COOPERATIVE CODE

CPALE TOS effective May 2019

4.3.1 Describe Organization and Registration of Cooperatives
4.3.2 Explain Administration
4.3.3 Describe the responsibilities, Rights and Privileges of Cooperatives
4.3.4 Explain membership, rights and obligations
4.3.5 Explain Capital Property of Funds
4.3.6 Explain Audit, Inquiry and Members' Right to Examine
4.3.7 Describe Allocation and Distribution of Funds
4.3.8 Enumerate the Types and Categories of Cooperatives
4.3.9 Explain merger and consolidation of Cooperatives
4.3.10 Explain dissolution of cooperatives

Republic Act No. 9520: An Act Amending the Cooperative Code of the Philippines to
Be Known As the "Philippine Cooperative Code of 2008"

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.

Objectives and Goals of a Cooperative.

The primary objective of every cooperative is to help improve the quality of life of its
members. Towards this end, the cooperative shall aim to:
a. Provide goods and services to its members to enable them to attain increased
income, savings, investments, productivity, and purchasing power, and promote
among themselves equitable distribution of net surplus through maximum
utilization of economies of scale, cost-sharing and risk-sharing;
b. Provide optimum social and economic benefits to its members;
c. Teach them efficient ways of doing things in a cooperative manner;
d. Propagate cooperative practices and new ideas in business and management;
e. Allow the lower income and less privileged groups to increase their ownership in
the wealth of the nation; and
f. Cooperate with the government, other cooperatives and people-oriented
organizations to further the attainment of any of the foregoing objectives.

Organizing a Primary Cooperative.

Fifteen (15) or more natural persons who are Filipino citizens, of legal age, having a
common bond of interest and are actually residing or working in the intended area of
operation, may organize a primary cooperative under this Code: Provided, that a
prospective member of a primary cooperative must have completed a Pre-Membership
Education Seminar (PMES).

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Any newly organized primary cooperative may be registered as multipurpose cooperative
only after compliance with the minimum requirements for multipurpose cooperatives to be
set by the Authority. A single-purpose cooperative may transform into a multipurpose or
may create subsidiaries only after at least two (2) years of operations.

Liability.
A cooperative duly registered under this Code shall have limited liability.

Term.
A cooperative shall exist for a period not exceeding fifty (50) years from the date of
registration unless sooner dissolve or unless said period is extended. The cooperative term,
as originally stated in the articles of cooperation, may be extended for periods not
exceeding fifty (50) years in any single instance by an amendment of the articles of
cooperation, in accordance with this Code: Provided, That no extension can be made
earlier than five (5) years prior to the original or subsequent expiry date/dates unless there
are justifiable reasons for an earlier extension as may be determined by the Authority.

Articles of Cooperation.
All cooperatives applying for registration shall file with the Authority the articles of
cooperation which shall be signed by each of the organizers and acknowledged by them if
natural persons, and by the chairpersons or secretaries, if juridical persons, before a notary
public.

The articles of cooperation shall set forth:

a. The name of the cooperative which shall 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 the cooperative;
d. The area of operation and the postal addresses 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.

No cooperative, other than a cooperative union shall be registered unless the articles of
cooperation is accompanied with the bonds of the accountable officers and a sworn
statements of the treasurer elected by the subscribers showing that at least twenty-five per
centum (25%) of the authorized share capital has been subscribed and at least twenty-five
per centum (25%) of the total subscription has been paid: Provided, That in no case shall
the paid-up share capital be less than Fifteen thousand pesos (P15,000.00).

Bylaws.
Each cooperative to be registered under this Code shall adopt bylaws not inconsistent with
the provisions of this Code. The bylaws shall be filed at the same time as the articles of
cooperation.

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Registration.
A cooperative formed and organized under this Code acquires juridical personality from
the date the Authority issues a certificate of registration under its official seal. All
applications for registration shall be finally disposed of by the Authority within a period of
sixty (60) days from the filing thereof, otherwise the application is deemed approved,
unless the cause of the delay is attributable to the applicant: Provided, That in case of a
denial of the application for registration, an appeal shall lie with the Office of the President
within ninety (90) days from receipt of notice of such denial: Provided, further, That
failure of the Office of the President to act on the appeal within ninety (90) days from the
filing thereof shall mean approval of said application.

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

Amendment of Articles of Cooperation and Bylaws.

Unless otherwise prescribed by this Code and for legitimate purposes, any provision or
matter stated in the articles of cooperation and by laws may be amended by two-thirds
(2/3) vote of all the members with voting rights, without prejudice to the right of the
dissenting members to exercise their right to withdraw their membership.

All amendments to the article of cooperation and/or bylaws shall be submitted to the
Authority. The amendments shall take effect upon its approval by the authority or within
thirty (30) days from the date of filing thereof if not acted upon by the Authority for a
cause not attributable to the cooperative.

Merger and Consolidation of Cooperatives.

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

No merger or consolidation shall be valid unless approved by a three-fourths (3/4) vote of

all the members with voting rights, present and constituting a quorum of each of the
constituent cooperatives at separate general assembly meetings. The dissenting members
shall have the right to exercise their right to withdraw their membership.

The Authority shall issue the guidelines governing the procedure of merger or
consolidation of cooperatives. In any case, the merger or consolidation shall be effective
upon the issuance of the certificate of merger or consolidation by the Authority.

Effects of Merger and Consolidation.

The merger or consolidation of cooperatives shall have the following effects:
1. The constituent cooperatives shall become a single cooperative which, in case of
merger, shall be the surviving cooperative, and, in case of consolidation, shall be
the consolidated cooperative;
2. The separate existence of the constituent cooperatives shall cease, except that of
the surviving or the consolidated cooperative;
3. The surviving or the consolidated cooperative shall possess all the assets, rights,
privileges, immunities and franchises of each of the constituent cooperatives;
4. The surviving or the consolidated cooperative shall be responsible for all the
liabilities and obligation of each of the constituent cooperatives in the same manner
as if such surviving or consolidated cooperative had itself incurred such liabilities
or obligations.
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Type and Categories of Cooperatives

Types of Cooperatives – Cooperatives may fall under any of the following types:
a. Credit Cooperative is one that promotes and undertakes savings and lending
services among its members. It generates a common pool of funds in order to
provide financial assistance to its members for productive and provident purposes;
b. Consumers Cooperative is one of the primary purpose of which is to procure and
distribute commodities to members and non-members;
c. Producers Cooperative is one that undertakes joint production whether agricultural
or industrial. It is formed and operated by its members to undertake the production
and processing of raw materials or goods produced by its members into finished or
processed products for sale by the cooperative to its members and non-members.
Any end product or its derivative arising from the raw materials produced by its
members, sold in the name and for the account of the cooperative, shall be deemed
a product of the cooperative and its members;
d. Marketing Cooperative is one which engages in the supply of production inputs to
members and markets their products;
e. Service Cooperative is one which engages in medical and dental care,
hospitalization, transportation, insurance, housing, labor, electric light and power,
communication, professional and other services;
f. Multipurpose Cooperative is one which combines two (2) or more of the business
activities of these different types of cooperatives;
g. Advocacy Cooperative is a primary cooperative which promotes and advocates
cooperativism among its members and the public through socially-oriented
projects, education and training, research and communication, and other similar
activities to reach out to its intended beneficiaries;
h. Agrarian Reform Cooperative is one organized by marginal farmers majority of
which are agrarian reform beneficiaries for the purpose of developing an
appropriate system of land tenure, land development, land consolidation or land
management in areas covered by agrarian reform;
i. Cooperative Bank is one organized for the primary purpose of providing a wide
range of financial services to cooperatives and their members;
j. Dairy Cooperative is one whose members are engaged in the production of fresh
milk which may be processed and/or marketed as dairy products;
k. Education Cooperative is one organized for the primary purpose of owning and
operating licensed educational institutions;
l. Electric Cooperative is one organized for the primary purposed of undertaking
power generations, utilizing renewable energy sources, including hybrid systems,
acquisition and operation of subtransmission or distribution to its household
members;
m. Financial Service Cooperative is one organized for the primary purpose of
engaging in savings and credit services and other financial services;
n. Fishermen Cooperative is one organized by marginalized fishermen in localities
whose products are marketed either as fresh or processed products;
o. Health Services Cooperative is one organized for the primary purpose of providing
medical, dental and other health services;
p. Housing Cooperative is one organized to assist or provide access to housing for the
benefit of its regular members who actively participate in the savings program for
housing. It is co-owned and controlled by its members;
q. Insurance Cooperative is one engaged in the business of insuring life and poverty
of cooperatives and their members;

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 r. Transport Cooperative is one which includes land and sea transportation, limited to
small vessels, as defined or classified under the Philippine maritime laws,
organized under the provisions of this Code;
s. Water Service Cooperative is one organized to own, operate and manage waters
systems for the provision and distribution of potable water for its members and
their households;
t. Workers Cooperative is one organized by workers, including the self-employed,
who are at same time the members and owners of the enterprise. Its principal
purpose is to provide employment and business opportunities to its members and
manage it in accordance with cooperative principles; and

Categories of Cooperative – Cooperatives shall be categorized according to membership

and territorial considerations as follows:
a. In terms of membership, cooperative shall be categorized into:
i. Primary – The members of which are natural persons;
ii. Secondary – The members of which are primaries;
iii. Tertiary – The members of which are secondary cooperatives.
b. In terms of territory, cooperatives shall be categorized according to areas of
operations which may or may not coincide with the political subdivisions of the
country.

Membership

Kinds of Membership
A cooperative may have two (2) kinds of members, to wit: (1) regular members and (2)
associate members.

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

A cooperative organized by minors shall be considered a laboratory cooperative and must

be affiliated with a registered cooperative. A laboratory cooperative shall be governed by
special guidelines to be promulgated by the Authority.

Government Officers and Employees

Any officer or employee of the Authority shall be disqualified to be elected or appointed to
any position in a cooperative: Provided, that the disqualification does not extend to a
cooperative organized by the officers or employees of the Authority.

All elective officials of the Government shall be ineligible to become officers and directors
of cooperatives: Provided, that the disqualification does not extend to a party list
representative being an officer of a cooperative he or she represents; and

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Any government employee or official may, in the discharge of is duties as a member in the
cooperative, be allowed by the end of office concerned to use official time for attendance
at the general assembly, board and committee meetings of cooperatives as well as
cooperative seminars, conferences, workshops, technical meetings, and training courses
locally or abroad: Provided, That the operations of the office concerned are not adversely
affected.

Application
An applicant for membership shall be deemed a member after approval of his membership
by the board of directors and shall exercise the rights of member after having made such
payments to the cooperative in respect to membership or acquired interest in the
cooperative as may be prescribed in the bylaws. In case membership is refused or denied
by the board of directors, an appeal may be made to the general assembly and the latter’s
decision shall be final. For this purpose, the general assembly may opt to create an appeal
and grievance committee, the members of which shall serve for a period of one (1) year
and shall decide appeals on membership application within thirty (30) days upon receipt
thereof. If the committee fails to decide within the prescribed period, the appeal is deemed
approved in favor of the applicant.

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

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

The death or insanity of a member in a primary cooperative, and the insolvency or

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

Membership in the cooperative may be terminated by a vote of the majority of all the
members of the board of directors for any of the following causes:
a. When a member has not patronized any of the services of the cooperative for an
unreasonable period of time as may be previously determined by the board of
directors;
b. When a member has continuously failed to comply with his obligations;
c. When a member has acted in violation of the bylaws and the rules of the
cooperative; and
d. For any act or omission injurious or prejudicial to the interest or the welfare of the
cooperative.

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

Refund of Interests
All sums computed in accordance with the bylaws to be due from a cooperative to a
former member shall be paid to him either by the cooperative or by the approved
transferee, as the case may be, in accordance with this Code."

Administration

The General Assembly

The general assembly shall be composed of such members who are entitled to vote under
the articles of cooperation and bylaws of the cooperative. The general assembly shall be
the highest policy-making body of the cooperative and shall exercise such powers as are
stated in this Code, in the articles of cooperation and in the bylaws of the cooperative. The
general assembly shall have the following exclusive powers which cannot be delegate:
1. To determine and approve amendments to the articles of cooperation and bylaws;
2. To elect or appoint the members of the board of directors, and to remove them for
cause. However, in the case of the electric cooperatives registered under this Code,
election of the members of the board shall be held in accordance with its bylaws or
election guideline of such electric cooperative; and
3. To approve developmental plans of the cooperative.
Subject to such other provisions of this Code and only for purposes of prompt and
intelligent decision-making, the general assembly may be a three-fourths (3/4) vote of all
its members with voting rights, present and constituting a quorum, delegate some of its
powers to a smaller body of the cooperative. These powers shall be enumerated under the
bylaws of the cooperative.

Meetings
1. A regular meeting shall be held annually by the general assembly on a date fixed in
the bylaws, or if not so fixed, on any dated within ninety (90) days after the close
of each fiscal year: Provided, That notice of regular meetings shall be sent in
writing, by posting or publication, or through other electronic means to all
members of record.
2. Whenever necessary, a special meeting of the general assembly may be called at
any time by a majority vote of the board of directors or as provided for in the
bylaws: Provided, that a notice in writing shall be sent one (1) week prior to the
meeting to all members who are entitled to vote. However, a special meeting shall
be called by the board of directors after compliance with the required notice within
from at least ten per centum (10%) of the total members who are entitled to vote to
transact specific business covered by the call. If the board fails to call a regular or a
special meeting within the given period, the Authority, upon petition of ten per
centum (10%) of all the members of the cooperative who are entitled to vote, and
for good cause shown, shall issue an order to the petitioners directing them to call a
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 meeting of the general assembly by giving proper notice as required in this Code or
in the bylaws;
3. In the case of a newly approved cooperative, a special general assembly shall be
called, as far as practicable, within ninety (90) days from such approval;
4. The Authority may call a special meeting of the cooperative for the purpose of
reporting to the members the result of any examination or other investigation of the
cooperative affairs; and
5. Notice of any meeting may be waived, expressly or impliedly, by any member.

Quorum
A quorum shall consist of at least twenty-five per centum (25%) of all the members
entitled to vote. In the case of cooperative banks, the quorum shall be as provided in
Article 99 of this Code. In the case of electric cooperatives registered under this Code, a
quorum, unless otherwise provided in the bylaws, shall consist of five per centum (5%) of
all the members entitled to vote.

Voting System
Each member of a primary cooperative shall have only one (1) vote. In the case of
members of secondary or tertiary cooperatives, they shall have one (1) basic vote and as
many incentive votes as provided for in the bylaws but not exceed five (5) votes. The votes
cast by the delegates shall be deemed as votes cast by the members thereof.

However, the bylaws of a cooperative other than a primary may provide for voting by
proxy. Voting by proxy means allowing a delegate of a cooperative to represent or vote in
behalf of another delegate of the same cooperative.

Composition and Term of the Board of Directors

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

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

Directors
1. Any member of a cooperative who under the bylaws of the cooperative, has the
right to vote and who possesses all the qualifications and none of the
disqualifications provided in the laws or bylaws shall be eligible for election as
director.
2. The cooperative may, by resolution of its board of directors, admit as directors, or
committee member one appointed by any financing institution from which the
cooperative received financial assistance solely to provide technical knowledge not
available within its membership. Such director or committee member not be a
member of the cooperative and shall have no powers, rights, nor responsibilities
except to provided technical assistance as required by the cooperative.
3. The members of the board of directors shall not hold any other position directly
involved in the day to day operation and management of the cooperative.
4. Any person engaged in a business similar to that of the cooperative or who in any
way has a conflict of interest with it, is disqualified from election as a director of
said cooperative.
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Meeting of the Board and Quorum Requirement
1. In the case of primary cooperatives, regular meetings of the board of directors shall
be held at least once a month.
2. Special meetings of the board of directors may be held at any time upon the call of
the chairperson or a majority of the members of the board: Provided, that written
notices of the meeting specifying the agenda of the special meeting shall be given
to all members of the board at least one (1) week before the said meeting.
3. A majority of the members of the Board shall constitute a quorum or the conduct of
business, unless the bylaws proved otherwise.
4. Directors cannot attend or vote by proxy at board meetings.

Vacancy in the Board of Directors

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

Officers of the Cooperative

The board of directors shall elect from among themselves the chairperson and vice-
chairperson, and elect or appoint other officers of the cooperative from outside of the
board in accordance with their bylaws. All officers shall serve during good behavior and
shall not be removed except for cause after due hearing. Loss of confidence shall not be a
valid ground for removal unless evidenced by acts or omission causing loss of confidence
in the honesty and integrity of such officer. No two (2) or more persons with relationships
up to the third civil degree of consanguinity or affinity nor shall any person engaged in a
business similar to that of the cooperative nor who in any other manner has interests in
conflict with the cooperative shall serve as an appointive officer.

Committees of Cooperatives
1. The bylaws may create an executive committee to be appointed by the board of
directors with such powers and duties as may be delegated to it in the bylaws or by
a majority vote of all the members of the board of directors.
2. The bylaws shall provide for the creation of an audit, election, mediation and
conciliation, ethics, and such other committees as may be necessary for the conduct
of the affairs of the cooperative. The members of both the audit and election
committee shall be elected by the general assembly and the rest shall be appointed
by the board. The audit committee shall be directly accountable and responsible to
the general assembly. It shall have the power and duty to continuously monitor the
adequacy and effectiveness of the cooperative’s management control system and
audit the performance of the cooperative and its various responsibility centers.

Unless otherwise provided in the bylaws, the board, in case of a vacancy in the
committees, may call an election to fill the vacancy or appoint a person to fill the same
subject to the provision that the person elected or appointed shall serve only for the
unexpired portion of the term.

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Functions, Responsibilities and Training Requirements of Directors, Officers and
Committee Members.
The functions and responsibilities of directors, officers and committee members, as well as
their training requirements, shall be in accordance with the rules and regulations issued by
the Authority.

Liability of Directors, Officers and Committee Members

Directors, officers and committee members, who are willfully and knowingly vote for or
assent to patently unlawful acts or who are guilty of gross negligence or bad faith in
directing the affairs of the cooperative or acquire any personal or pecuniary interest in
conflict with their duty as such directors, officers or committee members shall be liable
jointly and severally for all damages or profits resulting therefrom to the cooperative,
members, and other persons.

When a director, officer or committee member attempts to acquire or acquires, in violation

of his duty, any interest or equity adverse to the cooperative in respect to any matter which
has been reposed in him in confidence, he shall, as a trustee for the cooperative, be liable
for damages and shall be accountable for double the profits which otherwise would have
accrued to the cooperative.

Compensation
In the absence of any provisions in the bylaws fixing their compensation, the directors
shall not receive any compensation except for reasonable per diems: Provided however,
That the directors and officers shall not be entitled to any per diem when, in the preceding
calendar year, the cooperative reported a net loss or had a dividend rate less than the
official inflation rate for the same year. Any compensation other than per diems may be
granted to directors by a majority vote of the members with voting rights at a regular or
special general assembly meeting specifically called for the purpose: Provided, That no
additional compensation other than per diems shall be paid during the first year of
existence of any cooperative.

The compensation of officers of the cooperative as well as the members of the committee
as well as the members of the committees created pursuant to this Code or its bylaws may
be fixed in the bylaws. Unless already fixed in the bylaws, the compensation of all other
employee shall be determined by the board of directors.

Dealings of Directors, Officers, or Committee Members

A contract entered into by the cooperative with one (1) or more of its directors, officers,
and committee members is voidable, at the option of the cooperative, unless all the
following conditions are present.
1. That the presence of such director in the board meeting wherein contract was
approved was not necessary to constitute a quorum for such meeting;
2. That the vote of such director was not necessary for the approval of the contract;
3. That the contract is fair and reasonable under the circumstances; and
4. That in the case of an officer or committee member, the contract with the officer or
committee member has been previously authorized by the general assembly or by
the board of directors.

Where any of the first two conditions set forth in the preceding paragraph is absent, in the
case of a contract with a director, such contract may be ratified by a three-fourths (3/4)
vote of all the members with voting rights, present and constituting a quorum in a meeting
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called for the purpose: Provided, That full disclosure of the adverse interest of the directors
involved is made at such meeting, and that the contract is fair and reasonable under the
circumstances.

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

Illegal Use of Confidential Information

A director or officer, or an associate of a director or officer, who, for his benefit or
advantage or that of an associate, makes use of confidential information that, if generally
known, might reasonably be expected to adversely affect the operation and viability of the
cooperative, shall be held:
a. Liable to compensate the cooperative for the direct losses suffered by the
cooperative as a result of the illegal use of information; and
b. Accountable to the cooperative for any direct benefit or advantage received or yet
to be received by him or his associate, as a result of the transaction.

Removal
All complaints for the removal of any elected officer shall be filed with the board of
directors. Such officer shall be given the opportunity to be heard. Majority of the board of
directors may place the officer concerned under preventive suspension pending the
resolution of the investigation. Upon finding of a prima facie evidence of guilt, the board
shall present its recommendation for removal to the general assembly.

An elective officer may be removed by three fourths (3/4) votes of the regular members
present and constituting a quorum, in a regular or special general assembly meeting called
for the purpose. The officer concerned shall be given an opportunity to be heard at said
assembly.

Responsibilities, Rights and Privileges of Cooperative

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

Books to be Kept Open

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

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

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

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

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

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

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

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Bonding of Accountable Officers
Every director, officer, and employee handling funds, securities or property on behalf of
any cooperative shall be covered by a surety bond to be issued for a duly registered
insurance or bonding company for the faithful performance of their respective duties and
obligations. The board of directors shall determine the adequacy of such bonds.

Upon the filing of the application for registration of a cooperative, the bonds of the
accountable officers shall be required by the Authority. Such bonds shall be renewed
manually and the Authority shall accordingly be informed of such renewal.

Privileges of Cooperatives

Cooperatives registered under this Code, notwithstanding the provisions of any law to the
contrary, be also accorded the following privileges:
1. 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;
2. 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;
3. Cooperatives rendering special types of services and facilities such as cold storage,
ice plant, electricity, transportation, and similar services and facilities shall secure a
franchise therefore, and such cooperatives shall open their membership to all
persons qualified in their areas of operation;
4. 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;
5. Preferential treatment in the allocation of fertilizers, including seeds and other
agricultural inputs and implements, and in rice distribution shall be granted to
cooperatives by the appropriate government agencies;
6. 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;
7. Cooperatives and their federations, such as farm and fishery producers and
suppliers, market vendors and such other cooperatives, which have for their
primary purpose the production and/or the marketing of products from agriculture,
fisheries and small entrepreneurial industries and federations thereof, shall have
preferential rights in the management of public markets and/or lease of public
market facilities, stalls or spaces: Provided, That these rights shall only be utilized
exclusively by cooperatives: Provided, further, That no cooperative forming a joint
venture, partnership or any other similar arrangement with a non-cooperative entity
can utilize these rights;
8. Cooperatives engaged in credit services and/or federations shall be entitled to loans
credit lines, rediscounting of their loan notes, and other eligible papers with the
Development Bank of the Philippines, the Land Bank of the Philippines and other
financial institutions except the Bangko Sentral ng Pilipinas (BSP);

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 9. A public transport service cooperative may be entitled to financing support for the
acquisition and/or maintenance of land and sea transport equipment, facilities and
parts through the program of the government financial institutions. It shall have the
preferential right to the management and operation of public terminals and ports
whether land or sea transport where the cooperative operates and on securing a
franchise for active or potential routes for the public transport;
10. Cooperatives transacting business with the Government of the Philippines or any of
its political subdivisions or any of its agencies or instrumentalities, including
government-owned and controlled corporations shall be exempt from
prequalification bidding requirements;
11. Cooperative shall enjoy the privilege of being represented by the provincial or city
fiscal or the Office of the Solicitor General, free of charge, except when the
adverse party is the Republic of the Philippines;
12. Cooperatives organized by faculty members and employees of educational
institutions shall have the preferential right in the management of the canteen and
other services related to the operation of the educational institution where they are
employed.
13. The appropriate housing agencies and government financial institutions shall create
a special window for financing housing projects undertaken by cooperatives, with
interest rates and terms equal to, or better than those given for socialized housing
projects. This financing shall be in the form of blanket loans or long-term
wholesale loans to qualified cooperatives, without need for individual processing.

Capital, Property, and Funds

Capital Sources
Cooperatives registered under this Code may derive their capital from any or all of the
following sources:
1. Member’s share capital;
2. Loans and barrowings including deposits;
3. Revolving capital which consists of the deferred payment of patronage refunds, or
interest on share capital; and
4. Subsidies, donations, legacies, grants, aids and such other assistance from any local
or foreign institution whether public or private: Provided, That capital coming from
such subsides, donations, legacies, grants, aids and other assistance shall not be
divided into individual share capital holdings at any time but shall instead form
part of the donated capital or fund of the cooperative.nUpon dissolution, such
donated capital shall be subject to escheat.

Limitation on Share Capital Holdings

No member of primary cooperative other than cooperative itself shall own or hold more
than ten per centum (10%) of the share capital of the cooperative.

Where a member of cooperative dies, his heir shall be entitled to the shares of the
decedent: Provided, That the total shareholding of the heir does not exceed ten per centum
(10%) of the share capital of the cooperative; Provided, further, That the heir qualify and is
admitted as members of the cooperative: Provided finally , That where the heir fails to
qualify as a member or where his total shareholding exceeds ten per centum (10%) of the
share capital , the share or shares excess will revert to the cooperative upon payment to the
heir of the value of such shares.
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Assignment of Share Capital Contribution or Interest
Subject to the provisions of this Code, no member shall transfer his shares or interest in the
cooperative or any part thereof unless.
1. He has held such share capital contribution or interest for not less than one (1)
year.
2. The assignment is made to the cooperative or to a member of the cooperative or to
a person who falls within the field of the membership of the cooperative; and
3. The board of directors has approved such assignment.

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

Shares
The term "share" refers to a unit of capital in a primary cooperative the par value of which
may be fixed to any figure not more than One thousand pesos (P1,000.00). The share of
capital of a cooperative is the money paid or required to be paid for the operations of the
cooperative. The method for the issuance of share certificates shall prescribed in its
bylaws.

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

Investment of Capital
A cooperative may invest its capital in any of the following:
a. In shares or debentures or securities of any other cooperative;
b. In any reputable bank in the locality, or any cooperative;
c. In securities issued or guaranteed by the Government;
d. In real state primarily for the use of the cooperative or its members; or
e. In any other manner authorized in the bylaws.

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

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Audit, Inquiry and Members’ Right to Examine

Annual Audit
Cooperatives registered under this Code shall be subject to an annual financial,
performance and social audit. The financial audit shall be conducted by an external auditor
who satisfies all the following qualifications:
a. He is independent of the cooperative or any of its subsidiary that he is auditing; and
b. He is a member in good standing of the Philippine Institute of Certified Public
Accountants (PICPA) and is accredited by both the Board and Accountancy and
the Authority.

The social audit shall be conducted by an independent social auditor accredited by the
Authority.

Performance and social audit reports which contain the findings and recommendations of
the auditor shall be submitted to the board of directors.

The Authority, in consultation with the cooperative sector, shall promulgate the rules and
standards for the social audit of cooperatives.

Audit Report
The auditor shall submit to the board of directors and to the audit committee the financial
audit report which shall be in accordance with the generally accepted auditing standards
for cooperatives as jointly promulgated by the Philippine Institute of Certified Public
Accountants (PICPA) and the Authority.

Thereafter, the board of directors shall present the complete audit report to the general
assembly in its next meeting.

Right to Examine
A member shall have the right to examine the records required to be kept by the
cooperative during reasonable hours on business days and he may demand, in writing, for
a copy of excerpts from said records without charge except the cost of production.

Any officer of the cooperative who shall refuse to allow any member of the cooperative to
examine and copy excerpts from its records shall be liable to such member for damages
and shall be guilty of an offense which shall be punishable under Article 140 of this Code:
Provided, That if such refusal is pursuant to a resolution or order of the board of directors,
the liability under this article shall be imposed upon the directors who voted for such
refusal: Provided, further, That it shall be a defense to any action under this article that the
member demanding to examine and copy excerpts from the cooperative records has
improperly used any information secured through any prior examination of the records of
such cooperative or was not acting in good faith or for a legitimate purpose in making his
demand.

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Allocation and Distribution of Net Surplus

Net Surplus

Notwithstanding the provisions of existing laws, the net surplus of cooperatives shall be
determined in accordance with its bylaws. Every cooperative shall determine its net
surplus at the close of every fiscal year and at such other times as may be prescribed by the
bylaws.

The he net surplus shall not be construed as profit but as an excess of payments made by
the members for the loans borrowed, or the goods and services availed by them from the
cooperative or the difference of the rightful amount due to the members for their products
sold or services rendered to the cooperative including other inflows of assets resulting
from its other operating activities and which shall be deemed to have been returned to
them if the same is distributed as prescribed herein.

Order of Distribution

The net surplus of every cooperative shall be distributed as follows:

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

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2. An amount for the education and training fund, shall not be more than ten per
centum (10%) of the net surplus. The bylaws may provide that certain fees or a
portion thereof be credited to such fund. The fund shall provide for the training,
development and similar other cooperative activities geared towards the growth of
the cooperative movement:
a. Half of the amounts transferred to the education and training fund annually
under this subsection shall be spent by the cooperative for education and
training purposes; while the other half may be remitted to a union or
federation chosen by the cooperative or of which it is a member. The said
union or federation shall submit to the Authority and to its contributing
cooperatives the following schedules:
i. List of cooperatives which have remitted their respective
Cooperative Education and Training Funds (CETF);
ii. Business consultancy assistance to include the nature and cost; and
iii. Other training activities undertaken specifying therein the nature,
participants and cost of each activity.
b. Upon the dissolution of the cooperative, the unexpended balance of the
education and training fund appertaining to the cooperative shall be
credited to the cooperative education and training fund of the chosen union
or federation.
3. An amount for the community development fund, which shall not be less than three
per centum (3%) of the net surplus. The community development fund shall be
used for projects or activities that will benefit the community where the
cooperative operates.
4. An optional fund, a land and building, and any other necessary fund the total of
which shall not exceed seven per centum (7%).
5. The remaining net surplus shall be made available to the members in the form of
interest on share capital not to exceed the normal rate of return our investments and
patronage refunds: Provided, that any amount remaining after the allowable interest
and the patronage refund have been deducted shall be credited to the reserve fund.

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