standards, principles and practices, shall be published annually and shall be kept
posted in a conspicuous place in the principal office of the cooperative.

5. Subject to the pertinent provisions of the National Internal Revenue Code and other laws,
a cooperative may dispose by way of burning or other method of complete destruction
any document, record or book pertaining to its financial and nonfinancial operations
which are already more than five (5) years old except those relating to transactions which
are the subject of civil, criminal and administrative proceedings. An inventory of the
audited documents, records and books to be disposed of shall be drawn up and 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 disposition of said records.

iii. Reports of Cooperative

1. Every cooperative shall draw up regular reports of its program of activities, including
those in pursuance of their socio-civic undertakings, showing their progress and
achievements at the end of every fiscal year. The reports shall be made accessible to its
members, and copies thereof shall be furnished to all its members or record. These
reports shall be filed with the Cooperative Development Authority within one hundred
twenty (120) days from the end of the calendar year. The form and contents of the
reports shall be as prescribed by the rules of the Cooperative Development Authority.
Failure to file the required reports shall subject the accountable officer/s to fines and
penalties as may be prescribed by the Cooperative Development Authority, and shall be
a ground for the revocation of authority of the cooperative to operate as such. The fiscal
year of every cooperative shall be the calendar year except as may be otherwise
provided in the bylaws.

2. If a cooperative fails to make, publish and file the reports required herein, or fails to
include therein any matter required by the Cooperative Code, the Cooperative
Development Authority shall, within fifteen (15) days from the expiration of the prescribed
period, send such cooperative a written notice, stating its non-compliance and the
commensurate fines and penalties that will be imposed until such time that the
cooperative has complied with the requirements.

iv. Register of Member as Prima Facie Evidence - Any register or list of members shares kept by
any registered cooperative shall be prima facie evidence of the following particulars entered
therein:
1. The date on which the name of any person was entered in such register or list of
member; and
2. The date on which any such person ceased to be a member.

v. Probative Value of Certified Copies of Entries

1. A copy of any entry in any book, register or list regularly kept in the course of business in
the possession of a cooperative shall, if duly certified in accordance with the rules of
evidence, be admissible as evidence of the existence of entry and prima facie evidence
of the matters and transactions therein recorded.
2. No person or a cooperative is possession of the books of such 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 contents of which can be proved and the matters,
transactions and accounts therein recorded, unless by order of a competent court.

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 vi. Bonding of Accountable Officers

1. Every director, officer, and employee handling funds, securities or property on behalf of
any cooperative shall be covered by a surety bond to be issued for a duly registered
insurance or bonding company for the faithful performance of their respective duties and
obligations. The board of directors shall determine the adequacy of such bonds.
2. Upon the filing of the application for registration of a cooperative, the bonds of the
accountable officers shall be required by the Cooperative Development Authority. Such
bonds shall be renewed manually and the Cooperative Development Authority shall
accordingly be informed of such renewal.

vii. Preference of Claims

1. Notwithstanding the provisions of existing laws, rules and regulations to the contrary, but
subject to the prior claim of the Cooperative Development Authority, any debt due to the
cooperative from the member shall constitute a first lien upon any raw materials,
production, inputs, and products produced; or any land, building, facilities, equipment,
goods or services acquired and held, by such member through the proceeds of the loan
or credit granted by the cooperative to him for as long as the same is not fully paid.
2. No property or interest on property which is subject to a lien under paragraph (1) shall be
sold nor conveyed to third parties without the prior permission of the cooperative. The lien
upon the property or interest shall continue to exit even after the sale or conveyance
thereof until such lien has been duly extinguished.
3. Notwithstanding the provisions of any law to the contrary, any sale or conveyance made
in contravention of paragraph (2) hereof shall be void.

viii. Instrument for Salary or Wage Deduction

1. A member of a cooperative may, notwithstanding the provisions of existing laws to the
contrary, execute an instrument in favor of the cooperative authorizing his employer to
deduct from his/her salary or wages, commutation of leave credits and any other
monetary benefits payable to him by the employer and remit such amount as maybe
specified in satisfaction of a debt or other demand due from the member to the
cooperative.
2. Upon the execution of such instrument and as may be required by the cooperative
contained in a written request, the employer shall make the deduction in accordance with
the agreement and deduction in accordance with the agreement and remit forthwith the
amount so deducted within ten (10) days after the end of the payroll month to the
cooperative. The employer shall make the deduction for as long as such debt or other
demand remains unpaid by the employee.
3. The term "employer" as used in this article shall include all private firms and the national
and local governments and government-owned or controlled corporations who have
under their employer a member of a cooperative and have agreed to carry out the terms
of the instrument mentioned in paragraphs (1) and (2) of this article.
4. The provisions of this article shall apply to all similar agreements referred to in paragraph
(1) and were enforced prior to the approval of the Cooperative Code.
5. Notwithstanding the provisions of existing laws to the contrary, the responsibilities of the
employer as stated in paragraphs (1) and (2) of this articles shall be mandatory:
Provided, That in the case of private employer, the actual and reasonable cost deducting
and remitting maybe collected.

ix. Primary Lien of a Cooperative - Notwithstanding the provision of any law with the contrary, a
cooperative shall have primary lien upon the capital, deposits or interest of a member for any debt
due to the cooperative from such a member.

cc. Insolvency of a Cooperative

i. Proceedings Upon Insolvency of a Cooperative - In case a cooperative is unable to fulfill its
obligations to creditors due to insolvency, such cooperative may apply for such remedies as it
may deem fit under the provisions of Act No. 1956, as amended, otherwise known as the
Insolvency Law or under FRIA 2010. Nothing in this Article, however, precludes creditors from
seeking protection from said insolvency law or FRIA 2010.

SUMMARY OF VOTING REQUIREMENTS IN A COOPERATIVE

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Cooperative Act Voting by Board of Directors Voting by Members (Regular Presence
Members – Members with of
Voting Rights) Appraisal
Right or
Right to
Withdraw

Merger or Consolidation of Not Required ¾ of all members with voting Yes

Cooperatives rights, present and constituting
a quorum

Amendment of articles of Not Required 2/3 of all members with voting Yes
cooperation rights

Amendment of by-laws Not Required 2/3 of all members with voting Yes
rights

Division of Cooperatives into two Not Required ¾ of all members with voting No
or more Cooperatives rights, present and constituting
a quorum

Voluntary dissolution of Majority of all members ¾ of all members with voting No

cooperative where creditors are rights, present and constituting
not affected (Mere submission of board a quorum
resolution together with ratification
by General Assembly)

Voluntary dissolution of Majority of all members (Filing of ¾ of all members with voting No
cooperative where creditors are Formal Petition with notice and rights, present and constituting
affected hearing) a quorum

Filing up of vacancy in the board of Not Allowed Majority of all members with No
directors if vacancy is due to voting rights, present and
expiration of term constituting a quorum

Filing up of vacancy in the board of Majority of the Remaining Directors Majority of all members with No
directors if vacancy is not due to if they still constitute a quorum; or voting rights, present and
expiration of term (death, removal constituting a quorum
or resignation)

Allocation of interest on share Majority of all members present and Not Required No
capital constituting a quorum

Deferment of payment of interest Upon recommendation by Majority Approval by Majority of all No

on share capital of all members present and members with voting rights,
constituting a quorum present and constituting a
quorum

Removal of a member of Majority of all members Not Required No

cooperative for valid cause

Delegation of power of board of Majority of all members Not Required No

directors to an executive
committee

Placing an elected cooperative Majority of all members Not Required No

officer under preventive
suspension pending resolution by
the investigating committee over
his removal

Filling up of vacancy in the Majority of all members present and Not Required No
executive committees constituting a quorum

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Recommending to the General Majority of all members present and Not Required (But approval of No
Assembly the removal of elected constituting a quorum General Assembly is necessary
officer of the cooperative for the decision regarding the
removal)

Delegation of the delegable Not Required ¾ of all members with voting No

powers of General Assembly to the rights, present and constituting
Board of Directors a quorum

Ratification of contracts with self- Not Required ¾ of all members with voting No
dealing directors, officers or rights, present and constituting
executive committee members of a quorum
the cooperative

Ratification of disloyalty of a Not Required ¾ of all members with voting No

director of a cooperative rights, present and constituting
a quorum

Removal of an elected officer upon Not Required (But recommendation ¾ of all members with voting No
recommendation of the Board of by the board is necessary prior to rights, present and constituting
Directors the voting for the removal) a quorum

-END-

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