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Republic Act No. 6938The Cooperative Code of the Philippines
REPUBLIC
ACT NO. 6938 AN ACT TO ORDAIN A COOPERATIVE CODE OF THE PHILIPPINES
CHAPTER
I.GENERAL
CONCEPTS AND PRINCIPLES
Section
1. Title. - This Act shall be known as the "Cooperative
Code
of the Philippines."
Section
2. Declaration of Policy. - It is the declared policy of the
State
to foster the creation and growth of cooperatives as a practical
vehicle
for promoting self-reliance and harnessing people power towards the
attainment
of economic development and social justice. The State shall encourage
the
private sector to undertake the actual formation and organization of
cooperatives
and shall create an atmosphere that is conducive to the growth and
development
of these cooperatives.
Toward
this end, the Government and all its branches, subdivisions,
instrumentalities
and agencies shall ensure the provision of technical guidance,
financial
assistance and other services to enable said cooperatives to develop
into
viable and responsive economic enterprises and thereby bring about a
strong
cooperative movement that is free from any conditions that might
infringe
upon the autonomy or organizational integrity of cooperatives.
Further,
the State recognizes the principle of subsidiarity under which the
cooperative
sector will initiate and regulate within its own ranks the promotion
and
organization, training and research, audit and support services
relating
to cooperatives with government assistance where necessary.
Section
3. General Concepts. - A cooperative is a duly registered
association
of persons, with a common bond of interest, who have voluntarily joined
together to achieve a lawful common social or economic end, making
equitable
contributions to the capital required and accepting a fair share of the
risks and benefits of the undertaking in accordance with universally
accepted
cooperative principles.
Section
4. Cooperative Principles. - Every cooperative shall conduct
its
affairs in accordance with Filipino culture and experience and the
universally
accepted principles of cooperation which include the following:
(1) "Open and Voluntary Membership": Membership
in a cooperative
shall
be voluntary and available to all individuals regardless of their
social,
political, racial or religious background or beliefs.
(2) "Democratic Control": Cooperatives are
democratic
organizations.
Their affairs shall be administered by persons elected or appointed in
a manner agreed upon by the members. Members of primary cooperatives
shall
have equal voting rights on a one-member-one-vote principle: Provided
however, That in the case of secondary and tertiary
cooperatives,
the provisions of section 37 of this Code shall apply.
(3) "Limited Interest in Capital": Share
capital shall receive a
strictly
limited rate of interest.
(4) "Division of Net Surplus": Net surplus
arising out of the
operations
of a cooperative belongs to its members and shall be equitably
distributed
for cooperative development common services, indivisible reserve fund,
and for limited interest on capital and/or patronage refund in the
manner
provided in this Code and in the articles of cooperation and by-laws.
(5) "Cooperative Education": All cooperatives
shall make
provision for
the education of their members, officers and employees and of the
general
public based on the principles of cooperation.
(6) "Cooperation Among Cooperatives": All
cooperatives, in order
to
best serve the interest of their members and communities, shall
actively
cooperate with other cooperatives at local, national, and international
levels.
Section
5. Definition of Terms. - The following terms shall mean:
(1) "Member" includes a person either natural
or juridical who,
adhering
to the principles set forth in this Code and in the articles of
cooperation,
has been admitted by the cooperative as member;
(2) "General Assembly" shall mean the full
membership of the
cooperative
duly assembled for the purpose of exercising all the rights and
performing
all the obligations pertaining to cooperatives, as provided by this
Code,
its articles of cooperation and by-laws;
(3) "Board of Directors" shall mean that body
entrusted with the
management
of the affairs of the cooperative under its articles of cooperation and
by-laws;
(4) "Committee" shall refer to any body
entrusted with specific
functions
and responsibilities under the by-laws or resolution of the general
assembly
or the board of directors;
(5) "Articles of Cooperation" means the
articles of cooperation
registered
under this Code and includes a registered amendment thereof;
(6) "By-laws" means the by-laws registered
under this Code and
includes
any registered amendment thereof;
(7) "Registration" means the operative act
granting juridical
personality
to a proposed cooperative and is evidenced by a certificate of
registration;
(8) "Cooperative Development Authority" means
the government
agency
in charge of registration and regulation of cooperatives as such,
hereinafter
referred to as the Authority; and
(9) "Universally Accepted Principles" means
that body of
cooperative
principles adhered to worldwide by cooperatives in other jurisdictions.
CHAPTER
II.ORGANIZATION
AND REGISTRATION
Section
6. Organization of Cooperatives. A Cooperative may be organized
and registered by at least fifteen (15) persons for any or all of the
following
purposes:
(1)
To encourage thrift and savings mobilization among the members;
(2)
To generate funds and extend credit to the members for productive and
provident
purposes;
(3)
To encourage among members systematic production and marketing;
(4)
To provide goods and services and other requirements to the members;
(5)
To develop expertise and skills among its members;
(6)
To acquire lands and provide housing benefits for the members;
(7)
To insure against losses of the members;
(8)
To promote and advance the economic, social and educational status of
the
members;
(9)
To establish, own, lease or operate cooperative banks, cooperative
wholesale
and retail complexes, insurance and agricultural/industrial processing
enterprises, and public markets;
(10)
To coordinate and facilitate the activities of cooperatives; and
(11)
To undertake any and all other activities for the effective and
efficient
implementation of the provisions of this Code.
Section
7. Objectives of Cooperative. - The primary objective of every
cooperative
is to provide goods and services to its members and thus enable them to
attain increased income and savings, investments, productivity, and
purchasing
power and promote among them equitable distribution of net surplus
through
maximum utilization of economies of scale, cost-sharing and
risk-sharing
without, however, conducting the affairs of the cooperative for
eleemosynary
or charitable purposes.
A
cooperative shall provide maximum economic benefits to its members,
teach
them efficient ways of doing things in a cooperative manner, and
propagate
cooperative practices and new ideas in business and management and
allow
the lower income groups to increase their ownership in the wealth of
this
nation.
Section
8. Cooperative Not in Restraint of Trade. - No cooperative or
method
or act hereof which complies with this Code shall be deemed a
conspiracy
or combination in restraint of trade or an illegal monopoly, or an
attempt
to lessen competition or fix prices arbitrarily in violation of any of
the laws of the Philippines.
Section
9. Cooperative Powers and Capacities. - A cooperative
registered
under this Code shall have the following powers and capacities:
(1)
To sue and be sued in its cooperative name;
(2)
Of succession;
(3)
To amend its articles of cooperation in accordance with the provisions
of this code;
(4)
To adopt by-laws not contrary to law, morals or public policy, and to
amend
and repeal the same in accordance with this Code;
(5)
To purchase, receive, take or grant, hold, convey, sell, lease, pledge,
mortgage, and otherwise deal with such real and personal property as
the
transaction of the lawful affairs of the cooperative may reasonably and
necessarily require, subject to the limitations prescribed by law and
the
Constitution;
(6)
To enter into division, merger or consolidation, as provided in this
Code;
(7)
To join federations or unions, as provided in this Code;
(8)
To accept and receive grants, donations and assistance from foreign and
domestic sources; and
(9)
To exercise such other powers granted in this Code or necessary to
carry
out its purpose or purposes as stated in its articles of cooperation.
Section
10. Organizing a Primary Cooperative. - Fifteen (15) or more
natural
persons, who are citizens of the Philippines, having a common bond of
interest
and are residing or working in the intended area of operation may
organize
a cooperative under this Code.
Section
11. Economic Survey. - Every group of individuals or
cooperatives
intending to form a cooperative under this Code shall submit to the
Cooperative
Development Authority a general statement describing the structure,
purposes
and economic feasibility of the proposed cooperative, indicating
therein
the area of operation, the size of membership and other pertinent data.
Section
12. Liability. - A cooperative shall be registered under this
Code,
with limited liability.
Section
13. Term. - A cooperative shall exist for a period not
exceeding
fifty (50) years from the date of registration unless sooner dissolved
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 Cooperative
Development
Authority.
Section
14. Articles of Cooperation. - (1) All cooperatives applying
for
registration shall file with the Cooperative Development Authority the
articles of cooperation which shall be signed by each of the organizers
and acknowledged by them if natural persons, and by the presidents or
secretaries,
if juridical persons, before a notary public.
(2)
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 address 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
in accordance with Section 23 hereof.
(3)
The articles of cooperation may also contain any other provisions not
inconsistent
with this Code or any related law.
(4)
Four (4) copies each of the proposed articles of cooperation, by-laws,
and the general statement required under Section 11 of this Code shall
be submitted to the Cooperative Development Authority.
(5)
No cooperative shall be registered unless the articles of cooperation
are
accompanied with the bonds of the accountable officers and a sworn
statement
of the treasurer elected by the subscribers showing that at least
twenty-five
per cent (25%) of the authorized share capital has been subscribed and
at least twenty-five per cent (25%) of the total subscription has been
paid: Provided, That in no case shall the paid-up share capital
shall be less than two thousand pesos (P2,000.00).
Section
15. By-laws. - (1) Each cooperative to be registered under
this
Code shall adopt by-laws not inconsistent with the provisions of this
Code.
The by-laws shall be filed at the same time as the articles of
cooperation.
(2)
The by-laws of each cooperative shall provide:
(a)
The qualifications for admission to membership and the payment to be
made
or interest to be acquired as a condition for the exercise of the right
of membership;
(b)
The rights and liabilities of membership;
(c)
The circumstances under which membership is acquired, maintained and
lost;
(d)
The procedure to be followed in case of termination of membership;
(e)
The conditions under which the transfer of a share or interest of the
members
shall be permitted;
(f)
The rules and procedures on the agenda, time, place and manner of
calling,
convening, conducting meetings, quorum requirements, voting systems,
and
other matters related to the business affairs of the general assembly,
board of directors, and committees;
(g)
The general conduct of the affairs of the cooperative, including the
powers
and duties of the general assembly, the board of directors, committees
and the officers, and their qualifications and disqualifications;
(h)
The manner in which the capital may be raised and the purposes for
which
it can be utilized;
(i)
The mode of custody and of investment of net surplus;
(j)
The accounting and auditing systems;
(k)
The manner of loaning and borrowing, including limitations thereof;
(l)
The method of distribution of net surplus;
(m)
The manner of adopting, amending, repealing and abrogating by-laws;
(n)
A conciliation or mediation mechanism for the amicable settlement of
disputes
among members, directors, officers and committee members of the
cooperative;
and
(o)
Other matters incident to the purposes and activities of the
cooperative.
Section
16. Registration. - A cooperative formed or organized under
this
Code acquires juridical personality from the date the Cooperative
Development
Authority issues a certificate of registration under its official seal.
All applications for registration shall be finally disposed of by the
Cooperative
Development Authority within a period of thirty (30) 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.
Section
17. Certificate of Registration. - A certificate of
registration
issued by the Cooperative Development 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.
Section
18. Amendment of Articles of Cooperation and By-laws. - Unless
otherwise
prescribed by this Code and for legitimate purposes, any provision or
matter
stated in the articles of cooperation may be amended by two-thirds
(2/3)
vote of all the member with voting rights, without prejudice to the
right
of the dissenting members to exercise their right to withdraw their
membership
under Sections 31 and 32.
The
original and amended sections together shall contain all provisions
required
by law to be set out in the articles of cooperation. Amendments shall
be
indicated by underscoring or otherwise appropriately indicating the
change
or changes made and a copy thereof duly certified under oath by the
cooperative
secretary and a majority of the directors stating the fact that said
amendment
or amendments have been duly approved by the required vote of the
members.
All amendments to the articles of cooperation shall be submitted to the
Cooperative Development Authority. The amendments shall take effect
upon
its approval by the Cooperative Development 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.
Section
19. Contracts Executed Prior to Registration and Effect Thereof. - Contracts
executed between private persons and cooperatives prior to the
registration
of the cooperative shall remain valid and binding between the parties
and
upon registration of the cooperative. A formal written contract shall
be
adopted and made in the cooperative's name or on its behalf prior to
its
registration.
Section
20. Division of Cooperatives. - Any registered cooperative may,
by a resolution approved by a vote of two-thirds (2/3) of the members
eligible
to vote at a general assembly meeting, resolve to divide itself into
two
(2) or more cooperatives. The procedure for such division shall be
prescribed
in the regulations of the Cooperative Development Authority. The new
cooperatives
shall be come legally established upon registration with the Authority:
Provided, That all the requirements set forth in this Code have
been complied by the new cooperatives: Provided further,
That no division of a cooperative in fraud of creditors shall be valid.
Section
21. Merger and Consolidation of Cooperatives. - (1) Two (2) or
more
cooperatives may merge into a single cooperative which shall be the
consolidated
cooperative.
(2)
No merger or consolidation shall be valid unless approved by two-thirds
(2/3) of all the members eligible to vote 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 pursuant
to Sections 31 and 32.
(3)
The Cooperative Development 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 Cooperative Development
Authority.
Section
22. 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
rights,
privileges, immunities and powers and shall be subject to all the
duties
and liabilities of a cooperative organized under this Code;
(4)
The surviving or the consolidated cooperative shall possess all the
assets,
rights, privileges, immunities and franchises of each of the
constituent
cooperatives; and
(5)
The surviving or the consolidated cooperative shall be responsible for
all the liabilities and obligations of each of the constituent
cooperatives
in the same manner as if such surviving or consolidated cooperative had
itself incurred such liabilities or obligations. Any claim, action or
proceeding
pending by or against any such constituent cooperatives may be
prosecuted
by or against the surviving or consolidated cooperative, as the case
may
be. Neither the rights of creditors nor any lien upon the property of
any
of such constituent cooperative shall be impaired by such merger or
consolidation.
Section
23. Types and Categories of Cooperatives. - (1) "Types of
Cooperatives":
Cooperatives may fall under any of the following types:
(a) "Credit Cooperative" is one which promotes
thrift among its
members
and creates funds in order to grant loan for productive and provident
purposes;
(b) "Consumers Cooperative" is one the primary
purpose of which is
to
procure and distribute commodities to members and non-members;
(c) "Producers Cooperative" is one that
undertakes joint product
whether
agricultural or industrial;
(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 and other services; and
(f) "Multipurpose Cooperative" is one which
combines (2) or more
of
the business activities of these different types of cooperatives.
(2)
"Categories of Cooperatives": 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; and
(iii) Tertiary: The members of which are
secondaries upward to one
(1)
or more apex organizations.
Those
cooperative the members of which are cooperatives shall be known as
federations
or unions, as the case may be; and
(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.
Section
24. Federation of Cooperatives. - (1) A federation of
cooperatives
whose members are primary and/or secondary cooperatives with single
line
or multipurpose business activities may be registered under this Code
for
any or all of the following purposes:
(a) Primary Purpose: To carry on any
cooperative enterprise
authorized
under Section 6;
(b) Secondary Purpose:
(i)
To carry on, encourage, and assist educational and advisory work
relating
to its member cooperatives;
(ii)
To render services designed to encourage simplicity, efficiency, and
economy
in the conduct of the business of its member cooperatives and to
facilitate
the implementation of their book-keeping, accounting, and other system
and procedures;
(iii)
To print, publish, and circulate any newspaper or other publication in
the interest of its member cooperatives and enterprises;
(iv)
To coordinate and facilitate the activities of its member cooperatives;
(v)
To enter into joint ventures with national or International
cooperatives
of other countries in the manufacture and sale of products and/or
services
in the Philippines and abroad; and
(vi)
To perform such other functions as may be necessary to attain its
objectives.
A
federation of cooperatives may be registered by carrying out the
formalities
for registration of a cooperative.
(2)
Registered cooperatives may organize a federation at the provincial
city,
regional, and national levels according to the type of business carried
on.
Section
25. Cooperative Unions. - Registered cooperatives and
federations
at the appropriate levels may organize or join cooperative unions to
represent
the interest and welfare of all types of cooperatives at the
provincial,
city, regional, and national levels. Cooperative unions may
have the following purposes:
(a)
To represent its member organizations;
(b)
To acquire, analyze, and disseminate economic, statistical, and other
information
relating to its members and to all types of cooperatives within its
area
of operation;
(c)
To sponsor studies in the economic, legal, financial, social and other
phases of cooperation, and publish the results thereof;
(d)
To promote the knowledge of cooperative principles and practices;
(e)
To develop the cooperative movement in their respective jurisdictions;
(f)
To advise the appropriate authorities on all questions relating to
cooperatives;
(g)
To raise funds through membership fees, dues and contributions,
donations,
and subsidies from local and foreign sources whether private or
government;
and
(h)
To do and perform such other activities as may be necessary to attain
the
foregoing objectives.
Cooperative
unions may assist the national and local governments in the latter's
development
activities in their respective jurisdictions.
CHAPTER
III.MEMBERSHIP
Section
26. Who May Be Members of Cooperatives. - Any natural person,
who
is a citizen of the Philippines, a cooperative, or non-profit
organization
with juridical personality shall be eligible for membership in a
cooperative
if the applicant meets the qualifications prescribed in the by-laws: Provided,
That only natural persons may be admitted as members of a primary
cooperative.
Section
27. 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 is entitled to all the rights and privileges of
membership.
An associate member is one who has no rights to vote nor be voted upon
and shall be entitled only to such rights and privileges as the by-laws
may provide.
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
Cooperative
Development Authority.
Section
28. Government Officers and Employees. - (1) Any officer or
employee
of the Cooperative Development Authority shall be disqualified to be
elected
or appointed to any position in a cooperative;
(2)
Elective officials of the Government, except barangay officials, shall
be ineligible to become officers and directors of cooperatives; and
(3)
Any government employee may, in the discharge of his duties as member
in
the cooperative, be allowed by the head 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.
Section
29. 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 cooperatives as
may
be prescribed in the by-laws. 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.
Section
30. 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.
Section
31. Termination of Membership.- (1) A member of a
cooperative
may, for any reason, withdraw his membership from the cooperative by
giving
a sixty (60) day notice to the board of directors. The withdrawing
member
shall be entitled to a refund of his share capital contribution and all
other interests in the cooperative: Provided, That such refund
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.
(2)
The death, insanity, insolvency or dissolution of a member shall be
considered
an automatic termination of membership.
(3)
A member 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 the services of the cooperative for an
unreasonable period of time as may be fixed 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 by-laws 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 shall be communicated in person or by
registered
mail to the member and shall be appealable, within thirty (30) days
after
the decision is promulgated to the general assembly whose decision
therein,
whether in a general or special session, shall be final. Pending a
decision
by the general assembly, the membership remains in force.
Section
32. Refund of Interests. - All sums computed in accordance with
the by-laws 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 Code.
CHAPTER
IV.ADMINISTRATION
Section
33. Composition of the General Assembly. - 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.
Section
34. Powers of the General Assembly. - 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 by-laws of the cooperative. The general assembly shall have
the following exclusive powers which cannot be delegated:
(1)
To determine and approve amendments to the articles of cooperation and
by-laws;
(2)
To elect or appoint the members of the board of directors, and to
remove
them for cause;
(3)
To approve developmental plans of the cooperative; and
(4)
Such other matters requiring a two-thirds (2/3) vote of all members of
the general assembly, as provided in this Code.
Section
35. Meetings. - (1) A regular meeting shall be held annually
by
the general assembly on a date fixed in the by-laws, or if not so
fixed,
on any date within ninety (90) days after the close of each fiscal
year:
Provided, That written notice of regular meetings shall be sent
to all members of record at their official addresses at least two (2)
weeks
prior to the meeting, unless a different period is required in the
by-laws.
(2)
Whenever necessary, a special meeting of the general assembly may be
called
at any time by a majority of the board of directors or in the cases
specified
in the by-laws: Provided, That at least one (1) week written
notice
shall be sent to all members. However, a special meeting shall be
called
by the board of directors after compliance with the required notice
within
one (1) month after receipt of a request in writing from at least ten
per
cent (10%) of the total members to transact specific business covered
by
the call.
If
the board fails to call a regular meeting or a special meeting within
the
given period, the Cooperative Development Authority, upon petition of
ten
per cent (10%) of all the members of the cooperative, and for good
cause
shown, may issue an order to the petitioners directing them to call a
meeting
of the general assembly by giving proper notice required by this Code
or
by the by-laws.
(3)
In the case of a newly approved cooperative, a special general assembly
shall be called within ninety (90) days from such approval;
(4)
The Authority may call a special meeting of the cooperative:
(a)
For the purpose of reporting to the members the result of any audit,
examination,
or other investigation of the cooperative affairs ordered or made by
him;
or
(b)
When the cooperative fails to hold an annual general assembly during
the
period required for the purpose of enabling the members to secure any
information
regarding the affairs of the cooperative and benefits that they are
entitled
to receive pursuant to this Code.
(5)
Notice of any meeting may be waived, expressly or impliedly, by any
member.
Section
36. Quorum. - Unless otherwise provided in the by-laws, a
quorum
shall consist of twenty-five per cent (25%) of all the members entitled
to vote.
Section
37. Voting System. - (1) Each member of a primary cooperative
shall
have only one (1) vote. A secondary or tertiary cooperative shall have
voting rights as delegate of members-cooperatives, but such
cooperatives
shall have only five (5) votes. The votes cast by the delegates shall
be
deemed as votes cast by the members thereof.
(2)
No voting agreement or other device to evade the one-member-one-vote
provision
except as provided under subsection (1) hereof shall be valid.
(3)
No member of a primary cooperative shall be permitted to vote by proxy
unless provided for specifically in the by-laws of the cooperative.
However,
the by-laws 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 the behalf of another delegate of the same
cooperative.
Section
38. Composition of the Board of Directors. - The conduct and
management
of the affairs of the 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 fixed in the
by-laws
but not exceeding a term of two (2) years and shall hold office until
their
successors are duly elected and qualified, or until duly removed.
However,
no director shall serve for more than three (3) consecutive terms.
Section
39. Powers of the Board of Directors. - The board of directors
shall
direct and supervise the business, manage the property of the
cooperative
and may, by resolution, exercise all such powers of the cooperative as
are not reserved for the general assembly under this Code and the
by-laws.
Section
40. Directors. - (1) Any member of a cooperative who, under the
by-laws of the cooperative, has the right to vote and who possesses all
the qualifications and none of the disqualifications provided in the
laws
or the by-laws shall be eligible for election as director.
(2)
The cooperative may, by resolution of its board of directors, admit as
director, 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 need not be a member of the cooperative and shall
have
no powers, rights nor responsibilities except to provide technical
assistance
as required by the cooperative.
Section
41. Meeting of the Board, Quorum. - (1) Regular meetings of the
board of directors of every cooperative shall be held monthly, unless
the
by-laws provide otherwise.
(2)
Special meetings of the board of directors may be held at any time upon
the call of the President or as provided in the by-laws.
(3)
A majority of the members of the board shall constitute a quorum for
the
conduct of business, unless the by-laws provide otherwise.
(4)
Directors cannot attend or vote by proxy at board meetings.
Section
42. 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 general assembly in
a regular or special meeting called for the purpose. A director so
elected
to fill a vacancy shall be elected only for the unexpired term of his
predecessor
in office.
Section
43. Officers of the Cooperative. - The board of directors shall
elect from among themselves only the chairman and vice-chairman, and
elect
or appoint other officer of the cooperative from outside of the board
in
accordance with their by-laws. 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 shall serve as elective or appointive
officers
in the same board.
Section
44. Committee of Cooperatives. - (1) The by-laws 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 by-laws or by a majority vote
of
all the members of the board of directors.
(2)
The by-laws shall provide for the creation of an audit committee and
such
other committees as may be necessary for the proper conduct of the
affairs
of the cooperative.
Unless
otherwise provided in the by-laws, the board, in case of vacancy in
said
committees, may cause 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.
Section
45. Functions and Responsibilities of Directors, Officers and
Committee
Members. - The functions and responsibilities of the directors,
officers
and committee members shall be as prescribed in detail in the by-laws
of
a cooperative.
Section
46. Liability of Directors, Officers and Committee Members. -
Directors,
officers and committee members, who 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 member 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 for
double the profits which otherwise would have accrued to the
cooperative.
Section
47. Compensation. - (1) In the absence of any provision in the
by-laws
fixing their compensation, the directors shall not receive any
compensation
except for reasonable per diem: Provided, That 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 further,
that no additional compensation other than per diems shall be paid
during
the first year of existence of any cooperative.
(2)
The compensation of officers of the cooperative as well as the members
of the committees created pursuant to this Code or its by-laws may be
fixed
in the by-laws.
(3)
Unless already fixed in the by-laws, the compensation of all other
employees
shall be determined by the board of directors.
Section
48. Dealings of Directors, Officers and Committee Members. - A
contract
of the cooperative with one (1) or more of its directors, officers,
committee
members is voidable, at the option of such cooperative, unless all the
following conditions are present:
(1)
That the presence of such director in the board meeting in which the
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 two-thirds (2/3) vote of all the members with voting
rights
in a meeting called for the purpose: Provided, That full
disclosure
of the adverse interest of the directors involved is made at such
meeting,
and all that the contract is fair and reasonable under the
circumstances.
Section
49. 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 two-thirds (2/3) vote
of
all the members with voting rights. This provision shall be applicable,
notwithstanding the fact that the director used his own funds in the
venture.
Section
50. Illegal Use of Confidential Information. - (1) A director
or
officer, or an associate of a director or officer, who, in connection
with
a transaction relating to shares of a cooperative or a debt obligation
of a cooperative and for his benefit or advantage or that of an
associate,
makes use of confidential information that, if generally known, might
reasonably
be expected to affect materially the value of the share or the debt
obligation
shall be held:
(a)
Liable to compensate any person for a direct loss suffered by that
person
as a result of the transaction, unless the information was known or
reasonably
should have been known to the person at the time of the transaction; 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.
(2)
The cooperative shall take the necessary steps to enforce the
liabilities
described in subsection (a).
Section
51. Removal. - An elective officer, director or committee
member
may be removed by a vote of two-thirds (2/3) of the voting members
present
and constituting a quorum, in a regular or special general meeting
called
for the purpose. The person involved shall be given an opportunity to
be
heard at said assembly.
CHAPTER
V.RESPONSIBILITIES,
RIGHTS AND PRIVILEGES OF COOPERATIVES
Section
52. 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 Cooperative
Development
Authority.
Section
53. Books to be Kept Open. - (1) Every cooperative shall have
the
following open 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 cooperative;
(b)
A copy of the regulations of the Cooperative Development Authority;
(c)
A copy of the articles of cooperation and by-laws 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 committees;
(f)
Share books, where applicable;
(g)
Financial statements; and
(h)
Such other documents as may be prescribed by laws or the by-laws.
(2)
The chairman of the audit committee of a cooperative shall be
responsible
for books and records of account 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.
(3)
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 anytime. The financial statements,
audited
according to generally accepted auditing standards, principles and
practices,
shall be published annually.
(4)
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 non-financial operations which are already more than five
(5) years old except those relating to transactions which are 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 cooperative secretary and the chairman of the audit committee
of the cooperative and presented to the board of directors which may be
thereupon approve the disposition of said records.
Section
54. Annual Reports. - (1) Every cooperative shall draw up an
annual
report of its affairs as of the end of every fiscal year, and publish
the
same furnishing copies to all its members of record. A copy thereof
shall
be filed with the Cooperative Development Authority within sixty (60)
days
from the end of every fiscal year. The form and contents shall be a
ground
for 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 by the by-laws.
(2)
If any cooperative fails to make, publish and file the report required
herein, or fails to include therein any matter required by this Code,
the
Cooperative Development Authority shall, within fifteen (15) days from
the date of expiration of the prescribed period, send such cooperative
a registered notice, directed to its official and postal address
stating
the delinquency and its consequences. If the cooperative fails to make,
publish or file a copy of the report within thirty (30) days from
receipt
of such notice, any member of the cooperative or the Government may
petition
the court for mandamus to compel the cooperative and its officers to
make,
publish and file such report, as the case may be, and require the
cooperative
or the officers at fault to pay all the expenses of the proceeding,
including
counsel fees when the filing is made by a member.
Section
55. Register of Members as Prima Facie Evidence. - Any
register
or list of members or shares kept by any registered cooperative shall
be
prima facie evidence of the following particulars entered
therein:
Section
56. Probative Value of Certified Copies of Entries. - (1) A
copy
of any entry in any book, register or list regularly kept in the course
of business in the possession of a cooperative shall, if duly certified
in accordance with the rules of evidence, be admissible as evidence of
the existence of the entry and prima facie evidence of the
matters
and transactions therein recorded.
(2)
No person or cooperative in possession of the books of such cooperative
shall, in any legal proceedings to which the cooperative is not a
party,
be compelled to produce any of the books of the cooperative, the
contents
of which can be proved and the matters, transactions and accounts
therein
recorded, unless by order of a competent court.
Section
57. Bonding of Accountable Officers. - Every director, officer
and
employee handling funds, securities or property on behalf of any
cooperative
shall execute and deliver adequate bonds for the faithful performance
of
his duties and obligations. The board of directors shall determine the
adequacy of such bonds.
Section
58. Preference of Claims. - (1) Notwithstanding the provisions
of
existing laws, rules and regulations to the contrary, but subject to
the
prior claim of the Cooperative Development Authority, any debt due a
cooperative
from a member shall be first lien upon any raw materials, production
inputs,
and products produced; or any land, building, facilities, equipment,
goods
or services acquired and held, by such member through the proceeds of
the
loan or credit granted by the cooperative to him for as long as the
same
is not fully paid.
(2)
No property or interest on property which is subject to a lien under
paragraph
(1) shall be sold nor conveyed to third parties without prior
permission
of the cooperative. The lien upon the property or interest shall
continue
to exist even after the sale or conveyance thereof until such lien has
been duly extinguished.
(3)
Notwithstanding the provisions of any law to the contrary, any sale or
conveyance made in contravention of paragraph (2) hereof shall be void.
Section
59. Instrument for Salary or Wage Deduction. - (1) A member of
a
cooperative may, notwithstanding the provisions of existing laws to the
contrary, execute an instrument in favor of the cooperative authorizing
his employer to deduct from the salary or wages payable to him by the
employer
and pay to the cooperative such amount as may be specified in
satisfaction
of any debt or other demand due from the member to the cooperative.
(2)
Upon the execution of such instrument and as may be required by the
cooperative
contained in a written request, the employer shall make the deduction
in
accordance with the agreement and remit forthwith the amount so
deducted
to the cooperative. The employer shall make the deduction for as long
as
such debt or other demand or any part of it remains unpaid by the
employee.
(3)
The term "employer" as used in this article shall include all
private
firms and the national and local governments and government-owned or
controlled
corporations who have under their employ a member of a cooperative and
have agreed to carry out the terms of the instrument mentioned in
paragraphs
(1) and (2) of this article.
(4)
The provision of this section shall also apply to all such agreements
of
the nature referred to in paragraph (1) as were in force on the date of
the approval of this Code.
Section
60. Primary Lien. - Notwithstanding the provisions of any law
to
the contrary, a cooperative shall have a primary lien upon the capital,
deposits or interest of a member for any debt due to the cooperative
from
such a member.
Section
61. Tax Treatment of Cooperatives. - Duly registered
cooperatives
under this Code which do not transact any business with non-members or
the general public shall not be subject to any government taxes and
fees
imposed under the Internal Revenue Laws and other tax laws.
Cooperatives
not falling under this article shall be governed by the succeeding
section.
Section
62. Tax and Other Exemptions. - Cooperatives transacting
business
with both members and non-members shall not be subject to tax on their
transactions to members. Notwithstanding the provisions of the law or
regulation
to the contrary, such cooperatives dealing with non-members shall enjoy
the following tax exemptions:
(1)
Cooperatives with accumulated reserves and undivided net savings of not
more than Ten million pesos (P10,000,000.00) shall be exempt from all
national,
city, provincial, municipal or barangay taxes of whatever name and
nature.
Such cooperatives shall be exempt from customs duties, advance sales or
compensating taxes on their importation of machineries, equipment and
spare
parts used by them and which are not available locally as certified by
the Department of Trade and Industry. All tax-free importations shall
not
be transferred to any person until after five (5) years, otherwise, the
cooperative and the transferee or assignee shall be solidarily liable
to
pay twice the amount of the tax and/or duties thereon.
(2)
Cooperatives with accumulated reserves and undivided net savings of
more
than Ten million pesos (P10,000,000.00) shall pay the following taxes
at
the full rate:
(a) Income Tax: On the amount allocated for
interest on
capitals: Provided,
That the same tax is not consequently imposed on interest individually
receive by members;
(b) Sales Tax: On sales to non members: Provided,
however,
That all cooperatives, regardless of classification, are exempt from
the
payment of income and sales taxes for a period of ten (10) years.
For
cooperatives whose exemptions were removed by Executive Order No. 93,
the
ten-year period shall be reckoned from the effectivity date of said
Executive
Order. Cooperatives created after the approval of this Code shall be
granted
the same exemptions, the period of which shall be reckoned from the
date
of registration with the Authority: Provided, That at least
twenty-five
per cent (25%) of the net income of the cooperatives is returned to the
members in the form of interest and/or patronage refunds;
(c)
All other taxes unless otherwise provided herein; and
(d)
Donations to charitable, research and educational institutions and
reinvestment
to socio-economic projects within the are of operation of the
cooperative
may be tax deductible.
(3)
All cooperative, regardless of the amount of accumulated reserves and
undivided
net savings shall be exempt from payment of local taxes and taxes on
transactions
with banks and insurance companies: Provided, That all sales or
services rendered for non-members shall be subject to the applicable
percentage
taxes except sales made by producers, marketing or service
cooperatives: Provided further, That nothing in this article
shall preclude
examination
of the books of accounts or other accounting records of the cooperative
by duly authorized internal revenue officers for internal revenue tax
purposes
only, after previous authorization by the Authority.
(4)
Any judge in his capacity as notary public, ex officio, shall
render
service, free of charge, to any person or group of persons requiring
either
the administration of oath or acknowledgment of articles of cooperation
of a cooperative applicant for registration and instruments of loan
from
cooperative not exceeding Fifty thousand pesos (50,000.00).
(5)
Any register of deeds shall accept for registration, free of charge,
any
instrument relative to a loan made under this Code which does not
exceed
Fifty thousand pesos (50,000.00) or the deeds of title of any property
acquired by the cooperative or any paper or document drawn in
connection
with any action brought by the cooperative or with any court judgment
rendered
in its favor or any instrument relative to a bond of any accountable
officer
of a cooperative for the faithful performance of his duties and
obligations.
(6)
Cooperatives shall be exempt from the payment of all court and
sheriff's
fees payable to the Philippine Government for and in connection with
all
actions brought under this Code, or where such actions is brought by
the
Cooperative Development Authority before the court, to enforce the
payment
of obligations contracted in favor of the cooperative.
(7)
All cooperatives shall be exempt from putting up a bond for bringing an
appeal against the decision of an inferior court or seeking to set
aside
any third party claim: Provided, That a certification of the
authority
showing that the net assets of the cooperative are in excess of the
amount
of the bond required by the court in similar cases shall be accepted by
the court as sufficient bond.
(8)
Any security issued by a cooperative, shall be exempt from provisions
of
the Securities Act provided such security shall not be speculative.
Section
63. Privileges of Cooperatives. - Cooperatives registered
under
this Code shall, 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 valuables papers in the sale 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 own members shall be
granted
to the cooperatives concerned;
(5)
Preferential treatment in the allocation of fertilizers 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 connections with the shipment of
goods
and products of cooperatives;
(7)
Cooperatives and their federations, such as market vendor cooperatives,
shall have preferential rights in management of public markets and/or
lease
of public market facilities, stall or spaces;
(8)
Credit cooperatives and/or federations shall be entitled to loans,
credit
liens, rediscounting of their loan notes, and other eligible papers
with
the Development Bank of the Philippines, the Philippine National Bank,
the Land Bank of the Philippines, and other financial institutions
except
the Central Bank of the Philippines;
(9)
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 pre-qualification bidding requirements; and
(10)
Cooperatives 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.
CHAPTER
VI.INSOLVENCY
OF COOPERATIVES
Section
64. 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
the Insolvency Law (Act No. 1956, as amended).
Nothing
in this section, however, precludes creditors from seeking protection
from
said insolvency law.
CHAPTER
VII.DISSOLUTION
OF COOPERATIVES
Section
65. 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 affected by a
majority
vote of the board of directors, and by a resolution duly adopted by the
affirmative vote of at least two-thirds (2/3) of all the members with
voting
rights at a meeting to be held upon call of the directors: Provided,
That 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 the 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 notice of such meeting is
sent
to each stockholder or member 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 by a majority
of the board of directors and countersigned by the secretary of the
cooperative.
The Cooperative Development Authority shall thereupon issue the
certificate
of dissolution.
Section
66. 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 Cooperative
Development
Authority. The petition shall be signed by a majority of its board of
directors
or other officers managing its affairs, shall be verified by its
president
or 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 two-thirds (2/3) of all the members with voting
rights,
at a meeting called for that purpose.
If
the petition is sufficient in form and substance, the Cooperative
Development
Authority shall, by an order reciting the purpose of the petition, fix
a date on or before which objections thereto may be filled by any
person,
which date 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 for 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 newspaper, then in a newspaper of general circulation
in
the Philippines, and a similar copy shall be posted for three (3)
consecutive
weeks in three (3) public places in the municipality or city.
Upon
five (5) days notice, given after the date on which the right to file
objections
as fixed in the order has expired, the Cooperative Development
Authority
shall proceed to hear the petition and try any issue made by the
objections
filed; and if no such objection is sufficient, and the material
allegations
of the petition are true, it shall issue an order dissolving the
cooperative
and directing such disposition of its assets as justice requires. 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.
Section
67. 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 by-laws; or
(2)
insolvency.
Section
68. Dissolution by Order of 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 by-laws;
(4)
Willful failure to operate on a cooperative basis; and
(5)
Failure to meet the required minimum number of members in the
cooperative.
Section
69. Dissolution by Failure to Organize and Operate. - If a
cooperative
has not commenced business and operation within two (2) years after the
date shown on its certificate of registration or has not carried on
business
for two (2) consecutive years, the Authority shall send formal inquiry
to the said cooperative as to the status of its operation. Failure of
the
cooperative to promptly provide justifiable cause for its failure to
operate
shall warrant the Authority to strike off its name from the register
and,
for all intents and purposes, the cooperative shall be deemed dissolved.
Section
70. Cooperative Liquidation. - Every cooperative whose charter
expires
by its own limitation or whose cooperative existence is terminated by
voluntary
dissolution or is terminated by appropriate judicial proceedings shall
nevertheless be continued as a body cooperative for three (3) years
after
the time when it would have been so dissolved, for the purpose of
prosecuting
and defending suits by or against it and enabling it to settle and
close
its affairs, to dispose of and convey its property and to distribute
its
assets, but not for the purpose of continuing the business for which it
was established.
At
anytime during said three (3) years, said cooperative is authorized and
empowered to convey all of its property to trustees for the benefit of
members, creditors and other persons in interest. From and after any
such
conveyance by the cooperative of its property in trust for the benefit
of its members, creditors and others in interest, all interest which
the
cooperative had in the property terminates the legal interest vests in
the trustees and the beneficial interest vests in the members,
creditors
or other persons in interest.
Upon
the winding up of the cooperative affairs, any asset distributable to
any
creditor or shareholder or member who is unknown or cannot be found
shall
be given to the federation, union or association to which the
cooperative
is affiliated or to the movement.
Except
by decrease of share capital and as otherwise allowed in this Code, no
cooperative shall distribute any of its assets or property except upon
lawful dissolution and after payment of all its debts and liabilities.
Section
71. Rules and Regulations on Liquidation. The Authority shall
issue
the appropriated implementing guidelines for the liquidation of
cooperatives.
CHAPTER
VIII.CAPITAL,
PROPERTY AND FUNDS
Section
72. Capital. - The capitalization of cooperatives and the
accounting
therefore shall be governed by the provisions of this Code and the
regulations
issued hereunder.
Section
73. 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 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.
Section
74. Limitation on Share Capital Holdings. - No member of a
cooperative
other than a cooperative shall own or hold more than twenty per cent
(20%)
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 twenty per
cent
(20%) 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 such member or
where
his total share holding exceeds twenty per cent (20%) 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.
Section
75. 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 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.
Section
76. Interest on Share Capital. - Interest on share capital
shall
not exceed the normal rate on investments as determined by the
Cooperative
Development Authority and such interest shall be non-cumulative.
Section
77. Shares. - The term "share" refers to a unit of
capital
the par value of which may be fixed at any figure but not less than One
peso (Pl.00). The share capital of a cooperative is the money paid or
required
to be paid for to conduct its operations. The method of issuing the
share
certificates may be prescribed in the by-laws of a cooperative.
Section
78. Fines. - The by-laws of a cooperative may prescribe a fine
on
unpaid subscribed share capital subject to the guidelines which the
Cooperative
Development Authority may issue.
Section
79. Investment of Capital. - (1) 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 member;
or
(e)
In any other manner authorized in the by-laws.
Section
80. 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 per unit of product 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 that the time of retirement by such certificates and the
amounts
to be returned are at the discretion of the board of directors.
CHAPTER
IX.AUDIT,
INQUIRY AND MEMBERS' RIGHT TO EXAMINE
Section
81. Annual Audit. - Cooperatives under this Code shall be
subject
to an annual audit by an auditor who satisfies all the following
qualifications:
(1)
He is independent of the cooperative being audited and of any
subsidiary
of the cooperative; and
(2)
He is a member of any recognized professional accounting or cooperative
auditor's association with similar qualifications.
Section
82. Audit Report. - The auditor shall submit to the audit
committee
a report of the audit which shall contain a statement of the assets and
liabilities of the cooperative, including earnings and expenses, amount
of net surplus as well as losses and bad debts, if any.
The
audit committee shall forthwith furnish the board of directors a copy
of
the audit report. Thereafter, the board of directors shall present the
complete audit report to the general assembly in its next meeting.
Section
83. Non-liability for Defamation. - An auditor is not liable
to
any person in an action for defamation based on any act done, or any
statement
made by him in good faith in connection with any matter he is
authorized
or required to do pursuant to this Code.
Section
84. Right to Examine. - A member shall have the right to
examine
the records required to be kept by the cooperative under Section 51 of
this Code during reasonable hours on business days and he may demand,
in
writing, for a copy of excerpts from said records without charges
except
the cost of reproduction.
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 Section 106 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 section 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.
Section
85. Safety of Records. - Every cooperative shall, at its
principal
office, keep and carefully preserve the records required by this Code
to
be prepared and maintained. It shall take all necessary precaution to
prevent
its loss, destruction or falsification.
CHAPTER
X.ALLOCATION
AND DISTRIBUTION OF NET SURPLUS
Section
86. Net Surplus. - Notwithstanding the provisions of existing
laws,
the net surplus of cooperatives shall be determined in accordance with
its by-laws. Every cooperative shall determine its net surplus at the
close
of every fiscal year and at such other time as may be prescribed by the
by-laws.
The
net surplus shall not be construed as profit but as excess of payments
made by the members for the loans borrowed, or the goods and services
bought
by them from the cooperative and which shall be deemed to have been
returned
to them if the same is distributed as prescribed herein.
Section
87. 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 cent
(10%)
of 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 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 anytime 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 resolve:
(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.
(2)
An amount for the education and training fund, which shall be not more
than ten per cent (10%) of net surplus. The by-laws may provide that
certain
fees or fines or a portion thereof be credited to such fund:
(a)
Half of the amounts transferred to the education and training fund
annually
under this subsection may be spent by the cooperative for education and
training and other purposes; while the other half shall be credited to
the cooperative education and training fund of the respective apex
organization
of which the cooperative is a member. An apex organization may be a
federation
or union.
(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 above mentioned
apex
organization.
(3)
An optional fund, a land and building, community development, and any
other
necessary fund the total of which may not exceed ten per cent (10%).
(4)
The remaining net surplus shall be made available to the members in the
form of interest not to exceed the normal rate of return on investments
and patronage refunds.
The
sum allocated for patronage refunds shall be made available at the same
rate to all patrons of the cooperative in proportion to their
individual
patronage: Provided, That:
(a)
In the case of a member patron with paid-up share capital contribution,
his proportionate amount of patronage refund shall be paid to him
unless
he agrees to credit the amount to his account as additional share
capital
contribution;
(b)
In the case of a member patron with unpaid share capital contribution,
his proportionate amount of patronage refund shall be credited to his
account
until his share capital contribution has been fully paid;
(c)
In the case of a non-member patron, his proportionate amount of
patronage
refund shall be set aside in a general fund for such patrons and shall
be allocated to individual non-member patrons only upon request and
presentation
of evidence of the amount of his patronage. The amount so allocated
shall
be credited to such patron toward payment of the minimum capital
contribution
for membership. When a sum equal to this amount has accumulated at any
time within a period specified in the by laws, such patron shall be
deemed
and become a member of the cooperative if he so agrees or requests and
complies with the provisions of the by-laws for admission to membership;
(d)
If within any period of time specified in the by-laws, any subscriber
who
has not fully paid his subscribed share capital or any non-member
patron
who has accumulated the sum necessary for membership but who does not
request
nor agree to become a member or fails to comply with the provisions of
the by-laws for admission to membership, the amount so accumulated
credited
to their account together with any part of the general fund for
non-member
patrons shall be credited to the reserve fund or to the education and
training
fund of the cooperative, at the option of the cooperative.
CHAPTER
XI.SPECIAL
PROVISIONS RELATING TO AGRARIAN REFORM COOPERATIVES
Section
88. Coverage. - The provision of this Chapter shall primarily
govern
agrarian reform cooperatives: Provided, That the provisions of
other
chapter of this Code shall apply suppletorily except insofar as this
Chapter
otherwise provides.
Section
89. Definition and Purpose. - An agrarian reform cooperatives
within
the meaning of this Code is one where the majority of the members are
agrarian
reform beneficiaries and marginal farmers and organized for any or all
the following purposes:
(1)
To develop an appropriate system of land tenure, land development, land
consolidation or land management in areas covered by agrarian reform;
(2)
To coordinate and facilitate the dissemination of scientific methods of
production, and provide assistance in the storage, transport, and
marketing
of farm products for agrarian reform beneficiaries and their immediate
family, hereinafter referred to as "beneficiaries";
(3)
To provide financial facilities to beneficiaries for provident or
productive
purposes at reasonable costs;
(4)
To arrange and facilitate the expeditious transfer of appropriate and
suitable
technology to beneficiaries and marginal farmers at the lowest possible
cost;
(5)
To provide social security benefits, health, medical and social
insurance
benefits and other social and economic benefits that promote the
general
welfare of the agrarian reform beneficiaries and marginal farmers;
(6)
To provide non-formal education, vocational/technical training, and
livelihood
programs to beneficiaries and marginal farmers;
(7)
To act as channels for external assistance and services to the
beneficiaries
and marginal farmers;
(8)
To undertake a comprehensive and integrated development program in
agrarian
reform and resettlement areas with special concern for the development
of agro-based, marine-based, and cottage-based industries;
(9)
To represent the beneficiaries on any or all matters that affect their
interest; and
(10)
To undertake such other economic or social activities as may be
necessary
or incidental in the pursuit of the foregoing purposes.
Section
90. Cooperative Estates. - Landholdings like plantations,
estates
or haciendas acquired by the State for the benefit of the workers in
accordance
with the Comprehensive
Agrarian Reform Program shall be owned collectively by the
workers-beneficiaries
who shall form a cooperative at their option.
Section
91. Infrastructure. - In agrarian reform and resettlement
areas,
the Government shall grant to agrarian reform cooperatives preferential
treatment, if necessary, the authority to construct, maintain, and
manage
with government funding roads, bridges, canals, wharves, ports,
reservoirs,
irrigation systems, waterworks systems, and other infrastructures. For
this purpose, government technical assistance, facilities and equipment
shall be made available to such agrarian reform cooperatives for their
use.
Section
92. Lease of Public Lands. - The Government may lease public
lands
to any agrarian reform cooperatives for a period not exceeding
twenty-five
(25) years, subject to renewal for another twenty-five (25) years only:
Provided, That the application for renewal shall be made one (1)
year before the expiration of the lease: Provided further, That
such lease shall be for the exclusive use and benefit of the
beneficiaries
and marginal farmers subject to the provisions of the Comprehensive
Agrarian Reform Program.
Section
93. Preferential Right. - In agrarian reform areas, an
agrarian
reform cooperative shall have the preferential right in the grant of
franchise
and certificate of public convenience and necessity for the operation
of
public utilities and services: Provided, That it meets the
requirements
and conditions imposed by the appropriate government agency granting
the
franchise or certificate of public convenience and necessity.
Electric
service agencies shall, upon request of agrarian reform cooperative,
immediately
provide electric services to agrarian reform areas. If the electric
service
agencies concerned fails for any reason to provide the services
requested
within a period of one (1) year from receipt thereof, the agrarian
reform
cooperative concerned may provide the electric services in the agrarian
reform area directly through its own resources and shall continue to do
so until such time that the electric service agency concerned purchases
all the investments made by the agrarian reform cooperative in the
electrification
of the agrarian reform and resettlement areas.
Section
94. Privileges. - Subject to such reasonable terms and
conditions
as the Department of Agrarian Reform and the Authority may impose,
agrarian
reform cooperatives may be given the exclusive right to do any or all
of
the following economic activities in agrarian reform and resettlement
areas:
(1)
Supply and distribution of consumer, agricultural, aquacultural, and
industrial
goods, production inputs, and raw materials and supplies, machinery,
equipment
facilities and other services and requirements of the beneficiaries and
marginal farmers in the agrarian reform areas at reasonable prices;
(2)
Marketing of the products and services of the beneficiaries on the
local
and foreign markets;
(3)
Processing of the members products into finished consumer or industrial
goods for domestic consumption or for export;
(4)
Provision of essential public services at cost such as power,
irrigation,
potable water, passenger and/or cargo transportation by land, sea, or
air,
communication services, and public health and medical care services;
(5)
Management, conservation, and commercial development of marine,
forestry,
mineral, water, and other natural resources subject to compliance with
the laws and regulations on environmental and ecological controls;
(6)
Provision of financial, technological, and other services and
facilities
required by the beneficiaries in their daily lives and livelihood.
The
Government shall provide the necessary financial and technical
assistance
to agrarian reform cooperatives to enable them to discharge effectively
their purposes under this section. The Department of Agrarian Reform,
the
Cooperative Development Authority and the Central Bank of the
Philippines
shall draw up a joint program for the organization and financing of the
agrarian reform cooperative subject to this Chapter. The joint
program
shall be geared towards the beneficiaries gradual assumption of full
ownership
and management control of the agrarian reform cooperatives within ten
(10)
years from the date of registration of said cooperatives.
Section
95. Organization and Registration. - Agrarian reform
cooperatives
may be organized and registered under this Code only upon prior written
verification by the Department of Agrarian Reform to the effect that
the
same is needed and desired by the beneficiaries; results of a study
that
has been conducted fairly indicate the economic feasibility of
organizing
the same and that it will be economically viable in its operations; and
that the same may now be organized and registered in accordance with
the
requirements of this Code.
CHAPTER
XII.SPECIAL
PROVISIONS ON PUBLIC COOPERATIVES
Section
96. Definition and Coverage. - A public service cooperative,
within
the meaning of this Code, is one organized to render public service as
authorized under a franchise or certificate of public convenience and
necessity
duly issued by the appropriate government agency. Such services may
include
the following:
(1)
Power generation, transmission, and/or distribution;
(2)
Ice plants and cold storage services. Electric cooperatives created
under
Presidential Decree No. 269 shall be governed by this Chapter if they
qualify
as cooperative under the provisions of this Code;
(3)
Communications services including telephone, telegraph, and
telecommunications;
(4)
Land, sea, and air transportation cooperative for passenger and/or
cargo.
Transport cooperatives organized under the provisions of Executive
Order
No. 898, Series of 1983, shall be governed by this Chapter;
(5)
Public markets, slaughterhouses and other similar services; and
(6)
Such other types of public services as may be engaged in by any
cooperative.
Such cooperative shall be primarily governed by this Chapter and the
general
provisions of this Code insofar as they may be applicable unless they
are
inconsistent herewith.
Section
97. Registration Requirements. - No public service cooperative
shall
be registered unless it satisfies the following requirements:
(1)
It has the favorable endorsement of the proper government agency
authorized
to issue the franchise or certificates of public convenience and
necessity;
(2)
Its articles of cooperation and by-laws provide for the membership of
the
users and/or producers of the service of such cooperatives; and
(3)
It satisfies such other requirements as may be imposed by the other
pertinent
government agencies concerned. In case there are two (2) or more
applicants
for the same public service franchise or certificate of public
convenience
and necessity, all things being equal, preference shall be given to a
public
service cooperative.
Section
98. Regulation Requirements. - (1) The internal affairs of
public
service cooperatives such as the rights and privileges of members, the
rules and procedures for meetings of the general assembly, board of
directors
and committees; for the election and qualifications of officers,
directors,
and committee members, allocation and distribution of surpluses; and
all
other matters relating to their internal affairs shall be governed by
this
Code.
(2)
All matters relating to the franchise or certificate of public
convenience
and necessity of public service cooperatives such as capitalization and
investment requirements, equipment and facilities, frequencies,
rate-fixing,
and such other matters affecting their public service operations shall
be governed by the proper government agency concerned.
(3)
The Cooperative Development Authority and the proper government agency
concerned shall jointly issue the necessary rules and regulations to
implement
this Chapter.
CHAPTER
XIII.SPECIAL
PROVISIONS RELATING TO COOPERATIVE BANKS
Section
99. Governing Law. - (1) The provisions of this Chapter shall
primarily
govern cooperative banks registered under this Code and the other
provisions
of this Code shall apply to them only insofar as they are not
inconsistent
with the provisions contained in this Chapter.
(2)
Cooperatives duly established and registered under the provisions of
this
Code may organize among themselves a cooperative bank which shall
likewise
be considered a cooperative registerable under the provision of this
Code
subject to the requirements of and requisite authorization from the
Central
Bank.
Section
100. Definition, Classification and Functions. - A cooperative
bank
is one organized by the majority shares of which is owned and
controlled
by cooperatives primarily to provide financial and credit services to
cooperatives.
The term "cooperative bank" shall include cooperative rural banks.
A
cooperative bank may perform the following functions:
(1)
To carry on banking and credit services for the cooperatives;
(2)
To receive financial aid or loans from the Government and the Central
Bank
of the Philippines for and in behalf of the cooperative banks and
primary
cooperatives and their federations engaged in business and to supervise
the lending and collection of loans;
(3)
To mobilize savings of its members for the benefit of the cooperative
movement;
(4)
To act as a balancing medium for the surplus funds of cooperatives and
their federations;
(5)
To discount bills and promissory notes issued and drawn by cooperatives;
(6)
To issue negotiable instruments to facilitate the activities of
cooperatives;
(7)
To issue debentures subject to the approval of and under conditions and
guarantees to be prescribed by the Government;
(8)
To borrow money from banks and other financial institutions within the
limit to be prescribed by the Central Bank; and
(9)
To carry out all other functions as may be prescribed by the Authority:
Provided, That the performance of any banking function shall
be
subject to prior approval by the Central Bank of the Philippines.
Section
101. Registration Requirements. - No entity shall be
registered
by the Cooperative Development Authority as a cooperative bank unless
the
articles of cooperation and by-laws thereof as well as its
establishment
and operation as a cooperative bank have been approved by the Central
Bank
of the Philippines and it satisfies all requirements for registration
as
a cooperative.
Section
102. Membership. - Membership of a cooperative bank shall
include
only cooperatives and federations of cooperatives.
Section
103. Board of Directors. - The number, composition, and voting
rights
of the board of directors shall be defined in the articles of
cooperation
and by-laws of the cooperative bank, notwithstanding provisions of this
Code to the contrary.
Section
104. Loans. - Cooperatives may obtain loans from a cooperative
bank.
Loans granted by a cooperative bank shall be reported to the Central
Bank
of the Philippines.
Section
105. Supervision. - The cooperative banks registered under
this
Code shall be under the supervision of the Central Bank. The Central
Bank
upon consultation with the agency and the cooperative movement shall
formulate
guidelines regarding the operations and banking transactions of
cooperative
bank. These guidelines shall give due recognition to the unique
cooperative
nature and character of cooperative banks. To this end, cooperative
banks
may be exempted from Central Bank rules and regulations, applicable to
other types of banks, which would impede the cooperative rural bank
from
performing legitimate financial and banking services to its members.
Section
106. Capitalization. - (1) A national cooperative bank shall
have
a minimum authorized share capital of Two hundred million pesos
(P200,000,000.00)
in relation to Section 14(5). The authorized share capital shall be
divided
into such number of shares with a minimum par value of One thousand
pesos
(P1,000.00) per share. For the purpose primarily of determining the
permanency
of equity, the types of share a cooperative bank may issue, including
the
terms thereof and the rights appurtenant thereto, shall be subject to
such
rules and regulations as the Central Bank may prescribe.
(2)
A local cooperative bank shall have a minimum authorized share capital
of Twenty million pesos (P20,000,000.00) divided into such number of
shares
with a minimum par value of One hundred pesos (P100.00) per share.
Section
107. Distribution of Net Surplus. - The provisions of this
Code
on the allocation and distribution of net surplus shall apply.
Section
108. Privileges. - Cooperative banks shall have the following
privileges
subject to the approval of the Central Bank and compliance with
applicable
banking laws, rules and regulations:
(1)
The cooperative banks registered under this Code shall be given the
same
privilege granted to the rural banks, private development banks,
commercial
banks, and all other banks to re-discount notes with the Central Bank,
the Land Bank of the Philippines, and other government banks without
affecting
in any way the provisions of this Code; and
(2)
To act as a depository of government funds. For this purpose, all
government
departments, agencies and units of the national and local governments,
including government-owned and controlled corporations are hereby
authorized
to deposit their funds in any cooperative bank.
Section
109. Assistance to Cooperative Bank. - Whenever a cooperative
bank
organized under this Code is distressed or may need assistance in the
rehabilitation
of its financial condition or to avoid bankruptcy, the Monetary Board
of
the Central Bank of the Philippines shall designate an official of the
Central Bank or a person of recognized competence in banking or finance
as receiver or conservator of the said bank pursuant to the provisions
of Section 29 of Republic Act. No. 265, as amended.
CHAPTER
XIV.SPECIAL
PROVISIONS RELATING TO CREDIT COOPERATIVE
Section
110. Coverage. - This Chapter shall apply only to credit
cooperatives
and the rest of the provisions of this Code shall apply to them insofar
as the same are not inconsistent with the provisions of this Chapter.
Section
111. Definition and Objectives. - A credit cooperative is a
financial
organization owned and operated by its members with the following
objective:
(1)
To encourage savings among its members;
(2)
To create a pool of such savings for which loans for productive or
provident
purposes may be granted to its members; and
(3)
To provide related services to enable its members to maximize the
benefit
from such loans.
Section
112. Organization and Registration. - Credit cooperative shall
be
organized and registered in accordance with the general provisions of
this
Code.
Section
113. Organizational Linkage. - Credit cooperatives may
organize
chapter or subsidiaries, or join leagues and federations for the
purpose
of providing commonly needed essential services Including but not
limited
to the following:
(1)
Inter-lending of surplus fund;
(2)
Mutual benefits;
(3)
Deposit guarantee;
(4)
Bonding;
(5)
Education and training;
(6)
Professional and technical assistance;
(7)
Research and development;
(8)
Representation; and
(9)
Other services needed to improve their performance.
Existing
support organizations such as federations of credit cooperatives,
credit
cooperatives at the provincial, regional and national levels may
continue
as such under this Code.
Section
114. Prohibition. - The term "credit cooperative" shall
be
used exclusively by those who are duly registered under this Chapter,
and
no person or group of persons, or organizations shall use the said term
unless duly registered herein.
CHAPTER
XV.SPECIAL
PROVISIONS RELATING TO COOPERATIVE INSURANCE SOCIETIES
Section
115. Cooperative Insurance Societies. - Existing cooperatives
may
organize themselves into a cooperative insurance entity for the purpose
of covering the insurance requirements of the cooperative members
including
their properties and assets.
Section
116. Types of Insurance Provided. - Under the cooperative
insurance
program established and formed by virtue of the provisions of this
Code,
the cooperative insurance societies shall provide its constituting
members
different types of insurance coverage consisting of, but not limited
to,
life insurance with special group coverage, loan protection, retirement
plans, endowment with health and accident coverage, fire insurance,
motor
vehicle coverage, bonding, crop and livestock protection and equipment
insurance.
Section
117. Applicability of Insurance Laws. - The provisions of the Insurance
Code and all other laws and regulations relative to the
organization
and operation of an insurance company shall apply to cooperative
insurance
entities organized under this Code. The requirements on capitalization,
investments and reserves of insurance firms may be liberally modified
upon
consultation with the Cooperative Development Authority and the
cooperative
sector. But in no case may the requirements be reduced to less than
half
of those provided for under the Insurance
Code and other related laws.
Section
118. Implementing Rules. - The Insurance Commission, upon
consultation
with the Cooperative Development Authority and the cooperative sector,
shall formulate the rules and regulations implementing these provisions.
CHAPTER
XVI.MISCELLANEOUS
PROVISIONS
Section
119. Compliance with Other Laws. - (1) The Labor Code and all
other
labor laws shall apply to all cooperatives.
(2)
The Social Security Act, the Medical Care Act, and all other social
legislations
shall apply to all cooperatives.
(3)
All other laws and executive orders applicable to cooperatives duly
registered
under this Code.
Section
120. Register of Cooperatives. - The Cooperative Development
Authority
shall establish a register which shall contain chronological entry of
the
name of every cooperative registered or dissolved under this Code
together
with the basic information required for registration and any
information
considered useful. The Cooperative Development Authority shall publish
every year a list of cooperatives in existence, under dissolution and
whose
registration is cancelled during the year together with such
information
on each of them as may be prescribed in the regulations.
Section
121. Settlement of Disputes. Disputes among members, officers,
directors
and committee members, and intra-cooperative disputes shall, as far as
practicable, be settled amicably in accordance with the conciliation or
mediation mechanisms embodied in the by-laws of the cooperative, and in
applicable laws.
Should
such a conciliation/mediation proceeding fail, the matter shall be
settled
in a court of competent jurisdiction.
CHAPTER
XVII.FINAL
PROVISIONS
Section
122. Electric Cooperatives. - Electric cooperatives shall be
covered
by this Code. However, there shall be a transition period of three (3)
years within which the Cooperative Development Authority and the
National
Electrification Administration shall help and assist electric
cooperatives
to qualify under this Code. The Cooperative Development Authority and
the
National Electrification Administration shall jointly promulgate rules
and regulations to the end that the provisions of this law are
harmonized
with the provisions of Presidential Decree No. 269.
Section
123. Regulations. - (1) The Cooperative Development Authority
may
issue regulations to implement those provisions of this Code which
expressly
call for the issuance thereof. This paragraph shall not apply to those
cases wherein a specific provision of this Code expressly designates
particular
government agencies which shall issue the regulations called for by any
provision of this Code.
(2)
Where a provision of this Code does not expressly call for nor
authorize
the issuance of a regulation, no regulation shall be issued thereon.
Any
regulation issued in violation of this paragraph shall be null and void
ab initio.
(3)
No regulation shall be issued nor become effective under this Code
unless
the following requirements are satisfied:
(a)
Public announcement on the intention to issue regulations describing
the
subject to be dealt on with a copy of the proposed regulations
attached,
inviting the public to make known their views thereon and submit their
positions with respect thereof. The announcement shall be published in
a daily newspaper of national general circulation at least once a week
for four (4) consecutive weeks prior to the intended date of
commencement
of the public hearing thereon, specifying the date, time and place of
the
public hearing;
(b)
Public hearings may be conducted separately in Luzon, Visayas and
Mindanao
by the Authority and the proceedings thereof shall be duly recorded.
Minutes
of a public hearing shall be made available to the public at cost. The
public hearing may be held in several sessions: Provided, That
no
session shall be conducted unless the minutes of all other previous
sessions
have been published beforehand;
(c)
The proceed regulations shall be supported by a memorandum of
justification
for every provision thereof which shall include citation of the legal
bases
therefore, the reasons for such provision, and the expected results
therefrom;
and
(d)
The regulations shall be recommended by the Authority and approved by
the
Office of the President, and the same shall take effect thirty (30)
days
after publication in the Official Gazette.
Section
124. Penal Provisions. - The following acts or omissions
affecting
cooperatives are hereby prohibited:
(1)
The use of the word "cooperative" by any person or of persons
or
organizations, domestic or foreign, unless duly registered as a
cooperative
under this Code. In case of violation hereof, the individual or
individuals
concerned, or in the case of an organization, its officers and
directors
shall, upon conviction, each suffer the penalty of imprisonment for one
(1) year and a fine not exceeding One thousand pesos (P1,000.00) or
both
at the discretion of the court;
(2)
Direct or indirect interference or intervention by any public official
or employee into the internal affairs of a cooperative of which he is
not
a member, such as, but not limited to the following:
(a)
Influencing the election or appointment of officers, directors,
committee
members and employees through public or private endorsement or campaign
for or against any person or group of persons;
(b)
Requiring prior clearance for any policy or decision within the
cooperative;
(c)
Requesting or demanding for the creation of positions or organizational
units, or recommending any person for appointment, transfer, or removal
from his position; or
(d)
Any other acts inimical or adverse to the autonomy and independence of
cooperatives.
In
case of violation of any provision of this subsection, the individual
or
individuals, and in the case of organizations, its officers and
directors
shall, upon conviction by a court, each suffer a penalty of not less
than
one (1) year but not more than five (5) years imprisonment or a fine in
the amount of not less than Five thousand pesos (P5,000.00), or both at
the discretion of the court;
(3)
A director, officer or committee member who violated the provisions of
Section 47 (liability of directors, officers and committee members),
Section
50 (disloyalty of a director) and Section 51 (illegal use of
confidential
information) shall upon conviction suffer a fine of not less than Five
thousand pesos (P5,000.00), or imprisonment of not less than five (5)
years
but not more than ten (10) years or both at the court's discretion;
(4)
Any violation of any provision of this Code for which no penalty is
imposed
shall be punished by imprisonment of not less than six (6) months nor
more
than one (1) year and a fine of not less than One thousand pesos
(P1,000.00),
or both at the discretion of the court.
Section
125. Printing and Distribution. - (1) The National Printing
Office
shall publish this Code in the Official Gazette in full within sixty
(60)
days from the date of approval thereof. Copies of this Code shall be
given
to every department, agency and instrumentality of the National
Government,
including regional, provincial offices and local governments including
government-owned and controlled corporations.
(2)
All duly registered cooperative and their federations, unions and
associations,
and cooperative corporations shall be given one (1) copy each at cost.
Thereafter, every newly registered cooperative or cooperative
corporations
shall be issued at cost a copy of this Code and the regulations
promulgated
thereon together with its certificates of registration.
Section
126. Interpretation and Construction. - In case of doubt as to
the
meaning of any provision of this Code or the regulations issued in
pursuance
thereof, the same shall be resolved liberally in favor of the
cooperatives
and their members.
Section
127. Repeals. Except as expressly provided by this Code,
Presidential
Decree No. 175 and all other laws, or parts thereof, inconsistent with
any provision of this Code shall be deemed repealed: Provided,
however,
That nothing in this Code shall be interpreted to mean the amendment or
repeal of any provision of Presidential Decree No. 269: Provided
further,
That the electric cooperatives which qualify as such under this Code
shall
fall under the coverage thereof.
Section
128. Transitory Provisions. - All cooperatives registered
under
Presidential Decrees Nos. 175 and 775 and Executive Order No. 898, and
all other laws shall be deemed registered with the Cooperative
Development
Authority: Provided, however, That they shall submit to the
nearest
Cooperative Development Authority office the certificate of
registration,
copies of the articles of cooperation and by-laws and their latest duly
audited financial statements within one (1) year from the effectivity
of
this Act, otherwise their registration shall be cancelled: Provided
further, That cooperative created under Presidential Decree No.
1645,
shall be given three (3) years within which to qualify and register
with
the Authority: Provided finally, That after these cooperatives
shall
have qualified and registered, the provisions of Sections 3 and 5 of
Presidential
Decree No. 1645 shall no longer be applicable to said cooperatives.
Section
129. Separability. - Should any part of this Code be declared
unconstitutional,
the rest of the provisions shall not be affected thereby.
Section
130. Effectivity. - This Code shall take effect fifteen (15)
days
from the publication in a newspaper of general circulation.
Approved:
(Sgd.)
JOVITO R. SALONGAPresident
of Senate (Sgd.)
RAMON MITRASpeaker
of the House of Representatives (Sgd.)
EDWIN P. ACOBASecretary
of Senate (Sgd.)
QUIRINO D. ABAD SANTOS, JR.Secretary
of the House of Representatives (Sgd.)
CORAZON C. AQUINOPresident
of the Philippines
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