COOPERATIVE CODE OF THE PHILIPPINES (RA 6938 as

amended by RA 9520)
 Law that governs cooperatives

Cooperative – 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

Cooperative Development Authority (CDA)

 Implementing agency
 Agency charged with the authority and responsibility for implementing the program of
cooperatives development
 Responsible for promotion, registration, development, and evaluation of cooperatives

Basic Purpose of Cooperative: to foster the creation and growth of cooperatives

PURPOSES OF COOPERATIVE
 Encourage thrift and savings mobilization among its members
 Generate funds and extend credit to the members
 Encourage among members systematic production and marketing
 Provide goods and services and other requirements to the members
 Develop expertise and skills among members
 Acquire lands and provide housing benefits
 Insure against losses
 Promote and advance economic, social and educational status
 Establish, own, lease, or operate cooperative banks, cooperative wholesale and retail
complexes, insurance and agricultural/industrial processing enterprise, and public
markets
 Coordinate and facilitate the activities of cooperatives
 Advocate for the cause of cooperative movements
 Ensure the viability of cooperatives
 Encourage and promote self-help or self-employment
 Undertake any and all other activities

OBJECTIVES OF COOPERATIVE
 Primary: help improve the quality of life of its members
 Provide goods and services to its members
 Provide optimum social and economic benefits
 Teach them efficient ways of doing things in a cooperative manner
 Propagate cooperative practices and new ideas in business and management
 Allow the lower income and less privileged groups to increase their ownership
  Cooperate with the government, other cooperatives, and other people oriented
organizations

COOPERATIVE PRINCIPLES
1) Voluntary and open membership – membership is available to all
2) Democratic member control – controlled by their members
3) Member economic participation – members contribute equitably; there is a
maximum limit which is 10% of the share capital of the cooperative
4) Autonomy and independence – controlled by their members
5) Cooperation among cooperatives – they work together
6) Cooperative education – make provision for the education of their members
7) Concern for community – they work for sustainable development

 Principle of Subsidiarity – there should be no government intervention as much as

possible
 Principle of Transparency – highlights one of the backbones of democratic societies

 Articles of Cooperation – legal document signed by the organizers stating the name, goals
and objectives, place of operation of the cooperative and others

 Authorized share capital – amount approved by CDA to finance its business activities

 By-laws of the Cooperative – rules adopted by cooperative for the management and
regulation of its members and activities

 Dynamic – having a lot of ideas and enthusiasm; active

 Economic feasibility – practicability or workability of a cooperative

 Economic survey – describes the structure, purposes and economic feasibility of the
cooperative

 Paid-up shares – subscribes shares paid by a member

 Pledged shares – number of shares that a member will subscribe

 Thrift – careful use of money

 Member – includes a person, either natural or juridical that has been admitted by the
cooperative

 General Assembly – full membership of the cooperative duly assembled for the purpose of
exercising all the rights
 Board of Directors – body entrusted with the management of the affairs of the cooperative

 Committee – any body entrusted with specific functions and responsibilities

 Registration – operative act granting juridical personality to a proposed cooperative;

evidenced by certificate of registration

 Universally accepted principles – principles adhered to worldwide by cooperatives

 Representative assembly – full membership of a body of representatives elected by each

of the sectors, chapter or district

 Officers of the cooperative – members of the BOD, members of committee

 Social audit – assessing social impact and ethical performance vis-à-vis its stated mission,
vision, goals

 Performance audit – audit on efficiency and effectiveness of the cooperative as a whole

TYPES OF COOPERATIVES
 Single-line/Single purpose – those undertaking activities related to its main line of
business/purpose
 Service – provides any type of service to its members
 Subsidiary – 3 or more primary cooperatives doing the same line of business
 Credit – savings and lending services
 Consumer – procure and distribute commodities
 Producer – processing raw materials into finished goods for sale by the cooperative
 Marketing – supply of production inputs and markets their products
 Multi-purpose – combines 2 or more business activities
 Advocacy – promotes and advocates cooperativism
 Agrarian reform – agrarian reform beneficiaries
 Cooperative bank – provides wide range of financial services
 Dairy – engaged in production of fresh milk
 Education – for purpose of owning and operating licensed educational institutions
 Electric – for undertaking power generations
 Financial service – savings and credit services and other financial services
 Fishermen – organized by marginalized fishermen
 Health services – provides medical, dental and other health services
 Housing
 Insurance – insuring the life and properties of their members
 Transport – land and sea transportation
  Water service – organized to own, operate and manage water systems
 Workers – provide employment and business opportunities

Cooperative banks
General rule: Only one cooperative bank may be established in each province
Exception:
1. Economic conditions of the province
2. Established in another city/municipality

CATEGORIES OF COOPERATIVES
1) Primary – members are natural persons of legal age
2) Secondary – members are primaries
3) Tertiary – member are secondaries; called as federation and unions

Federation of cooperatives
 3 or more primary cooperatives doing same line of business

Functions:
 Carry on any cooperative enterprise that complements or supplements but does
not conflict the business/economic activities of its members
 Carry on, encourage, and assist educational and advisory work
 Render services and facilitate implementation of bookkeeping, accounting and
other systems
 Print, publish, and circulate newspaper or other publication
 Coordinate and facilitate activities
 Enter into joint ventures
 Perform other functions

Cooperative Unions
 Registered cooperatives and/or federations organized to represent the interest and
welfare of all types of cooperatives

Functions:
 Represent its member organization
 Sponsor studies
 Raise funds

Principal office – registered head office indicated in articles of cooperation

Branch office – office outside the principal office
ORGANIZATION AND REGISTRATION
Who may organize?
 15 or more natural persons
 Filipino citizens
 Of legal age
 Having common bond of interest
 Residing or working In the intended area of operation
 Prospective member of a primary cooperative must have completed Pre-Membership
Education Seminar

Single purpose cooperative may transform to a multipurpose or may create subsidiaries only
after at least 2 years of operation.

Minimum paid up share capital

 Primary – P15,000; par value shall not exceed P1,000
 Multipurpose – P100,000 or as required by the feasibility study

Other requirements: Preferred share capital shall not exceed 25% of total authorized share
capital

PRE-QUALIFICATION REQUIREMENTS
Principal office
 Primary – P10 million
 Secondary – P15 million
 Tertiary – P20 million

Branch office
 Primary – P5 million
 Secondary – P10 million
 Tertiary – P15 million

LIABILITY OF COOPERATIVES: limited liability

TERM OF COOPERATIVES
 Original term – 50 years from date of registration
 Extension – 50 years
 Limitation – no extension earlier than 5 years prior to original or subsequent expiry
date

ARTICLES OF COOPERATION
 All cooperatives shall file with the CDA the articles of cooperation
 Shall be signed by each organizers
SUBSCRIPTION REQUIREMENT
 Authorized share capital – at least 25% subscribed
 Subscribed share capital – at least 25% paid
 Paid up share capital – at least P15,000

COOPERATIVE BY-LAWS – shall be filed at the same time as the articles of cooperation

REGISTRATION
 Certificate of registration
 Shall be given by CDA within 60 days from filing; otherwise, deemed approved
 If denied, appealed in the Office of the President within 90 days
 Shall be given by Office of Pres. within 90 days; otherwise, deemed approved
 Conclusive evidence
 Processing fee:
 Primary: P500
 Secondary: P2,000
 Tertiary: P3,000

VOTING REQUIREMENTS
 Amendment of Articles of Cooperation and By-laws – 2/3 of all members with voting
rights
 Amendments shall take effect upon approval by CDA or within 30 days from
date of filing if not acted upon
 Division of cooperatives – 3/4 of all members with voting rights
 Termination of membership – majority of all members of BOD
 Regular votes – 3/4 of all the members with voting rights
 Compensation – majority vote of members with voting rights
 Ratification of voidable contracts entered by directors, officers, or committee members –
3/4 of all members with voting rights
 Ratification of disloyalty of Director – 3/4 of all members with voting rights
 Removal of Officers – 3/4 of votes of regular members present and constituting a
quorum

MEMBERSHIP
 Regular members – entitle to all rights including voting right
 Associate members – has no right to vote nor be voted
 Can be considered as regular member if:
a) Has been a member for 2 continuous years
b) Patronizes the cooperative
c) Signifies his intention of becoming regular member
 Laboratory cooperative – organized by minors
 Guardian cooperative – affiliated with laboratory cooperative
Can government officers and employees join a cooperative?
 Officer/employee of CDA – disqualified to be elected or appointed
 All elected officials of government – ineligible to become officers and directors
 Government employee/official may discharge his duties as member
 Party list representative – disqualification does not extend

RIGHTS AND DUTIES OF MEMBERS

a) Participate in decision-making
b) Vote on all matters
c) Seek any elective position
d) Receive interest on capital and patronage refund
e) Inspect and examine books of accounts
f) Exercise all rights and privileges

Who may become member?

 Applicant will apply to the BOD and make payments
 In case of refusal, appeal to General Assembly within 30 days
 General assembly will make Grievance Committee and will make decision within 30
days; fails to decide – deemed approved

Benefits of being a member

 Economic benefits
 May develop habit of thrift and wise use of money
 Can avail loans at reasonable rate of interest
 Social benefits
 Develop awareness in solving common problems
 Develop feeling of belongingness
 Inculcate participation

WITHDRAWAL OF MEMBERSHIP
 Any valid reason
 60 days notice to BOD
 Entitled to a refund of share capital contribution and other interests
 Valid grounds for termination:
 Primary: death or insanity
 Secondary/Tertiary: insolvency or dissolution

TERMINATION OF MEMBERSHIP
 May be terminated by a vote of the majority of all the members of BOD
 Causes/grounds:
o Member has not patronized the cooperative
 o Continuously failed to comply with his obligations
o Acted in violation of the by-laws and rules
o For any act or omission injurious or prejudicial
 Decision of BOD shall be in writing
 The termination can be appealed within 30 days from receipt
 GA may create and appeal and Grievance Committee and committee is given 30 days
to decide; no decision – deemed approved (still a member)
ADMINISTRATION
Composition of General Assembly – composed of members in good standing who are:
 Paid membership fee and at least one share
 Pay his dues on time
 Abides with cooperative’s by-laws
 Performs obligations
 Attends required seminars/training activities
 Patronizes the cooperative and actively participates

POLICY MAKING BODY

 General Assembly – highest policy-making body
 Regular votes – 3/4 of all the members with voting rights
 Quorum – at least 25% of all members with voting rights
For electric cooperatives – 5% of all members with voting rights
Cooperative banks – 50% + 1 of the members with voting shares

Powers of General Assembly

1) Determine and approve amendments
2) Elect or appoint and to remove for cause
3) Approve developmental plans

MEETINGS
 Regular meetings – on date fixed in by-laws or on any date within 90 days after the
close of fiscal year
 Special meeting – any time by a majority vote of BOD
 Regular meeting of BOD
 Primary – at least once a month

VOTING
 Primary – each member have only 1 vote
 Secondary/Tertiary – 1 basic vote and as many incentive votes but not more than 5
votes
 Voting by proxy is allowed
BOARD OF DIRECTORS
 Term: 2 years
 Odd number of members of BOD, from 5 to 15
 Shall conduct meeting within 10 days after election
 Supervise and control the affairs
 Strategic planning, direction setting, and policy formulation activities
 Members of BOD shall not hold any other position directly involved on the day to day
operation
 Any person engaged in a similar business or with conflict of interest is disqualified
 VACANCY:
 Expiration of term: filled by GA in a regular/special meeting
 Other than expiration: filled by the vote of majority of remaining directors
 BOD shall elect from themselves Chairperson and Vice-Chairperson
 Other officers are from outside the BOD
 Not entitled for compensation if:
1) reported net loss or dividend rate less than official inflation rate
2) during the first year of existence

Certificate of compliance – issued to all types of cooperatives after compliance with rules of
CDA

Executive committee – smaller BOD

Liability of BOD, Officers, and Committee members

 jointly and severally for all damages; solidarily
 accountable for double the profits

MANDATORY COMMITTEES
 Audit committee – elected by GA
 Election committee – elected by GA
 Mediation and conciliation committee – elected by BOD
 Ethics committee – elected by BOD

Committees of Cooperative
 Credit and collection – approves/disapproves loans
 Audit – installs adequate and effective accounting system, conducts internal audit
 Election – supervises conduct of all election
 Membership – campaigns for membership
 Finance – raises fund, collects payments of fees, takes charge in financial matters
 Documentation – prepares all required documents
 Survey – gathers data and other relevant information
 Education and training – plans and implements education and training programs
Reserve Requirement Ratio (RRR)
 Thrift, Savings and Cooperative Banks – BSP issuance
 Rural cooperative banks – 4%

Electric cooperatives registered under National Electrification are exempted from paying
income and property taxes.

Allocation and distribution of Net Surplus

 Reserve fund – 10%
 Education and training fund – 10%
 Community development fund – 3%
 Optional or land & bldg. fund – 7%
 Interest on share capital and patronage refunds – 70%

Regular reports shall be filed to CDA within 120 days from the end of calendar year.