Common and Preferred Share

1
1. The share capital of a cooperative may consist of
WHAT IS COOPERATIVE?
common share capital and preferred share capital if
(under Article 3 of RA 9520) the latter is provided for under the cooperatives’ articles
of cooperation and by laws. Should the cooperative wish
to have common and preferred shares, statements to
A cooperative is an autonomous and duly registered association that effect should appear in the Articles of Cooperation
specifying the amount of shares to be offered for
of persons, with a common bond of interest, who have
common shares and for preferred share. However, it is
voluntarily joined together to achieve their social, economic recommended that only the common share be offered.
and cultural needs and aspirations by making equitable
2. Should preferred share capital be offered, the rights and
contributions to the capital required, patronizing their privileges of holders of preferred shares shall be
provided for in the By-laws of the cooperative.
products and services and accepting a fair share of the risks
and benefits of the undertaking in accordance with universally 3. Preferred share capital shall not exceed Twenty Five
(25%) percent or one-fourth (1/4) of the total
accepted cooperative principles.
authorized share capital of the cooperative.

4. The paid up and subscription of the common share

The Cooperative PRINCIPLES
capital contribution should strictly adhere to the
twenty-five percent (25%) requirement based on the
authorized capital share.
1. Voluntary and Open Membership
2. Democratic Member Control 5. No member shall own more than Ten (10%) percent of
the subscribed share capital of the cooperative.
3. Member Economic Participation
4. Autonomy and Independence
5. Education, Training and Information
6. Cooperation among Cooperatives
7. Concern for Community 25
Assuming that the following percentages were determined by
26 the Board of Directors:
 a) Assuming 70% of 22,200 is for ISC = 15,540.00
1. Capital Formation
b) Assuming 30% of 22,200 is for PR = 6,660.00
2. Cash Trading

Computation of Interest on Share Capital 3. Selling at Market Price

Rate of Interest on Share Capital (ISC) = % (Net Surplus – 4. Constant Expansion
Statutory Reserves)
Total Average share 5. Quality Standardized Goods
Month (TASM) 6. Cooperative Wholesale or Inter-lending (Cooperative
70% (74,000.00 –
51.800.00 Bank)
150,000.00 7. Minimize Expenditures

15,540.00
150,000 NATURE and CHARACTERISTICS of Cooperatives

Rate of ISC = 10%

1. Cooperatives are service-oriented.
Computation of Patronage Refund
2. Cooperatives are community-oriented.
Rate of Interest on Patronage Refund (PR) = % (Net Surplus – 3. Cooperatives are people-oriented.
Statutory Reserves)
Interest on 4. Cooperatives are business enterprises.
Loans 5. Cooperatives are owned, managed and patronized by
30% (74,000.00 –
51,800.00) members.
100,000.00 6. Cooperatives develop best through self-help and mutual

6,660.00 help.
100,000 7. Cooperatives serve best when they answer the real and

Rate of PR = 6.7% felt needs of the members.

2 3

Cooperative PRACTICES
 Basic Operational Requirements in Cooperative
Statement of Operation
Business
December 31, 2014

COLLABORATION Income:
Interest on Loan 100,000
a) Staff and Employees Membership fee 5,000
 Implements policies, programs Other Income 3,000
 Performs day-to-day business & operational Total 108,000
activities Less Expenses:
Salaries and wages 12,000
b) Members Organizational expenses 20,000
 Hears & approves develop-mental plans & budget Taxes and Licenses 1,000
 Elect the members of the BOD, Audit Committee bond of Account Officers 1,000
& Election Committee Total 34,000
 Hears & accepts reports, AFS & hiring of an
external auditor Net Surplus 74,000
 Has the final decision Less: Statutory Reserves (SR):
50% General Reserve Fund 37,000
c) Board of Directors formulates: 10% Education & Training Fund 7,400
 Plans, Programs & Activities 7% Optional Fund 5,180
 Budget 3% Community Dev’t. Fund 2,220
 Policies
 Appoints other officers Total SR 51,800
 Approves hiring of staff & employees For distribution on Interest on Share
Capital and Patronage Refund 22,200
d) Other Officers
- Performs their duties as prescribed in the By-
laws and Rule 7 of the IRR

24
23
Sample Computation
Patronage Refund DIFFERENCES between a Cooperative and other
Forms of Business Enterprises
The principle of Patronage Refund is a principle of equity
wherein an equal right of members to participate in the a) No. of Persons Required for Formation
organization and to equitably share in the benefits accruing is Single proprietorship: Only 1 person
established. Partnership: At least 2 or more
Corporation: At least 5 persons
Under the principle, the Net Surplus shall not be construed as Cooperative: At least 15 persons
profit, but as excess payments made by them from the
cooperative and which shall be deemed to have been returned b) Grant of Juridical Personality
to them if the same is distributed as prescribed by the Code and Single proprietorship: No separate juridical personality;
by prescribed Implementing Rules and Regulations, Provided business name be registered with DTI
that: Partnership: Mere agreement of partners; better
registered with SEC
1. the amount allocated for patronage refund shall not be Corporation: Must be registered with SEC
less than thirty percent (30%) of the net surplus after Cooperative: Must be registered with CDA
deducting the statutory reserves based on the principle
of equity; and c) Registration Requirements
2. in no case shall the rate of patronage refund be more Single proprietorship: Application Form
than twice the rate of interest on share capital. Partnership: Contract of Partnership
Corporation: Articles of Incorporation, By-Laws and
Bank Statement
Formula in Computing the Patronage Refund (PR): Cooperative: Articles of Cooperation, By-Laws,
Economic Survey, Bonds and Treasurer’s Affidavit

Rate of PR = X (Net Surplus less Statutory Reserves) d) Capitalization Contributions

Interest on Loans
Single proprietorship: Only owner contributes capital
Partnership: Partners contribute cash or services
Where: X shall be a percentage to be determined by the Board Corporation: Stockholders pay for amount of shares he
of Directors allocated for interest on Patronage Refund wants to buy
Cooperative: Member contributes
4

5
e) Management Structure CAPITALIZATION AND ACCOUNTING PROCEDURES OF
Single proprietorship: Only 1 person decides COOPERATIVES
Partnership: Partners make a collective decision
Sec. 9. Interest on Share Capital (ISC) - Interest on Share
Corporation: Board of Directors make final decision
Capital shall not exceed the Rate of Return on Investment.
Cooperative: General Assembly has the final decision Unless otherwise provided for in the By-laws of the
cooperative, share capital shall earn interest; the Rate of
f) Voting Rights
Interest shall be computed as follows:
Single proprietorship: No voting rights as it concerns
only 1 person
Rate of ISC = X (Net Surplus less Statutory
Partnership: Vote proportional to interest
Reserves)
Corporation: Vote proportional to interest, proxy voting
Total Average Share Month
allowed
Cooperative: 1 member-1 vote; no proxy voting for
Where: X shall be a percentage to be determined by the Board
primary
of Directors allocated for interest on share capital.
a) Liability
No allocation of interest on share capital shall be made without
Single proprietorship: Unlimited as to owner
the approval of the Board of Directors which may increase or
Partnership: Unlimited as to partner except limited
decrease any or both.
partnerships
Corporation: Limited until authorized capital
Payment of interest, unless otherwise provided for in the By-
Cooperative: Limited until subscribed share capital
laws, must be made on such date as may be determined by the
Board of Directors. The General/Representative Assembly,
b) Taxability
however, upon the recommendation of the Board of Directors,
Single proprietorship: Income tax of owner
may defer the payment of such interest including Patronage
Partnership: Partners pay tax on shares as partners
Refund to raise Revolving Capital.
Corporation: Profits taxable; stockholders pay tax on
dividends received
No cumulative interest shall be allowed for any kind or class of
Cooperative: Net surplus non-taxable; shareholders pay
share issued by the cooperative.
tax on the interest on share
capital received by them
Share Capital shall receive a strictly limited Rate of Interest.

22
 21 I) Effect of Death of Owner, Partner, Stockholder or
Member
Single proprietorship: End of business operations
ORDER of DISTRIBUTION of NET SURPLUS unless heirs can take over business
Partnership: Partners automatically dissolves
1. Reserve Fund Corporation: Corporation continues; heirs inherent
- shall be set at least 10% of the net surplus; shall be shares
used for the stability of the coop and to meet net losses in its Cooperative: Cooperative continues; heirs become
operations. Provided, That, in the first five (5) years of members if qualified
operation after registration, this amount shall not be less than
fifty per centum (50%) of the net surplus: c) Motive for Existence
Single proprietorship: Profit
2. Education and Training Fund Partnership: Profit or service
- shall not be more than 10% of the net surplus; half Corporation: Profit
may be remitted to a union or federation which the coop is a Cooperative: Profit and service
member, and half will be spent by the coop for education and
training purposes
TYPES, CATEGORIES OF COOPERATIVES
3. Community Development Fund
- shall not be less 3% of the net surplus; shall be used for I. CATEGORIES of Cooperatives (in terms of
projects or activities that will benefit the community where Membership, Art. 23 (2a), RA 9520)
the coop operates
 The 1st Category is a PRIMARY
4. Optional Fund COOPERATIVE the members of which are
- a land and building fund; shall not exceed 7% natural persons.
5. Remaining net surplus shall be divided into patronage  The 2nd category is a SECONDARY
refund and interest on share capital COOPERATIVE the members of which are
primary cooperatives.

 The 3rd Category is a TERTIARY

COOPERATIVE the members of which are
secondary cooperatives.
6
7
 MANNER of DISTRIBUTION of NET SURPLUS in the
II. TYPES of Cooperatives Cooperative

1) Credit Cooperative – Net Surplus – Notwithstanding the provisions of existing laws,

 Promotes and undertakes savings and lending
the net surplus of cooperatives shall be determined in
services among its members.
 Generates common pool of funds in order to accordance with its by-laws. Every cooperative shall
provide financial assistance and other related
determine its net surplus at the close of every fiscal year
financial services to its members for productive
and provident purposes. and at such other times as may be prescribed by the by-
laws.
2) Consumers Cooperative –
 Procures and distributes retail commodities to
members as well as to non-members.
The net surplus shall not be construed as profit but as an
3) Producers Cooperative – excess of payments made by the members for the loans
 Undertakes joint production activities whether
borrowed, or the goods and services availed by them from
agricultural or industrial in nature.
the cooperative or the difference of the rightful amount
Producers Cooperative is formed and
due to the members for their products sold or services
operated by its members to undertake the
production and processing of raw materials or rendered to the cooperative including other inflows of
goods produced by its members into finished or
assets resulting from its other operating activities and
processed products for sale by the cooperative to
its members and non-members. Any end product which shall be deemed to have been returned to them if
or its derivative arising from the raw materials
the same is distributed as prescribed herein.
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.

20
 19 8

o Subsidies, donations, legacies, grants, aids

and such other assistance from any local or 1. Marketing Cooperative – engages in the supply of
foreign institution whether public or production inputs to members and markets their
private: Provided, that capital coming from products.
such subsidies, donations, legacies, grants,
aids and other assistance shall not be 2. Service Cooperative - engages in:
divided into individual share capital - medical and dental care
holdings at any time but shall instead form - hospitalization
part of the donated capital or fund of the - transportation
cooperative. Upon dissolution, such - insurance
donated capital shall be subject to escheat - housing
- labor
ART. 73. Limitation on Share Capital Holdings. - water distribution
- power generation
No member of primary cooperative other than - communication
cooperative itself shall own or hold more than
- other services
ten per centum (10%) of the share capital of the
cooperative.
3. Multipurpose Cooperative – combines two (2) or
more of the business activities of these
ART.75. Capital Build-Up.
different types of cooperatives.
The bylaws of every cooperative shall be provided
4. Advocacy Cooperative - promotes and advocates
for a reasonable and realistic member capital
cooperativism among its members and the public
build-up program to allow the continuing growth
through socially-oriented projects, education and
of the members’ investment in their cooperative
training, research and communication, and other
as their economic conditions continue to improve.
similar activities to reach out to its intended
beneficiaries.

9
5. Agrarian Cooperative - is one organized by Other Responsibilities of the B.O.D. as provided in RA9520
marginal farmers majority of which are agrarian
reform beneficiaries for the purpose of: 1. ART.28 Application. Approve or disapprove an applicant
 developing an appropriate system of for membership
land tenure
 land development 2. ART.30 Termination of Membership. Terminate the
 land consolidation or membership by means of Expulsion and Withdrawal
 land management in areas covered by
agrarian reform 3. ART.40 Meetings of the Board. Hold regular meetings
every month
6. Cooperative Bank - organized for the primary
purpose of organizing a wide range of financial 4. ART.56 Bonding of Accountable Officers. Every director,
services to cooperatives and their members. officer and employee handling funds, securities or
property on behalf of the cooperative shall be covered by a
7. Dairy Cooperative - is one whose members are surety bond to be issued by a duly registered insurance or
engaged in the production of fresh milk which bonding company for the faithful performance of their
may be processed and/or marketed as dairy respective duties and obligations.
products.

8. Education Cooperative - is one organized for SOURCES of FUNDS of Cooperatives

the primary purpose of owning and operating
licensed educational institutions, Capital Sources - Cooperatives may derive their capital
notwithstanding the provisions of Republic Act from any or all of the following sources:
No. 9155, otherwise known as the Governance of o Member’s share capital;
Basic Education Act of 2001.
o Loans and borrowings including deposits;
9. Financial Service Cooperative - is one organized
for the primary purpose of engaging in: o Revolving capital which consists of the
- savings and deferred payment of patronage refunds, or
- credit services and interest on share capital; and
- other financial services 17

12. Appoint the members of the Mediation and Conciliation

Committee, Ethics Committee, Education and Training
18 Committee and other Officers as specified in the Code
and By-laws of the cooperative
13. Decide election-related cases involving the Election 14. Electric Cooperative - is one organized for the primary
Committee and its member purpose of undertaking:
- power generation
14. Act on the recommendation of the Ethics Committee on - utilizing renewable energy sources
cases involving violations of the Code of Governance and including hybrid systems
Ethical Standards - acquisition and operation of sub-
transmission or distribution to its
15. Ensure compliance by the cooperative with the household members.
regulations of the CDA and other statutory requirements
of appropriate government agencies 15. Health Services Cooperative - is one organized for the
primary purpose of providing medical, dental and other
16. Report to the General/Representative Assembly the health services.
performance and achievements of the cooperative
16. Housing Cooperative - is one organized to assist or
17. Present to the General/Representative Assembly provide access to housing for the benefit of its regular
policies which require confirmation as provided under members who actively participate in the savings
the law, the cooperative bylaws, and regulations program for housing. It is co-owned and controlled by
its members.
18. Present to the General/Representative Assembly the
financial, social and performance reports Insurance Cooperative - Is one engaged in the business in
insuring life and property of cooperatives and their member
19. perform such other functions as may be prescribed in
the by-laws or authorized by the
General/Representative Assembly.

11

10

13. Fishermen Cooperative - is one organized by

marginalized fishermen in localities whose products are
18. Transport Cooperative - is one which includes land and
marketed either as fresh or processed products.
sea transportation, limited to small vessels, as defined
 or classified under the Philippine maritime laws,
organized under the provisions of this Code. 4. Evaluate the capability and qualification and
recommend for approval of the General/Representative
19. Water Services Cooperative - is one organized to own, Assembly the engagement of the services of an external
operate and manage water systems for the provision auditor
and distribution of potable water for its members and
their households. 5. Appoint and terminate, based on just cause, the General
Manager or the Chief Executive Officer (CEO)
20. Workers Cooperative - is one organized by workers,
including the self-employed, who are at the same time 6. Review, monitor and evaluate the effectiveness of the
the members and owners of the enterprise. Its principal programs, projects and activities
purpose is to provide employment and business
opportunities to its members and manage it in 7. Formulate and review the vision, mission, and goals of
accordance with cooperative principle. the cooperative

8. Establish risk management system

9. Establish performance evaluation system at all levels

10. Review and approve the organizational and operational

structures

11. Establish policies and procedures for the effective

operation and ensure proper implementation of such

16
15
Duties & Responsibilities of the Board of Directors (per
revised IRR) General Assembly: Definition, Duties and Responsibilities

1. Provide over-all policy direction What is a GENERAL ASSEMBLY?

ART.5 Shall mean the full membership of the cooperative
2. Formulate development plan duly assembled for the purpose of exercising all the rights
and performing all the obligations pertaining to
3. Review of the annual plan and budget and recommend cooperative, as provided by R.A. 9520, its Articles of
for approval of the General/Representative Assembly Cooperation and By-laws.
 ART.32 The general assembly shall be composed of such
members who are entitled to vote under the articles of
cooperation and by-laws of the cooperative.

ART.33 The general assembly shall be the highest policy-

making body of the cooperative and shall exercise such
powers as are stated in this R.A.9520, in the articles of
cooperation and in the by-laws of the cooperative.

Duties & Responsibilities of the G.A.

 To determine & approve amendments to the articles

of cooperation & by-laws
 To elect & remove the members of the Board of
Directors, and to remove them for cause
 To approve developmental plans of the cooperative
 To decide on issues brought to them
 To hear and pass upon the reports of the Board of
Directors, Officers and committees
 To hear & approve the annual work plan and budget
 To determine & approve the hiring of the services on
an external auditor
13
 To hear the result of any audit, examination or
investigation of cooperative affairs MEMBERSHIP
12
Kinds of Membership
ORGANIZATION and MANAGEMENT of Cooperatives
1) Regular member – one who has complied with all
membership requirements and entitled to all the rights
and privileges of membership.
2) Associate member - one who has no rights 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 member who meets the minimum
 requirements of regular membership, continue to o To be heard and seek redress
patronize the coop for 2 years, and signifies his o To due process and just punishment
willingness to remain a member shall be considered a o To equal protection of law
regular member.

Common Bond of Membership MEMBER’S OBLIGATIONS & RESPONSIBILITIES

a) residential - members working and/or residing in the o To contribute share capital and participate in savings
same place mobilization
b) institutional - members consist of employees, workers o To patronize cooperative products and services
and/or officers of a particular institution (public or o Pay other financial obligations on time
private) o To vote and be voted upon
c) associational - members come from a registered
o To share their views and participate in decision-making
and/or recognized association, group, club,
(esp. during AGA)
fraternity, and other similar groupings. Recognized
o To monitor performance for the betterment of the
association means legitimate groupings of
persons which is publicly known in a particular cooperative
community and able to present certification from o To attend and be actively involved in all cooperative
applicable gov’t entity activities
d) occupational - members come from same or allied o Participate in the membership-education program
profession or occupation o To help fellow members

14

MEMBER’S RIGHTS & PRIVILEGES

o To fair and equitable access to co-op services, benefits

and proceeds or net surplus and risks
o To vote and be voted upon (spec. for members in good
standing in accord. to its by-laws & RA 9520)
o To be properly informed
o To participate in cooperative activities
 Information Material Produced by:

PROVINCIAL COOPERATIVE DEVELOPMENT OFFICE

Capitol, Puerto Princesa City
Palawan 434-4173
January 10, 2022
BR-2