CHAPTER XI

AGRARIAN REFORM COOPERATIVES

“ART. 87. Coverage. The provisions of this Chapter shall primarily govern agrarian reform cooperatives:
Provided, That the provisions of the other chapters of this Code shall apply suppletorily except insofar as
this Chapter otherwise provides.

“ART. 88. Definition and Purpose. An 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
61
Land consolidation or land management in areas covered by agrarian reform.
“An agrarian reform cooperative as defined shall be organized for any or all of the following purposes:
“(1) To develop an appropriate system of land tenure, land development, laud consolidation or land
management in areas covered by agrarian reform;
“(2) To coordinate and facilitate the dissemination of scientific methods of production, and provide
assistance in the storage, transport, and marketing of farm products for agrarian reform beneficiaries and
their immediate family, hereinafter referred to as ‘beneficiaries’;
“(3) To provide financial facilities to beneficiaries for provident or productive purposes at reasonable
costa;
“(4) To arrange and facilitate the expeditious transfer of appropriate and suitable technology to
beneficiaries and marginal farmers at the lowest possible cost;
“(5) To provide social security benefits, health, medical and social insurance benefits and other social and
economic benefits that promote the general welfare of the agrarian reform beneficiaries and marginal
farmers;

“(6) To provide non-formal education, vocational/technical training, and livelihood programs to

beneficiaries and marginal farmers;

“(7) To act as conduite for external assistance and services to the beneficiaries and marginal farmers;

“(8) To undertake a comprehensive and integrated development program in agrarian reform and
resettlement areas with special concern for the
Development of agro-based, marine-based, and cottage-based industries;

“(9) To represent the beneficiaries on any or all matters that affect their interest; and

“(10) To undertake such other economic or social activities as may be necessary or incidental in the
pursuit of the foregoing purposes.

“ART. 89. Cooperative Estates. Landholdings like plantations, estates or haciendas acquired by the State
for the benefit of the workers in accordance with the Comprehensive Agrarian Reform Program which
shall be collectively owned by the worker- beneficiaries under a cooperative set-up.

“ART. 90. Infrastructure. In agrarian reform and resettlement areas, the Government shall grant to
agrarian reform cooperatives preferential treatment in the construction, maintenance and management of
roads, bridges, canals, wharves, ports, reservoirs, irrigation systems, waterworks systems, and other
infrastructures with government funding. For this purpose, the Government shall provide technical
assistance, facilities and equipment to such agrarian reform cooperatives.

“ART. 91. Lease of Public Lands. The Government may lease public lande to any agrarian reform
cooperative for a period not exceeding twenty- five (25) years, subject to renewal for another twenty-five
(25) years only: Provided, That the application for renewal shall be made one (1) year before the
expiration of the lease: Provided, further, That such lease shall be for the exclusive use and benefit of the
beneficiaries and marginal farmers subject to the provisions of the Comprehensive Agrarian Reform
Program.

“ART. 92. Preferential Right. In agrarian reform areas, an agrarian reform cooperative shall have the
preferential right in the grant of franchise
And certificate of public convenience and necessity for the operation of public utilities and services:
Provided, That it meets the requirements and conditions imposed by the appropriate government agency
granting the franchise or certificate of public convenience and necessity. If there is an electric service
provider in the area, it shall, upon the request of an agrarian reform cooperative, immediately provide
electric services to the agrarian reform areas. If the electric service provider faile to provide the services
requested within a period of one (1) year, the agrarian reform cooperative concerned may undertake to
provide the electric services in the area through its own resources. All investments made by the said
agrarian reform cooperative for the electrification of the agrarian reform resettlement areas shall be the
subject of sale to the electric service provider once it takes on the service.

“ART. 93. Privileges. Subject to such reasonable terms and conditions as the Department of Agrarian
Reform’ (DAR) and the Authority may impose, agrarian reform cooperatives may be given the exclusive
right to do any or all of the following economic activities in agrarian reform and resettlement areas:
“(1) Supply and distribution of consumer, agricultural, aqua-cultural, and industrial goods, production
inputs, and raw materials and supplies, machinery, equipment, facilities and other services and
requirements of the beneficiaries and marginal farmers at reasonable prices;

“(2) Marketing of the products and services of the beneficiaries in local and foreign markets;

“(3) Processing of the members’ products into finished consumer or industrial goods for domestic
consumption or for export;

“(4) Provision of essential public services at cost such as power, irrigation, potable water,

Passenger and/or cargo transportation by land or sea, communication services, and public health and
medical care services;

“(5) Management, conservation, and commercial development of marine, forestry, mineral, water and
other natural resources subject to compliance with the laws and regulations on environmental and
ecological controls; and

“(6) Provision of financial, technological, and other services and facilities required by the beneficiaries in
their daily lives and livelihood.

“The Government shall provide the necessary financial and technical assistance to agrarian reform
cooperatives to enable them to discharge effectively their purposes under this article. The DAR, the
Authority and the BSP shall draw up a joint program for the organization and financing of the agrarian
reform cooperatives subject of this Chapter. The joint program shall be geared towards the beneficiaries’
gradual assumption of full ownership and management control of the agrarian reform cooperatives.

“ART. 94. Organization and Registration. Agrarian reform cooperatives may be organized and registered
under this Code only upon prior written verification by the DAR to the effect that the same is needed and
desired by the beneficiaries; results of a study that has been conducted fairly indicate the economic
feasibility of organizing the same and that it will be economically viable in its operations; and that the
same may now be organized and registered in accordance with the requirements of this Code.

“The Authority, in consultation with the concerned government agencies and cooperative sector, shall
issue appropriate rules and regulations pertaining to the provisions of this Chapter.”
SEC 12. Articles 96, 97 and 98 of Chapter XII on the Special Provisions on Public Service Cooperatives
of the same Code are hereby transferred to another chapter. Chapter XII as amended shall now read, as
follows:
CHAPTER XII COOPERATIVE BANKS

“ART. 95. Governing Law. The provisions of this Chapter shall primarily govern cooperative banks
registered under this Code and the other provisions of this Code shall apply to them only insofar as they
are not inconsistent with the provisions contained in this Chapter.

“ART. 96. Supervision. The cooperative banks registered under this Code shall be under the supervision
of the BSP. The BSP, upon consultation with the Authority and the concerned cooperative sector, shall
formulate guidelines regarding the operations and the governance of cooperative banks. These guidelines
shall give due recognition to the unique nature and character of cooperative banks. To this end,
cooperative banks shall provide financial and banking services to its members.

“ART. 97. Organization, Membership and Establishment of a Cooperative Bank. (1) Cooperative
organizations duly established and registered under this Code may organize a cooperative bank, which
shall likewise be considered a cooperative registrable under the provisions of this Code subject to the
requirements and requisite authorization from the BSP. Only one cooperative bank may be established in
each province: Provided, That an additional cooperative bank may be established in the same province to
cater to the needs of the locality depending on the economic conditions of the province as may be
determined by the BSP: Provided, further, That the additional cooperative bank shall be located in the city
ormunicipality other than the city or municipality where the first cooperative bank is located.

“(2) Membership in a cooperative bank shall either be regular or associate. Regular membership shall be
limited to cooperative organizations which are holders of common shares of the bank. Associate momhers
are those subscribing and holding preferred shares of the bank, which may include but are not limited to
the following:

“(a) Individual members of the bank’s member-primary cooperatives; and

“(b) Samahang Nayon and Municipal Katipunan ng mga Samahang Nayon (MKSN) which held common
shares of cooperative banks prior to the effectivity of this Act shall apply for conversion to full-fledged
cooperatives in order to maintain their status as regular members of cooperative banks: Provided, That
they shall notify the cooperative bank concerned of their intention. To convert within a period of ninety
(90) days from the effectivity of this Act. Samahang Nayon and MKSN are hereby given a period of one
(1) year from the effectivity of this Act to complete their conversion as cooperatives. Cooperative banks
shall exert reasonable offorts to inform their member Samahang Nayon and MKSN to finally convert or
to give the notice of conversion within the prescribed period. Upon the failure of the Samahang Nayon
and MKSN to finally convert to a full-fledged cooperative within the maximum period of one (1) year,
the cooperative bank concerned may convert the common shares held by such associations to preferred
shares.
“(3) The articles of cooperation and bylaws of a cooperative bank, or any amendment thereto, shall be
registered with the Authority only when accompanied by a certificate of authority issued by the BSP,
under its official seal.

ART. 98. Administration of Cooperative Banks. To maintain the quality of bank management and accord
appropriate protection to depositors and the public in general, the BSP shall prescribe the fit and proper
qualifications of bank directors and officers for the purposes of this article, giving due recognition to the
unique nature and character of cooperative banka.

“Notwithstanding the provisions of this Code, the number, composition and term of the board of directors
shall be defined in the articles of cooperation and bylaws of the cooperative bank.

“ART. 99. Quorum and Voting Rights. – The quorum requirement for general assembly meetinge, whether
special or regular, shall be one-half plus one of the number of voting shares of all the members in good
standing. In the meetings of the board of directors, whether special or regular, the quorum requirement
shall be one-half plus one of all the members of the board of directors. Each director shall only have one
vote.

“Notwithstanding the provisions of this Code to the contrary, the quorum requirement for amendments of
articles of cooperation and bylaws shall be three-fourths (3/4) vote of all the members with voting rights,
present and constituting a quorum. All other voting requirements shall be as prescribed by the BSP.

“The voting rights of members shall be proportionate to the number of their paid-up shares.

“ART. 100. Powers, Functions and Allied Undertakings of Cooperative Banks. – A cooperative bank shall
primarily provide financial, banking and credit services to cooperative organizations and their members.
However, the BSP may prescribe appropriate guidelines, ceilings and conditions on borrowings of a
cooperative organization from a cooperative bank.

“The powers and functions of a cooperative bank shall be subject to such rules and regulations as may be
promulgated by the BSP.

“In addition to the powers granted by this Code and other existing laws, any cooperative bank may
perform any or all of the banking services offered by other types of banks subject to the prior approval of
the BSP.

“ART. 101. Capital Requirements of Cooperative Banks. (1) A cooperative bank shall have a minimum
paid-up capital in such amount as may be required by the BSP.
“The BSP may prescribe rules and regulations on the types of shares a cooperative, bank may issue,
including the terms thereof and rights appurtenant thereto to determine compliance with laws and
regulations govoriiing capital and equity structure of banks: Provided, That cooperative banks shall issue
par value shares only.

“(2) The Barrio Savings Fund (BSF) and Barrio Guarantee Fund (BGF) collected/deducted by various
banks throughout the country from the loan proceeds of farmer borrowers who were members of
cooperatives and Samahang Nayon in compliance with Presidential Decree No. 175 and accompanying
letters of instruction, which are still floating and outstanding either as active or dormant deposit accounts
in the books of those banks, shall be deposited to the cooperative bank located in the province where the
depository banks of the BSF and BGF are located, or if there is no cooperative bank in the province, to
the cooperative bank nearest to the province. The BSP, in coordination with the Authority, shall come up
with the implementing guidelines on how to credit the owners of the funds.

Those funds whose owners could not be located or identified shall be subject to escheat.

“ART. 102. Privileges and Incentives of Cooperative Banks. The cooperative banks registered under this
Code shall be given the same privileges and incentives granted to the rural banks, private development
banks, commercial banks, and all other banks to rediscount notes with the BSP, the Land Bank of the
Philippines, and other government banks without affecting in any way the provisions of this Code.

“(1) Subject to the approval of the BSP, a cooperative bank shall publish a statement of its financial
condition, including those of its subsidiaries and affiliates, in such terms understandable to the layman
and in such frequency as may be prescribed by the BSP, in English or Filipino, at least once every quarter
in a newspaper of local circulation in the city or province where the principal office is located or, if no
newspaper is published in the same province, then in a newspaper published in the nearest city or
province or in a newspaper of general circulation. The BSP, however, may allow the posting of the
financial statements of the cooperative bank in conspicuous places it may determine in lieu of the
publication required in the preceding sentence when warranted by the circumstances.

“However, in cases of foreclosure of mortgages covering loans granted by a cooperative bank, and the
execution of judgments thereon involving real properties and levied upon by a sheriff, it shall be exempt
from publication requirement where the total amount of the loan, excluding interest and other charges due
and unpaid, does not exceed Two hundred fifty thousand pesos (P250,000.00) or such amount as the BSP
may prescribe, as may be warranted by the prevailing economic conditions and by the nature and
character of the cooperative banks. It shall be sufficient publication in suchcases if the notice of
foreclosure and execution of judgment are posted in conspicuous areas of the cooperative bank’s
premises, the municipal hall, the municipal public market, the barangay hall, or the barangay public
market, if there be any, where the property mortgaged is situated, within a period of sixty (60) days
immediately praceding the public auction or the execution of judgment. Proof of publication as required
herein shall be accomplished by an affidavit of the sheriff or officer conducting the foreclosure sale or
execution of judgment, and shall be attached to the record of the case.
“(2) A cooperative bank shall be allowed to foreclose lands mortgaged to it subject to the provisions of
Republic Act No. 6657, otherwise known as the Comprehensive Agrarian Reform Law of 1988.

“ART. 108. Assistance to Cooperative Hanks. In accordance with existing policies, government agencies,
government-owned or controlled corporations and financial institutions shall provide assistance, technical
or otherwise, to cooperative banks to permit them to grow, develop and perform their role in countryside
development towards a sustainable national economic development. Whenever a cooperative bank
organized under this Code is in a state of continuing inability or unwillingness to maintain a period of
liquidity, the BSP may designate one of its officials or a person of recognized competence, preferably
with experience in cooperative banking and finance, as conservator of the said bank pursuant to the
appropriate provisions of existing banking laws.

“ART. 104. Applicability of Banking Laws and Regulations. With respect to the provisions and
governance of the cooperative banks, the provisions of the banking laws, rules and regulations shall
prevail, notwithstanding Section 71 of Republic Act No. 8791, otherwise known as the General Banking
Act of 2000.
The BSP and the Authority, in consultation with the concerned cooperative sector, shall issue appropriate
rules and regulations pertaining to the provisions of this Chapter.”

SEC. 13. Articles 99, 100, 101, 102, 103, 104, 105, 106, 107, 108 and 109 of Chapter XIII on Special
Provisions Relating to Cooperative Banks of the same Code are hereby transferred to another chapter.
Chapter XIII as amended shall now read, as follows:

CHAPTER XIII INSURANCE COOPERATIVE

“ART. 105. Cooperative Insurance Societies. Existing cooperatives may organize themselves into a
cooperative insurance entity for the purpose of engaging in the business of insuring life and property of
cooperatives and their members.

“ART. 106. Types of Insurance Provided; - Under the cooperative insurance program established and
formed by virtue of the provisions of this Code, the cooperative insurance societies shall provide ita
constituting members different types of insurance coverage consisting of, but not limited to, life insurance
with special group coverage, loan protection, retirement plans, endowment with health and accident
coverage, fire insurance, motor vehicle coverage, bonding, crop and livestock protection and equipment
insurance.

“ART. 107. Applicability of Insurance Laws. The provisions of the Insurance Code and all other laws and
regulations relative to the organization and operation of an insurance company shall apply to cooperative
insurance entities organized under this Code. The requirements on capitalization, investments and
reserves of insurance firms may be liberally modified upon consultation with the Authority and the
cooperative sector, but in no case
May the requirements be reduced to less than half of those provided for under the Insurance Code and
other related laws.

“ART. 108. Implementing Rules. The Insurance Commission and the Authority, in consultation with the
concerned cooperative sector, shall issue the appropriate rules and regulations implementing the
provisions of this Chapter,”

SEC. 14. Articles 110, 111, 112, 113 and 114 of Chapter XIV on Special Provisions relating to Credit
Cooperative of this Code are hereby transferred to another chapter. Chapter XIV as amended shall now
read, as follows:

CHAPTER XIV PUBLIC SERVICE COOPERATIVES

“ART. 109. Definition and Coverage. A public service cooperative, within the meaning of this Code, is
one organized to ronder public services as authorized under a franchise or certificate of public
convenience and necessity duly issued by the appropriate government agency. Such services may include
the following:

“(1) Power generation, transmission, and/or distribution;

“(2) Ice plants and cold storage services;

“(3) Communication services including telephone, telegraph, and telecommunications;

“(4) Land and sea transportation cooperatives for passenger and/or cargo. Transport cooperatives
organized under the provisions of Executive Order No. 898, Series of 1983, shall be governed by this
Chapter;

“(5) Public markets, slaughterhouses and other similar services; and

(6) Such other types of public service as may in by any cooperative. Such cooperative be engaged in by
primarily governed by this Chapter and the general provisions of this Code insofar as they may be
applicable unless they are inconsistent herewith.
“ART. 110. Registration Requirements. Unless otherwise provided in this Code, no public service
cooperative shall be registered unless it satisfies the following requirements:

“(1) Its articles of cooperation and bylaws provide for the membership of the users and/or producers of
the service of such cooperatives; and

“(2) Such other requirements as may be imposed by the other pertinent government agencies concerned.
In case there are two (2) or more applicants for the same public service franchise or certificate of public
convenience and necessity, all thinga being equal, preference shall be given to a public service
cooperative.

“ART. 111. Regulation of Public Service Cooperatives. (1) The internal affairs of public service
cooperatives such as the rights and privileges of members, the rules and procedures for meetings of the
general assembly, board of directors and committees; for the election and qualifications of officers,
directors, and committee members; allocation and distribution of surpluses; and all other matters relating
to their internal affairs shall be governed by this Code.

“(2) All matters relating to the franchise or certificate of public convenience and necessity of public
service cooperatives such as capitalization and investment requirements, equipment and facilities,
frequencies, rate-fixing and such other matters affecting their public service operations shall be governed
by the proper government agency concerned.
“(3) The Authority and the proper government agency concerned shall jointly issue the necessary rules
and regulations to implement this Chapter.

“(4) The Authority shall establish a committee for the monitoring of transportation service cooperatives
composed of representatives from the Authority, the Land Transportation Franchising and Regulatory
Board (LIFRB), the Land Transportation Office (LTO), Office of Transport Cooperatives (OTC), other
concerned government agencies, as may be necessary, and the National Federation of Transportation
Cooperatives. A local monitoring committee shall likewise be established at the extension offices of the
Authority to facilitate the monitoring of transportation cooperatives.

“ART. 112. Engagement in Allied Businesses by Transportation Service Cooperatives, Subject to

pertinent national laws and local ordinances, primary transportation service cooperatives including
secondary and tertiary federation of cooperatives may engage in a business related to transportation
services, including but not limited to:

“(1) Importation, distribution and marketing of petroleum products in accordance with existing laws;

“(2) Operation of gasoline stations and transportation service centers;

“(3) Importation, distribution and marketing of spare parts and supplies; and

“(4) Marketing of vehicle/drivers insurance policies.

“ART. 113. Renewal of Franchise and Vehicle Registration. Renewals of franchise and vehicle
registration shall be granted to transportation service cooperatives: Provided, That such cooperative
Presents a certificate of good standing issued by the Authority, OTC, and the local government unit
concerned as proof that it has continuously provided the required public transportation services.

“The Authority, in consultation with the concerned government agencies and cooperative sector, shall
issue appropriate rules and regulations pertaining to the provisions of this Chapter.”

SEC. 15. Articles 115, 116, 117 and 118 of Chapter XV on Special Provisions relating to Cooperative
Insurance Societies of the same Code are hereby transferred to another chapter. Chapter XV as amended
shall now read, as follows:

CHAPTER XV CREDIT COOPERATIVES

“ART. 114. Coverage. This Chapter shall apply to credit cooperatives and other cooperatives, including
multipurpose cooperatives, that provide savings and credit to their members only. The rest of the
provisions of this Code shall apply to them insofar as the same are not inconsistent with the provisions of
this Chapter.

“ART. 115. Definition and Objectives.

Credit cooperative is a financial organization owned and operated by its members with the following
objectives:

“(1) To encourage savings among its members;

“(2) To create a pool of such savings for which loans for productive or provident purposes may be granted
to its members; and
“(3) To provide related services to enable its members to maximize the benefit from such loans.
76

“ART. 116. Organization and Registration. Credit cooperatives shall be organized and registered in
accordance with the general provisions of this Code.

“ART. 117. Organizational Linkage. Credit cooperatives may organize chapters or subsidiaries, or join
leagues and federations for the purpose of providing commonly needed essential services

Including but not limited to the following:

“(1) Interlending of surplus fund;

“(2) Mutual benefits;

“(3) Deposit guarantee;

“(4) Bonding;

“(5) Education and training;

“(6) Professional and technical assistance;

“(7) Research and development;

“(8) Representation; and

“(9) Other services needed to improve their performance.

“Existing support organizations such as federations of credit cooperatives, credit cooperatives at the
provincial, regional and national levels may continue as such under this Code.”
AX SEC. 16. A new Article is inserted in Chapter XV on Credit Cooperatives and shall now read, as
follows:

“ART. 118. Conversion of Credit Cooperatives to Financial Service Cooperatives. Existing credit and
multipurpose cooperatives with savings and credit facilities shall formally inform the Authority of its
intention to continue performing its present
Functions. Should the said cooperatives decide to exercise enhanced functions, it shall notify the
Authority and satisfy the requirements for conversion to financial service cooperative.”

SEC. 17. A new Chapter on Financial Service Cooperatives shall be inserted in this Chapter and shall
read, as follows:

CHAPTER XVI

FINANCIAL SERVICE COOPERATIVES

“ART. 119. Definition and Functions of Financial Service Cooperatives. A financial service cooperative is
a financial organization owned and operated by its members and authorized to provide the following
services, exclusively to its members:

“(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.

“The articles of cooperation and bylaws of any financial service cooperative, or any amendment thereto,
shall be registered with the Authority only if accompanied by a certificate of authority issued by the BSP,
under its official seal.

“The authority granted under this provision may be revoked by the BSP if any of the grounds for
receivership mentioned under Section 30 of Republic Act No. 7653 and Sections 53 and 56 of Republic
Act No. 8791 is present or if the financial service cooperative has willfully violated this Code or any of
the related rules and regulations.

The BSP shall issue a coase and desist order to cooperatives exercising the functions of a financial service
cooperative without authority from the BSP.
“The BSP may charge equitable rates or fees, as may be prescribed by the Monetary Board for licensing,
examination and other services which it renders under this Code.

“Upon the favorable certification of the BSP and the prior approval of the Authority, a cooperative, the
main purpose of which is to perform savings and credit functions, may convert to financial service
cooperative subject to the required qualifications and procedures provided under this Code and in the
implementing rules and regulations.

“ART. 120. Membership and Affiliation. – A financial service cooperative shall have two (2) typeв of
members:

“(1) Regular members, who are natural persons; and

“(2) Associate members, who are natural persons but who do not immediately qualify under the
requirements for membership set out in the bylaws of the cooperative. All associate members who are
natural persons shall be given two (2) years to become regular membora. Failure to convert within said
period shall mean automatic withdrawal of their associate membership. They may, however, re-apply as
regular members after two (2) years.

“Minors who are dependents of regular members can qualify as associate members. When they reach the
age of majority and within two (2) years from acceptance of their associate membership, they have the
option to convert into regular members: As associate members, they may open accounts, deposit funds
and withdraw from their account, subject to the bylaws and rules of the cooperative, and the rules and
regulations of theAuthority, notwithstanding the provisions of existing laws to the contrary.

“ART. 121. Regulation and Supervision. The Authority shall exercise lead regulatory powers and
supervision over the operations of the financial service cooperatives, to wit:

“(1) Issue rules and regulations for the safe and sound conduct of operations of financial service
cooperatives;

“(2) Establish standards of operation for uniform application to all financial service cooperatives;

“(3) Prescribe ratios, ceilings, limitations, or other forms of regulation on the different types of accounts
and practices of financial service cooperatives, which shall, conform to internationally
Accepted standards; “(4) Investigate to determine whether a financial service cooperative is conducting
its business in a safe and sound manner;

“(5) Conduct regular examination of the books of accounts, records and other documents of financial
service cooperatives;

“(6) Inquire into the solvency and liquidity of a financial service cooperatives;

“(7) Prescribe appropriate fees for supervision and examination of financial service cooperatives to,
among others, monitor and oversee that existing laws and regulations are complied with;

“(8) Pass upon and review the qualifications and disqualifications of individuals elected or appointed
directors or officers and disqualify those found unfit;

(9) Disqualify, suspend or remove any director or officer who commits or omite an act which render him
unfit for the position;

“(10) Select, designate and deputize federations, through an approved accreditation criteria, that will
supervise primary financial service cooperatives and issue basic guidelines therefor;

“(11) Require the submission of relevant reports from the deputized supervisor;

“(12) Provide remedial measures in the operations of financial service cooperatives that are in a state of
continuing inability or unwillingness to maintain a period of liquidity at the request of the deputized
supervisor or when the deputized supervisor fails to perform its functions;

“(13) Accredit external auditors in accordance with standards for audit and financial reporting in
cooperation with the PICPA; and

“(14) Appoint a conservator or a roceiver as may be necessary subject to the rules and regulations to be
promulgated by the Authority in coordination with the BSP, taking into consideration the grounds, powers
and procedures under Sections 29 and 30 of Republic Act No. 7653 as may be deemed appropriate to
financial service cooperatives.

“The Authority shall include in its rules and regulations, appropriate sanctions and penalties, on the
financial service cooperatives, its members, officers and responsible persons, for any action that fails to
adhere to sound and prudent management practices or are inconsistent with the provisions of this Code,
other applicable laws on cooperatives, rules, regulations, circulars or orders issued by the Authority, and
require the cooperative to undertake corrective or remedial measures relative thereto.
The BSP Is authorized to conduct risk-based supervision and examination of financial service
cooperatives as it may deem necessary.

“ART. 122. Promulgation of Rules and Regulations. The BSP, in coordination with the Authority, shall
prescribe the appropriate prudential rules and regulations applicable to the financial service cooperatives.

“Subject to the regulations of the BSP, the banking laws, rules and regulations shall have suppletory
application to financial services cooperatives: Provided, however, That the provisions on access to
borrowings or financial assistance to be extended by the BSP or the Philippine Deposit Insurance
Corporation (PDIC) shall not apply to financial service cooperatives: Provided, further, That the deposit
liabilities of the financial service cooperatives shall not be insured by the PDIC.

“ART. 123. Financial Service Cooperative Federations. Financial service cooperatives may organize
themselves into financial service cooperative federations, and register their federation with the Authority.
These financial service cooperative federations may be deputized by the Authority as the supervisor of
their members, and they shall have the following functions:

“(a) Develop standards and provide services for the benefit of its affiliates and their members in
accordance with the rules and regulations of the Authority;

“(b) Define common objectives and coordinate activities for the financial service cooperative federation;

“© Establish and administer funde such as liquidity fund, loan fund, investment fund, stabilization fund
and such other funds;
(d) Establish a savings guarantee system for the protection of their affiliates’ member-depositors within
three (3) years from the approval of this Code;

“€ Exercise on-site and off-site supervisory power over ita members;

“Provide remedial assistance to ita members concerning their operations and management;

“() Act as the liquidator and when applicable, sequester properties to satisfy an obligation secured by a
mortgage when authorized by the Authority; and
“(h) Transmit relevant and required information regarding the operations and performance of member-
cooperatives to the Authority.

“The Authority and other government agencies, government-owned or controlled corporatione and
government financial institutions shall provide technical and such other assistance that may be allowed by
their charters to financial service cooperative federations for the establishment and/or strengthening of
their respective cooperative savings guarantee system. The technical assistance to be provided shall
include, among others, training supervision and examination.

“ART. 124. Designation of Existing Unit at the Cooperative Development Authority to Perform
Regulatory and Supervisory Functions. Within six (6) months from the approval of this Code, the
Authority shall designate the unit to formulate and implement the necessary regulations, rules, policies,
guidelines and standards applicable solely to financial service cooperatives and deputized federations in
the performance of their savings, credit
And such other related enhanced financial service operations.

“The Department of Finance, the BSP and other concerned government agencies shall provide technical
and training support for the effective and efficient implementation of the regulatory and supervisory
functions and responsibilities of the Authority.

“ART. 125. Prohibition. The terms ‘credit cooperative,’ ‘financial service cooperative’, and ‘financial
service cooperative federation’ shall be used exclusively by those who are duly registered under this.
Code, and no person, group of persons, or organizations shall use the said torms unless duly registered
with the Authority. Violations of this prohibition shall be punishable in accordance with Article 140 of
this Code.”

SEC. 18. A new Chapter on Electric Cooperativen shall be inserted and shall read, as follows:

CHAPTER XVII ELECTRIC COOPERATIVES

“ART. 126. Coverage. The provisions of this Code shall apply to all electric cooperatives registered with
the Authority. This shall also cover new distribution utilities that will register with the Authority.

“Electric cooperatives may undertake power generation utilizing renewable energy sources, including
hybrid systems, acquisition and operation of subtransmission or distribution as its primary purposes.

“ART. 127. Registration of Electric Cooperatives. The registration of an electric cooperative with the
Authority under this Code shall be submitted for approval to the members through
A referendum, called for the purpose as provided for under Articles 128 and 129 of this Code.

“ART. 128. Voting Requirement for Registration. In compliance with the referendum as a voting
procedure, the required number of votes for registration with the Authority shall be twenty percent (20%)
of all members in good standing.

“ART. 129. Documents to be Submitted for Registration with the Authority. For purposes of registration,
electric cooperatives shall submit the following documenta:

“(a) Copy of the board resolution certifying to the result of the vote approved through a referendum
approving the registration of the cooperative with the Authority in compliance with Article 128;

“(b) Certified copy of the articles of incorporation/cooperation and bylaws as required by the Authority;

“© Duly audited financial statements for the past two (2) years;

“(d) List of names of incumbent board of directors and their addresses certified by the board secretary
arid attested to by the chairperson;

“€ Within six (6) months from the registration, the treasuror shall submit a sworn statement of the
authorized share capital, the subscribed share capital of members, and the amount of paid-up share capital
of members and the amount of paid-up share capital received by the treasurer; and

“(f) Bonds of accountable officers.

“ART. 130. Registration Options of Electric Cooperatives. Electric cooperatives registered with

The National Electrification Administration (NEA) under Presidential Decree No. 269, as amended,
which opt not to register with the Authority are allowed to retain the word ‘cooperative’ in their registered
names: Provided, That they shall not be entitled to the benefits and privileges under this Code.

“ART. 131. Role of the Energy. Regulatory Commission. All rates and tariffs of electric cooperatives
registered under the Authority shall be subject to the rules on application and approval of and by the
Energy Regulatory Commission for distribution utilities.
“ART. 132. Effects of Registration with the Authority. (1) Upon the effectivity of this Code, electric
cooperatives that are duly registered with the Authority, and issued a certificate of registration, shall no
longer be covered by Presidential Decree No. 269, as amended by Presidential Decree No. 1645:
Provided, That electric cooperatives registered with the Authority shall now be covered by the provisions
of this Code as well as future rules and issuances of the Author