INTRODUCTION

CHAPTER VI
INSOLVENCY OF COOPERATIVES
”ART. 63. Proceedings Upon Insolvency. – In case a cooperative is unable to

fulfill its obligations to creditors due to insolvency, such cooperative may apply
for such remedies as it may deem fit under the provisions of Act No. 1956, as
amended, otherwise known as the Insolvency Law.
“Nothing in this article, however, precludes creditors from seeking protection

from said insolvency law.”
SEC. 7. Articles 65, 66, 67, 68, 69, 70 and 71 of Chapter VII on Dissolution of
Cooperatives of the same Code are hereby renumbered and amended to
read, as follows:
CHAPTER VII
DISSOLUTION OF COOPERATIVES
“ART. 64. Voluntary Dissolution Where no Creditors are Affected. – If the

dissolution of a cooperative does not prejudice the rights of any creditor
having a claim against it, the dissolution may be effected by a majority vote of
the board of directors, and by a resolution duly adopted by the affirmative vote
of at least three-fourths (3/4) of all the members with voting rights, present
and constituting a quorum at a meeting to be held upon call of the
directors: Provided, That the notice of time, place and object of the meeting
shall be published for three (3) consecutive weeks in a newspaper published
in the place where the principal office of said cooperative is located, or if no
newspaper is published in such place, in a newspaper of general circulation in
the Philippines: Provided, further, That the notice of such meeting is sent to
each member of record either by registered mail or by personal delivery at
least thirty (30) days prior to said meeting. A copy of the resolution authorizing
the dissolution shall be certified to by a majority of the board of directors and
countersigned by the board secretary. The Authority shall thereupon issue the
certificate of dissolution.
“ART. 65. Voluntary Dissolution Where Creditors Are Affected. – Where the

dissolution of a cooperative may prejudice the rights of any creditor, the
petition for dissolution shall be filed with the Authority. The petition shall be
signed by a majority of its board of directors or other officers managing its
affairs, verified by its chairperson or board secretary or one of its directors and
shall set forth all claims and demands against it and that its dissolution was
resolved upon by the affirmative vote of at least three-fourths (3/4) of all the
members with voting rights, present and constituting a quorum at a meeting
called for that purpose.
“If the petition is sufficient in form and substance, the Authority shall issue an
order reciting the purpose of the petition and shall fix a date which shall not be
less than thirty (30) nor more than sixty (60) days after the entry of the order.
Before such date, a copy of the order shall be published at least once a week
or three (3) consecutive weeks in a newspaper of general circulation
published in the municipality or city where the principal office of the
cooperative is situated, or in the absence of such local newspaper, in a
newspaper of general circulation in the Philippines, and a copy shall likewise
be posted for three (3) consecutive weeks in three (3) public places in the
municipality or city where the cooperative’s office is located.
“Upon expiry of the five (5)-day notice to file objections, the Authority shall
proceed to hear the petition and try any issue raised in the objection filed; and
if the objection is sufficient and the material allegations of the petition are
proven, it shall issue an order to dissolve the cooperative and direct the
disposition of its assets in accordance with existing rules and regulations. The
order of dissolution shall set forth therein:
“(1) The assets and liabilities of the cooperative;
“(2) The claim of any creditor;
“(3) The number of members; and
“(4) The nature and extent of the interests of the members of the cooperative.
“ART. 66. Involuntary Dissolution. – A cooperative may be dissolved by order

of a competent court after due hearing on the grounds of:
“(1) Violation of any law, regulation or provisions of its bylaws; or
“(2) Insolvency.
“ART. 67. Dissolution by Order of the Authority. – The Authority may suspend

or revoke, after due notice and hearing, the certificate of registration of a
cooperative on any of the following grounds:
“(1) Having obtained its registration by fraud;
“(2) Existing for an illegal purpose;
“(3) Willful violation, despite notice by the Authority, of the provisions of this

Code or its bylaws;
“(4) Willful failure to operate on a cooperative basis; and
“(5) Failure to meet the required minimum number of members in the

cooperative.
“ART. 68. Dissolution by Failure to Organize and Operate. – If a cooperative

has not commenced business and its operation within two (2) years after the
issuance of its certificate of registration or has not carried on its business for
two (2) consecutive years, the Authority shall send a formal notice to the said
cooperative to show cause as to its failure to operate. Failure of the
cooperative to promptly provide justifiable cause for its failure to operate shall
warrant the Authority to delete its name from the roster of registered
cooperatives and shall be deemed dissolved.
“ART. 69. Liquidation of a Cooperative. – Every cooperative whose charter

expires by its own limitation or whose existence is terminated by voluntary
dissolution or through an appropriate judicial proceeding shall nevertheless
continue to exist for three (3) years after the time it is dissolved, not to
continue the business for which it was established but for the purpose of
prosecuting and defending suits by or against it; settlement and closure of its
affairs; disposition, conveyance and distribution of its properties and assets.
“At any time during the said three (3) years, the cooperative is authorized and
empowered to convey all of its properties to trustees for the benefit of its
members, creditors and other persons in interest. From and after any such
conveyance, all interests which the cooperative had in the properties are
terminated.
“Upon the winding up of the cooperative affairs, any asset distributable to any
creditor, shareholder or member who is unknown or cannot be found shall be
given to the federation or union to which the cooperative is affiliated with.
“A cooperative shall only distribute its assets or properties upon lawful

dissolution and after payment of all its debts and liabilities, except in the case
of decrease of share capital of the cooperative and as otherwise allowed by
this Code.
“ART. 70. Rules and Regulations on Liquidation. – The Authority shall issue

the appropriate implementing guidelines for the liquidation of cooperatives.”
SEC. 8. Articles 72, 73, 74, 75, 76, 77, 78, 79 and 80 of Chapter VIII on
Capital, Property, and Funds of the same Code are hereby renumbered and
amended to read, as follows:
CHAPTER VIII
CAPITAL, PROPERTY, AND FUNDS
“ART. 71. Capital. – The capitalization of cooperatives and the accounting

procedures shall be governed by the provisions of this Code and the
regulations which shall be issued.
“ART. 72. Capital Sources. – Cooperatives registered under this Code may

derive their capital from any or all of the following sources:
“(1) Members’ share capital;
“(2) Loans and borrowings 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 subsidies, 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.
“Upon dissolution, such donated capital shall be subject to escheat.
“ART. 73. Limitation on Share Capital Holdings. – No member of a primary

cooperative other than a cooperative itself shall own or hold more than ten per
centum (10%) of the share capital of the cooperative.
Where a member of a cooperative dies, his heir shall be entitled to the shares
of the decedent: Provided, That the total share holding 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
member of the cooperative: Provided, finally, That where the heir fails to
qualify as a member or where his total share holding exceeds ten per centum
(10%) of the share capital, the share or shares in excess will revert to the
cooperative upon payment to the heir of the value of such shares.
“ART. 74. 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 membership of the
cooperative; and
“(3) The board of directors has approved such assignment.
“ART. 75. Capital Build–Up. – The bylaws of every cooperative shall provide

for a reasonable and realistic member capital build-up program to allow the
continuing growth of the members’ investment in their cooperative as their
own economic conditions continue to improve.
“ART. 76. Shares. – The term ‘share’ refers to a unit of capital in a primary

cooperative the par value of which may be fixed at any figure not more than
One thousand pesos (P1,000.00). The share 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 be prescribed in its bylaws.
“ART. 77. 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.
“ART. 78. 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 estate primarily for the use of the cooperative or its members; or
“(e) In any other manner authorized in the bylaws.
“ART. 79. 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.”
SEC. 9. Articles 81, 82, 83, 84 and 85 of Chapter IX on Audit, Inquiry and
Members’ Right to Examine of the same Code are hereby renumbered and
amended to read, as follows:

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CHAPTER VI

”ART. 63. Proceedings Upon Insolvency. – In case a cooperative is unable to

“Nothing in this article, however, precludes creditors from seeking protection

“ART. 64. Voluntary Dissolution Where no Creditors are Affected. – If the

“ART. 65. Voluntary Dissolution Where Creditors Are Affected. – Where the

“(1) The assets and liabilities of the cooperative;

“(2) The claim of any creditor;

“(3) The number of members; and

“ART. 66. Involuntary Dissolution. – A cooperative may be dissolved by order

“(1) Violation of any law, regulation or provisions of its bylaws; or

“ART. 67. Dissolution by Order of the Authority. – The Authority may suspend

“(1) Having obtained its registration by fraud;

“(2) Existing for an illegal purpose;

“(3) Willful violation, despite notice by the Authority, of the provisions of this

“(4) Willful failure to operate on a cooperative basis; and

“(5) Failure to meet the required minimum number of members in the

“ART. 68. Dissolution by Failure to Organize and Operate. – If a cooperative

“ART. 69. Liquidation of a Cooperative. – Every cooperative whose charter

“A cooperative shall only distribute its assets or properties upon lawful

“ART. 70. Rules and Regulations on Liquidation. – The Authority shall issue

CAPITAL, PROPERTY, AND FUNDS

“ART. 71. Capital. – The capitalization of cooperatives and the accounting

“ART. 72. Capital Sources. – Cooperatives registered under this Code may

“(1) Members’ share capital;

“(2) Loans and borrowings including deposits;

“(4) Subsidies, donations, legacies, grants, aids and such other assistance

“Upon dissolution, such donated capital shall be subject to escheat.

“ART. 73. Limitation on Share Capital Holdings. – No member of a primary

“ART. 74. Assignment of Share Capital Contribution or Interest. – Subject to

“(2) The assignment is made to the cooperative or to a member of the

“(3) The board of directors has approved such assignment.

“ART. 75. Capital Build–Up. – The bylaws of every cooperative shall provide

“ART. 76. Shares. – The term ‘share’ refers to a unit of capital in a primary

“ART. 78. Investment of Capital. – A cooperative may invest its capital in any

“(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;

“(e) In any other manner authorized in the bylaws.

“ART. 79. Revolving Capital. – The general assembly of any cooperative may

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