MANUAY, ALONDRA B.

ACC225(2916)

CHAPTER I: GENERAL CONCEPTS AND PRINCIPLES

An act amending the cooperative code of the Philippines to be known as the
_"PHILIPPINE COOPERATIVE CODE OF 2008"
A COOPERATIVE is an autonomous and duly registered association of persons,
with a common bond of interest, who have voluntarily joined together to achieve their
social, economic, and cultural needs and aspirations by making equitable
contributions to the capital required, patronizing their products and services and
accepting a fair share of the risks and benefits of the undertaking in accordance with
universally accepted cooperative principles.
Cooperative Principles (Art.4, RA 9520)
Every cooperative shall conduct its affairs in accordance with Filipino culture, good
values and experience and the universally accepted principles of cooperation which
include, but are not limited to, the following:
1. Voluntary and Open Membership
– Cooperatives are voluntary organizations, open to all persons able to
use their services and willing to accept the responsibilities of
membership, without gender, social, racial, cultural, political or
religious discrimination.
2. Democrative Member Control
– Cooperatives are democratic organizations that are controlled by their
members who actively participate in setting their policies and making
decisions.
– members have equal voting rights of one-member, one-vote
3. Member Economic Participation
– Members contribute equitably to , and democratically control, the capital
of their cooperatives.
– They shall receive limited compensation or limited interest, if any, on
capital subscribed and paid as a condition of membership.
4. Autonomy and Independence
– Cooperatives are autonomous, self-help organizations controlled by
their members.
– If they enter into agreements with others they shall do so on terms that
ensure democratic control of their members and maintain their
cooperative autonomy.
5. Education, Training and Information
– Cooperatives shall provide education and training for their members,
elected and appointed representatives, managers, and employees, so
that they can contribute effectively and efficiently to the development of
their cooperatives.
6. Cooperation Among Cooperatives
 – Cooperatives serve their members most effectively and strengthen the
cooperative movement by working together through local, national,
regional and international structures.

7. Concern for Community

– Cooperatives work for the sustainable development of their
communities through policies approved by their members.

CHAPTER II: ORGANIZATION AND REGISTRATION

Purposes of Cooperatives (Art.6, RA 9520)
A cooperative may be organized and registered 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 member’s 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 member.
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.
11. To advocate for the cause of the cooperative movements.
12. To ensure the viability of cooperatives through the utilization of new
technologies.
13. To encourage and promote self-help as an engine for economic growth and
poverty alleviation.
14. To undertake any and all other activities for the effective and efficient
implementation of the provisions of this Code.

Objectives of Cooperative
 – to help improve the quality of life of its members.

Goal of Cooperative: it aims to

a. Provide goods and services to its members to enable them to attain

increased income, savings, investments, productivity, and purchasing power,
and promote among themselves equitable distribution of net surplus through
maximum utilization of economies of scale, cost-sharing and risk-sharing.

b. Provide optimum social and economic benefits to its members.

c. Teach them efficient ways of doing things in a cooperative manner.
d. Propagate cooperative practices and new ideas in business and
management.
e.  Allow the lower income and less privileged groups to increase their
ownership in the wealth of the nation.
f. Cooperate with the government, other cooperatives and people-oriented
organizations to further the attainment of any of the foregoing objectives.
Characteristics of Cooperative:
– Limited Liability
– Limited life
o A cooperative shall exist for a period not exceeding 50 years
from the date of registration unless the period is extended.
o No extension can be made earlier than 5 years.
– It has Juridical Personality
Organizing a Primary Cooperative:
 Fifteen (15) or more natural persons
 Filipino citizens
 legal age
 having a common bond of interest
 Actually residing or working in the intended area of operation
 That a prospective member of a primary cooperative must have completed a
Pre-Membership Education Seminar (PMES)
Requirements for Registration of Cooperative
Every individual intending to form a cooperative shall submit to the authority a
four (4) copies each of the following:
1. Articles of Cooperation
 – Shall be signed by each of the organizers and acknowledged by them if
natural persons and by the chairpersons or secretaries, if juridical persons,
before a notary public.
2. Bylaws
3. General statement
o Describing the structure which shall include bookkeeper and
purposes of the cooperative.
 bonds of the accountable officers and a sworn statements of the
treasurer elected by the subscribers showing that at least twenty-five per
centum (25%) of the authorized share capital has been subscribed and at
least twenty-five per centum (25%) of the total subscription has been paid:
Provided, that in no case shall the paid-up share capital be less than Fifteen
thousand pesos (P15,000.00)

CHAPTER III: MEMBERSHIP

Cooperative categorize its membership into three (3):

1. Primary – its members are natural persons

2. Secondary – its members are primary cooperatives.
3. Tertiary – its members are secondary cooperatives.

Kinds of Membership (Art.26, RA 9520)

A cooperative may have two (2) kinds of members
1. Regular members
o  who has complied with all the membership requirements and
entitled to all the rights and privileges of membership
 Associate who meets the minimum requirements of regular
membership.
 Continues to patronize the cooperative for 2 years
 Signifies his intention to remain a member.

2. Associate members
o who has no right to vote nor be voted upon and shall be entitled
only to such rights and privileges as the bylaws may provide.
o not complied all membership requirement.

Cooperative organized by Minors

– Is considered a laboratory cooperative.
– must be affiliated with a registered cooperative.

laboratory Cooperative
– Shall be governed by special guidelines to be promulgated by the Authority.

Government Officers and Employees (Art.27, RA 9520)

– Shall be disqualified to be elected or appointed to any position in a
cooperative.
 – The disqualification does not extend to a cooperative organized by the
officers or employees of the Authority.

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.

Application of Membership
– An applicant for membership shall be deemed a member after approval of his
membership by the board of directors and shall exercise the rights of member
after having made such payments to the cooperative in respect to
membership or acquired interest in the cooperative as may be prescribed in
the bylaws.

Termination of Membership
1) A member of a cooperative may, for any valid reason, withdraw his
membership from the cooperative by giving a sixty (60) day notice to the
board of directors.
– Subject to the bylaws of the cooperative, the withdrawing member shall be
entitled to a refund of his share capital contribution and all other interests in
the cooperative:
– That such fund shall not be made if upon such payment the value of the
assets of the cooperative would be less than the aggregate amount of its
debts and liabilities exclusive of his share capital contribution.
2) the DEATH or INSANITY of a member in a primary cooperative,
– INSOLVENCY or DISSOLUTION of a member in a secondary or tertiary
cooperative may be considered valid grounds for termination of
membership:
– That in case of death or insanity of an agrarian reform beneficiary-
member of a cooperative, the NEXT-OF-KIN may assume the duties and
responsibilities of the original member
3) Membership in the cooperative may be terminated by a vote of the majority
of all the members of the board of directors for any of the following
causes:

WHEN A MEMBER:
 Not patronized any of the services of the cooperative for an unreasonable
period of time as may be previously determined by the board of directors.
 Continuously failed to comply with his obligations.
 Acted in violation of the bylaws and the rules of the cooperative.
 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 said member and shall be appealable within
thirty (30) days from receipt thereof to the general assembly whose
decision shall be final.
  The general assembly may create an appeal and grievance committee whose
members shall serve for a period of one (1) year and shall decide appeals on
membership termination. The committee is given thirty (30) days from receipt
thereof to decide on the appeal. Failure to decide within the prescribed period,
the appeal is deemed approved in favor of the member. Pending a decision
by the general assembly, the membership remains in force.

CHAPTER IV: ADMINISTRATION

Composition of the General Assembly

– Shall be composed of such members who are entitled to vote under the
articles of cooperation and bylaws of the cooperative.

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 bylaws of the cooperative.

The general assembly shall have the following exclusive powers which CANNOT
BE DELEGATE:

1. To determine and approve amendments to the articles of cooperation and bylaws.

2. To elect or appoint the members of the board of directors, and to remove them for
cause.
– However, in the case of the ELECTRIC COOPERATIVES registered under
this Code, election of the members of the board shall be held in accordance
with its bylaws or election guideline of such electric cooperative

3. To approve developmental plans of the cooperative.

– Subject to such other provisions of this Code and only for purposes of prompt
and intelligent decision-making, the GENERAL ASSEMBLY may be a three-
fourths (3/4) vote of all its members with voting rights, present and constituting
a quorum, delegate some of its powers to a smaller body of the cooperative.
These powers shall be enumerated under the bylaws of the cooperative.

Meetings of General Assembly

– Regular Meeting
o HELD ANNUALLY by the general assembly on a date fixed in the
bylaws
o If not so fixed, on any dated within (90) days after the close of each
fiscal year.
o The notice of regular meetings
 shall be sent in writing, by posting or publication, or through
other electronic means to all members of record.

– Special Meeting
 o May be CALLED AT ANY TIME by a majority vote of the board of
directors or as provided for in the bylaws.
o Notice in writing SHALL BE SENT ONE (1) WEEK prior to the meeting
to all members who are entitled to vote.
o Shall be called by the BOARD OF DIRECTORS after compliance with
the required notice within from at least ten per centum (10%) of the
total members who are entitled to vote to transact specific business
covered by the call.

If the board fails to call a regular or a special meeting within the given period
The Authority, upon PETITION OF TEN PER CENTUM (10%) OF ALL
THE MEMBERS of the cooperative who are entitled to vote, and for good cause
shown, shall issue an order to the petitioners directing them to call a meeting of the
general assembly by giving proper notice as required in this Code or in the bylaws.

– Newly Approved Cooperative

o A special general assembly shall be called WITHIN NINETY (90)
DAYS from such approval.
– The Authority
o May call a SPECIAL MEETING of the cooperative for the purpose of
reporting to the members the result of any examination or other
investigation of the cooperative affairs.
– Notice of any meeting
o may be WAIVED, EXPRESSLY OR IMPLIEDLY, by any member

Quorum of General Assembly

– Shall consist of at least twenty-five per centum (25%) of all the members
entitled to vote.
– Cooperative Banks
– Electric Cooperatives
o The quorum, unless otherwise provided in the bylaws, shall consist of
five per centum (5%) of all the members entitled to vote.

 Voting System
– Primary Cooperative
o  Each member of a primary cooperative shall have only one (1) vote.
– Secondary or Tertiary Cooperative
o In the case of members of secondary or tertiary cooperatives shall
have one (1) basic vote and as many incentive votes as provided
for in the bylaws but not exceed five (5) votes.

CHAPTER V: RESPONSIBILITIES, RIGHTS AND PRIVILEGES OF

COOPERATIVE

Every cooperative shall have an OFFICIAL POSTAL ADDRESS to which all

notices and communications shall be sent. Such address and every change thereof
shall be registered with the Authority.

Books to be Kept Open (Art.52, RA 9520)

 Every cooperative shall have the following documents ready and accessible to
its members and representatives of the Authority for inspection during reasonable
office hours at its official address:

a. A copy of this Code and all other laws pertaining to cooperatives

b.  A copy of the regulations of the Authority
c. A copy of the articles of cooperation and bylaws of the cooperative
d. A register of members
e. The books of the minutes of the meetings of the general assembly, board of
directors and committee
f. Share books, where applicable
g. Financial statement
h. Such other documents as may be prescribed by laws or the bylaws

The accountant or the bookkeeper

– Shall be responsible for the MAINTENANCE OF THE COOPERATIVE in
accordance with generally accepted accounting practices.
– He shall also be responsible for the PRODUCTION OF THE SAME AT THE
TIME OF AUDIT or inspection.

The audit committee

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

Each cooperative SHALL MAINTAIN RECORDS OF ACCOUNTS such that the

true and correct condition and the results of the operation of the cooperative may be
ascertained therefrom at any time.

The financial statements, audited according to generally accepted auditing

standards, principles and practices, shall be published annually and shall be kept
posted in a conspicuous place in the principal office of the cooperative.

Reports
– The reports shall be made ACCESSIBLE TO ITS MEMBERS, and copies
thereof shall be furnished to all its members or record.
– These reports shall be FILED with the Authority WITHIN one hundred twenty
(120) DAYS from the end of the calendar year. 
–  If a cooperative FAILS to make, publish and file the reports required herein,
or fails to include therein any matter required by the Code, the Authority shall,
within fifteen (15) days from the EXPIRATION of the prescribed period, SEND
such cooperative a written notice, stating its non-compliance and the
commensurate fines and penalties that will be imposed until such time that the
cooperative has complied with the requirements.

Bonding of Accountable Officers

– Every director, officer, and employee handling funds, securities or property on
behalf of any cooperative shall be covered by a SURETY BOND to be
 issued for a duly registered insurance or bonding company for the faithful
performance of their respective duties and obligations.
– Such bonds shall be RENEWED manually and the Authority shall accordingly
be informed of such renewal.

Preference of Claims
– NO PROPERTY or INTEREST ON PROPERTY which is subject to a lien
shall be sold nor conveyed to third parties without the prior permission of the
cooperative.
–  any sale or conveyance made in contravention shall be VOID.

Tax Treatment of Cooperative

–  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 taxes and fees imposed under the internal revenue laws and other tax
laws.

Tax and Other Exemptions

– Cooperatives transacting business with both members and non-members
shall not be subjected to tax on their transactions with members. In relation to
this, the transactions of members with the cooperative shall not be subject to
any taxes and fees, including not limited to final taxes on members' deposits
and documentary tax. Notwithstanding the provisions of any law or regulation
to the contrary, such COOPERATIVES DEALING WITH NONMEMBERS
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)
a. 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 a certified by the department
of trade and industry (DTI). All tax free importations shall not be sold
nor the beneficial ownership thereof 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
imposed tax and / or duties.
b. Donations to charitable, research and educational institutions and
reinvestment to socioeconomic projects within the area of operation of
the cooperative may be tax deductible.

CHAPTER VI: INSOLVENCY OF COOPERATIVES

 Proceeding Upon Insolvency

In case a cooperative is unable to fulfill its obligations to creditors due to
insolvency, such cooperative may apply for such remedies as it may deem fit under
the provisions of Act No. 1956, as amended, otherwise known as the Insolvency
Law.

CHAPTER VII: DISSOLUTION OF COOPERATIVES

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 three-
fourths (3/4) of all the members with voting rights, present and constituting a
quorum at a meeting to be held upon call of the directors.
– That the notice of time, place and object of the meeting
o shall be PUBLISHED for three (3) consecutive weeks in a newspaper
published in the place where the principal office of said cooperative is
located, or if no newspaper is published in such place, in a newspaper
of general circulation in the Philippines.
– Notice of such meeting
o Is sent to each member of record either by registered mail or by
personal delivery at least thirty (30) days prior to said meeting.

Voluntary Dissolution Where Creditors Are Affected

–  Dissolution of a cooperative may prejudice the rights of any creditor, the
petition for dissolution shall be filed with the Authority.
– The petition shall be signed by a majority of its board or directors or other
officers managing its affairs, verified by its chairperson or board secretary or
one of its directors and shall set forth all claims and demands against it and
that its dissolution was resolved upon by the affirmative vote of at least three-
fourths (3/4) of all the members with voting rights, present and constituting a
quorum at a meeting called for that purpose.
– 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
4. The nature and extend of the interests of the members of the
cooperative.

Involuntary Dissolution
A cooperative may be dissolved by order of a competent court after due
hearing on the grounds of:
1. Violation of any law, regulation or provisions of its bylaws
2. Insolvency

Dissolution by Order of the Authority

The Authority may suspend or revoke, after due notice and hearing, the
certificate of registration of a cooperative on any of the following grounds:
1. Having obtained its registration by fraud
2. Existing for an illegal purpose
3. Willful violation, despite notice by the Authority, of the provisions of this Code or its
bylaws
4. Willful failure to operate on a cooperative basis
5. Failure to meet the required minimum number of members in the cooperative.

Dissolution by Failure to Organize and Operate

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

Liquidation of a Cooperative
– The Authority shall issue the appropriate implementing guidelines for the
liquidation of cooperatives.
– Every cooperative whose charter expires by its own limitation or whose
existence is terminated by voluntary dissolution or through an appropriate
judicial proceeding shall nevertheless continue to exist for three (3) years
after the time it is dissolved; not to continue the business for which it was
established but for the purpose of prosecuting and defending suits by or
against it; settlement and closure of its affairs; disposition, conveyance and
distribution of its properties and assets.
– At any time during the said three (3) years the cooperative is authorized and
empowered to convey all of its properties to trustees for the benefit of its
members, creditors and other persons in interest.
–  From and after any such conveyance, all interests which the cooperative
had in the properties are TERMINATED.
– Upon the WINDING UP of the cooperative affairs, any asset distributable to
any creditor, shareholder or member who is unknown or cannot be found
shall be GIVEN to the federation or union to which the cooperative is affiliated
with.
– A cooperative shall only distribute its assets or properties upon lawful
dissolution and after payment of all its debts and liabilities, except in the
case of DECREASE OF SHARE CAPITAL of the cooperative and as
otherwise allowed by this Code.

CHAPTER VIII: CAPITAL, PROPERTY, AND FUNDS

Capital Sources
Cooperatives registered under this Code may derive their capital from any or
all of the following sources:
– Member's share capital
– Loans and barrowings including deposits
– Revolving capital which consists of the deferred payment of patronage
refunds, or interest on share capital
– Subsidies, donations, legacies, grants, aids and such other assistance from
any local or foreign institution whether public or private

Limitation on Share Capital Holdings

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

– Where a member of cooperative dies, his heir shall be entitled to the

SHARES of the decedent. Provided, That the TOTAL SHAREHOLDING OF
THE HEIR does not exceed ten per centum (10%) of the share capital of the
cooperative; Provided, further, That the heir qualify and is admitted as
members of the cooperative: Provided finally, That where the heir fails to
qualify as a member or where his total shareholding exceeds ten per centum
(10%) of the share capital , the share or shares excess will revert to the
cooperative upon payment to the heir of the value of such shares.

Assignment of Share Capital Contribution or Interest

Subject to the provisions of this Code, no member shall transfer his shares or
interest in the cooperative or any part thereof unless.

1. He has HELD SUCH SHARE CAPITAL contribution or interest for not less than
one (1) year.
2. The assignment is made to the cooperative or to a member of the cooperative or
to a person who falls within the field of the membership of the cooperative.
3. The board of directors has APPROVED such assignment.

Capital Build-Up
The bylaws of every cooperative shall be PROVIDED FOR A REASONABLE
and REALISTIC member capital build-up program to allow the continuing growth of
the members' investment in their cooperative as their economic conditions continue
to IMPROVE.

Investment of Capital
A cooperative may invest its capital in any of the following:

– In shares or debentures or securities of any other cooperative.

– In any reputable bank in the locality, or any cooperative.
– In securities issued or guaranteed by the Government.
– In real state primarily for the use of the cooperative or its members.
– In any other manner authorized in the bylaws.

CHAPTER X: ALLOCATION AND DISTRIBUTION OF NET SURPLUS

Net Surplus
The net surplus shall not be construed as profit but as an excess of
payments made by the members for the loans borrowed, or the goods and services
availed by them from the cooperative or the difference of the rightful amount due to
the members for their products sold or services rendered to the cooperative including
other inflows of assets resulting from its other operating activities and which shall be
deemed to have been returned to them if the same is distributed as prescribed
herein.
Order of Distribution: The net surplus of every cooperative shall be distributed as
follows:
First Priority: An amount for the reserve fund which shall be at least ten per centum
(10%) of net surplus: Provided, That, in the first five (5) years of operation after
registration, this amount shall not be less than fifty per centum (50%) of the net
surplus:
– Reserve fund
o shall be used for the stability of the cooperative and to meet net losses
in its operations.
o shall not be utilized for investment, other than those allowed in this
Code.
o Shall not distributed upon dissolution.

Second Priority, goes to education and training fund, shall not be more than ten per
centum (10%) of the net surplus. The bylaws may provide that certain fees or a
portion thereof be credited to such fund. The fund shall provide for the training,
development and similar other cooperative activities geared towards the growth of
the cooperative movement:
–  Upon the DISSOLUTION of the cooperative, the unexpended balance of the
education and training fund appertaining to the cooperative SHALL BE
CREDITED to the cooperative education and training fund of the chosen
union or federation.
Third Priority, an amount for the community development fund, which shall not be
less than three per centum (3%) of the net surplus. The community development
fund shall be used for projects or activities that will benefit the community where the
cooperative operates.
Fourth Priority, an optional fund, a land and building, and any other necessary fund
the total of which shall not exceed seven per centum (7%).
Fifth Priority, the remaining net surplus shall be made available to the members in
the form of interest on share capital not to exceed the normal rate of return our
investments and patronage refunds: Provided, that any amount remaining after the
allowable interest and the patronage refund have been deducted shall be credited to
the reserve fund.