BUSINESS LAWS AND

REGULATIONS – COOPERATIVES

Atty. Manuel R. del Rosario

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CURRENT Cooperative Code
of the Philippines
Republic Act No. 9502
(February 17, 2009)

OLD Cooperative Code

of the Philippines
Republic Act No. 6938
(March 10, 1990)

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 STATE POLICY ON COOPERATIVES
The 1987 constitution provides a mandate to Congress to create an agency that
will use cooperatives as instruments of social justice and development. (Article XII,
Section 15)

It is the declared policy of the State to foster the creation and growth of
cooperatives as a practical vehicle for promoting self-reliance and harnessing
people power towards the attainment of economic development and social justice.

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.

The primary goal of every cooperative is to help improve the quality of life
of its members.

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 COOPERATIVE PRINCIPLES

1. Voluntary and open membership;

2. Democratic member control;
3. Member economic participation;
4. Autonomy and independence
5. Education, training and information;
6. Cooperation among cooperatives
7. Concern for community;

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 SOME DEFINITIONS

1. Member – includes a person whether natural or juridical who, adhering

to the principles in the Code and Articles of Cooperation, has been
admitted by the cooperative as a member;
2. General Assembly – the full membership of the cooperative duly
assembled for the purpose of exercising all rights and performing all
obligations pertaining to cooperatives;
3. Board of Directors – the body entrusted with the management of the
affairs of the cooperative under its Articles of Cooperation and Bylaws;
4. Cooperative Development Authority (CDA) – refers to the government
agency in charge of the registration and regulation of cooperatives;
5. Officers of the Cooperative – include members of the Board of
Directors, members of the different committees, the general
manager or chief executive officer, secretary, treasurer and others

provided by the bylaws.

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 TYPES OF COOPERATIVES
• Credit Cooperative. 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.
• Consumers Cooperative. The primary purpose is to procure and
distribute commodities to members and non-members.
• Producers Cooperative. 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.
• Marketing Cooperative. Engages in the supply of production inputs to
members and markets their products.

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 TYPES OF COOPERATIVES

• Service Cooperative. Engages in medical and dental care,

hospitalization, transportation, insurance, housing, labor, electric
light and power, communication, professional and other services.
• Multipurpose Cooperative. Combines two or more of the
business activities of these different types of cooperatives.
• Advocacy Cooperative. 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.
• Agrarian Reform Cooperative. 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.

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 TYPES OF COOPERATIVES
• Cooperative Bank. Organized for the primary purpose of providing a wide
range of financial services to cooperatives and their members.
• Dairy Cooperative. One whose members are engaged in the production of
fresh milk which may be processed and/or marketed as dairy products.
• Education Cooperative. 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.
• Electric Cooperative. 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.
• Financial Service Cooperative. One organized for the primary purpose of
engaging in savings and credit services and other financial services.

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 TYPES OF COOPERATIVES

• Fishermen Cooperative. Organized by marginalized fishermen in

localities whose products are marketed either as fresh or processed
products;
• Health Services Cooperative. Organized for the primary purpose of
providing medical, dental and other health services.
• Housing Cooperative. 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.
• Insurance Cooperative. Engaged in the business of insuring life and
poverty of cooperatives and their members.
• Transport Cooperative. 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;

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 TYPES OF COOPERATIVES

• Water Service Cooperative. Organized to own, operate and manage

waters systems for the provision and distribution of potable water for its
members and their households.
• Workers Cooperative. 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.

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TYPES OF COOPERATIVES
December 31, 2018

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TYPES OF COOPERATIVES
December 31, 2018

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 BIGGEST COOPERATIVES
December 31, 2018

ACDI Multi-Purpose Cooperative,

Taguig City
183,125 members
P33.47 Billion in assets

Philippine Army Finance Center Producers Integrated Cooperative,

Taguig City
137,548 members
P22.43 Billion in assets

Cebu CFI Community Cooperative,

Cebu City
344,742 members
P13.12 Billion in assets

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 CATEGORIES OF COOPERATIVES

In terms of membership –

1.Primary – Members are natural persons

2.Secondary – Members are primaries
3.Tertiary – Members are secondary cooperatives

In terms of territory, cooperatives are categorized according to

areas of operations which may or may not coincide with the
political subdivisions of the country.

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 MINIMUM CAPTAL OF COOPERATIVES

The minimum paid-up share capital is PhP15,000, subject to increase

by the CDA upon consultation with the cooperative sector and the
NEDA.

The par value of shares of a primary cooperative shall not exceed

P1,000.

No member of primary cooperative other than cooperative itself shall

own or hold more than 10% of the share capital of the cooperative.

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 MEMBERSHIP
New members may only be admitted to the cooperative after undergoing Pre-
Membership Education Seminar.

There are two kinds of members:

1. Regular members. Entitled to all the rights and privileges of membership,

including the right to vote and be voted upon.

2. Associate members. Has no right to vote nor be voted upon and shall be
entitled only to such rights and privileges as the bylaws may provide. However, an
associate member shall be considered a regular member if: (a) he has been a
member for 2 continuous years; (b) he patronizes the cooperative as its member;
and (c) he signifies his intention of becoming a regular member.

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

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 PRIVILEGES OF A COOPERATIVE
Cooperatives registered under R.A. 9520 can enjoy the following privileges:

 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;

 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;

 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 therefor, and such cooperatives shall open
their membership to all persons qualified in their areas of operation;

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 PRIVILEGES OF A COOPERATIVE
 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;

 Preferential treatment in the allocation of fertilizers and in rice

distribution shall be granted to cooperatives by the appropriate
government agencies;

 Preferential and equitable treatment in the allocation or control of

bottomries of commercial shipping vessels in connection with the
shipment of goods and products of cooperatives;

 Cooperatives and their federations, such as market vendor

cooperatives, shall have preferential rights in management of public
markets and/or lease of public market facilities, stall or spaces;

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 PRIVILEGES OF A COOPERATIVE

 Credit cooperatives 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 Philippine National Bank,
the Land Bank of the Philippines and other financial institutions except
the Central Bank of the Philippines;

 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 pre-qualification bidding
requirements; and

 Cooperatives 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.

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 PRIVILEGES OF A COOPERATIVE

 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: Cooperatives organized by faculty
members and employees of educational institutions Provided, That
such services are operated within the premises of the said educational
institution; and

 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 to qualified cooperatives, without
need for individual processing.

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 9 STEPS IN SETTING UP
A COOPERATIVE
FIRST. Get organized. You must have at least 15 members to do that. At once
determine the common problems you would want solved and the basic needs
you would want provided for through a cooperative. You may want to include
increasing your production, marketing your produce, credit assistance, power
generation, banking or insurance and other similar needs. Determining your
problems and needs will also help you classify the kind of cooperative you will
be organizing. Even before a cooperative is set up, a dedicated core group
people who will do all the organizational and paper works is a must. From this
core group, working communities may be formed to set things moving. These
committees may include membership, finance, executive, secretariat to name
a few.

SECOND. Reserve your proposed cooperative name. Secure and fill up

Cooperative Name Reservation Request Form (CNRRF). This must be
submitted to CDA Central Office or any of its Extension Office. A reservation
fee shall apply.

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 9 STEPS IN SETTING UP
A COOPERATIVE

THIRD. Prepare a general statement called an economic survey. An

economic survey is a general statement describing, among others, the
structure and purposes of the proposed cooperative. The structure and
actual staffing pattern shall include a bookkeeper. This should indicate the
area of operation, the size of membership and other pertinent data in a
format provided by the CDA.

FOURTH. Prepare the cooperative's by-laws. The by-laws contain the rules
and regulations governing the operation of the cooperative.

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 9 STEPS IN SETTING UP
A COOPERATIVE
FIFTH. Prepare the Articles of Cooperation. Mandatory contents of the
Articles of Cooperation are the following:

(a) the name of the cooperative, which must include the word "cooperative";
(b) the purpose or purposes and scope of business for which the cooperative is to be
registered;
(c) the term of existence of cooperative;
(d) the area of operation and the postal address of its principal office;
(e) the names, nationality and the postal addresses of the registrants;
(f) the common bond of membership;
(g) The list of names of the directors who shall manage the cooperative; and
(h) 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. The articles of
cooperation 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.

Articles of Cooperation NOT Articles of Incorporation for Cooperatives

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 9 STEPS IN SETTING UP
A COOPERATIVE
SIXTH. Secure bonds for accountable officers. A surety bond should be
secured from a duly registered insurance or bonding company. Every
director, officer and employee handling funds, securities or property on
behalf of the cooperative shall be covered by this. The board of directors
shall determine the adequacy of such bonds.

SEVENTH. Execute Treasurers Affidavit. A sworn statement 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 should be executed and to be attached to the articles of
cooperation. The paid-up share capital shall not be less than Fifteen
thousand pesos (P15,000.00).

Authorized share capital

Subscribed share capital

Paid-up share capital

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 9 STEPS IN SETTING UP
A COOPERATIVE
EIGHTH. Complete the Pre-Membership Education Seminar (PMES). A
prospective member of a primary cooperative must have completed a
Pre-Membership Education Seminar (PMES). You may contact the
Regional or Extension Office which has jurisdiction over your proposed
cooperative for technical assistance.

NINTH. Register your cooperative with the CDA. Submit the following
required documents in four (4) copies, duly notarized:

1. Economic Survey;
2. Articles of Cooperation and By-Laws;
3. Surety bond of accountable officers;
4. Treasurer's Affidavit;
5. Approved Cooperative Name Reservation Slip;
6. Certificate of PMES;

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 WHERE TO REGISTER
A COOPERATIVE?

The CDA is the sole government agency mandated to register all types of
cooperatives. Its main office is located at 827 Aurora Blvd., Immaculate
Conception, Quezon City. For registration of primary cooperatives, this power
has been delegated to the Regional or Extension Offices.

Prospective cooperatives must submit their application to the CDA Extension

Office where the principal office of the cooperative is located.

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 CAPITAL SOURCES OF COOPERATIVES

1. Member’s share capital

2. Loans and borrowing including deposits
3. Revolving capital
4. Subsidies, donations, legacies, grants, aids and such other
assistance from any local or foreign institution whether public
or private. Upon dissolution, donated capital shall be subject
to escheat (given to the national government).

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 TAX TREATMENT OF COOPERATIVES
Cooperatives 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
transacting business with both members and non-members shall be
subject to another set of rules, but transactions with members shall
remain to be non-taxable.

AUDIT
Audit shall be conducted by an external auditor, who must be a member
of good standing of the Philippine Institute of Certified Public
Accountants, accredited by the CDA and the Board of Accountancy.

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 ALLOCATION OF
NET SURPLUS

Every cooperative shall determine their net surplus at the close of every fiscal
year and at such other times prescribed by the bylaws.

The net surplus SHALL NOT BE CONSTRUED AS PROFITS but as an excess of

payments made by members for the loans borrowed or for goods and services
availed by them from the cooperative.

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 ORDER OF DISTRIBUTION
OF NET SURPLUS (5)
1. An amount for the reserve fund which shall be at least 10% of the net
surplus, provided that in the first 5 years of operation this amount shall not be
less than 50% of the net surplus.

The reserve fund shall be used for the stability of the cooperative and to meet
net losses in it operations.

The reserve fund shall not be used for investments other than those allowed
by the Code. However such reserve fund may be used for any project that
expands the operations of the cooperative upon approval of the general
assembly.

Upon dissolution of the cooperative, the reserve fund shall NOT be distributed
among the members. It can however (a) be used as a usufructuary trust fund
for use by other cooperatives or (b) donated, contributed or otherwise
dispose of the amount for the benefit of the community where the
cooperative operates.
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 ORDER OF DISTRIBUTION
OF NET SURPLUS (5)
2. An amount for the education and training fund which shall be at least 10%
of the net surplus.

3. An amount for the community development fund which shall not be less
than 3% of the net surplus.

4. An optional fund, a land and building fund and any other necessary fund
the total of which shall not exceed 7% of the net surplus.

5. The remaining net surplus shall be made available to the members in the
form of interest on share capital and as patronage refunds.

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 HOW IS A COOPERATIVE
DISSOLVED?

1. Voluntary dissolution where no creditors are affected

2. Voluntary dissolution where creditors are affected
3. Involuntary dissolution
- violation
- insolvency
4. Order of the CDA
- registration by fraud
- established for an illegal purpose
- unlawful violation of the Code
- willful failure to operate on a cooperative basis
- failure to meet the required minimum number of members
5. Expiration of the Charter

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 FAILURE TO ORGANIZE A
COOPERATIVE

If a cooperative has not commenced business and its operation within 2 years
after the issuance of its certificate of registration OR has not carried on its
business for 2 consecutive years:

The CDA will send a formal notice for the cooperative to SHOW CAUSE as to
its failure to operate.

Failure of the cooperative to promptly provide a justifiable reason will warrant

the CDA to delete its name from the roster of registered cooperatives and
shall be deemed dissolved.

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 LIQUIDATION OF A COOPERATIVE

1. Charter expires on its own

2. Voluntary dissolution
3. Dissolution through a judicial proceeding

The cooperative shall continue to exist for 3 years after it is dissolved for the
purpose of prosecuting and defending suits, settlement and closure of it
affairs, disposition, conveyance and distribution of its properties and assets.

The cooperative may convey all of its properties to trustees for the benefit of
its members, creditors and other persons of interest.

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 MINIMUM VOTING REQUIREMENTS
FOR CERTAIN ACTS

Amendment of Articles of Cooperation or the Bylaws:

2/3 of all members with voting rights

Division of the Cooperative into 2 or more Cooperatives

¾ of all members with voting rights

Merger or Consolidation of Cooperatives

¾ of all members with voting rights

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 PENAL PROVISIONS

Anyone who uses the word “Cooperative” without being registered with the
CDA is punishable by imprisonment (5 years) and a fine (PhP20,000).

Electric cooperatives registered with the National Electrification

Administration (NEA) are exempt and may not register with the CDA.

Any person who willfully attempt in any manner to evade or defeat tax in
violation of the tax treatment/privileges provided under the Code is
punishable by imprisonment (2 years but not more than 4 years) and a fine
(not less than P30,000 but not exceeding P100,000), without prejudice to a
separate action to collect the taxes.

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Thank You!

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