Begun and held in Metro Manila, on Monday, the twenty-eighth day

of July, two thousand eight.

AN ACT AMENDING THE COOPERATIVE CODE OF THE

PHILIPPINES TO BE KNOWN AS THE “PHILIPPINE
COOPEFUTIW CODE OF 2008”

Be it enacted by the Senate and House of Representatives of the

Philippines in Congress assembled:

SECTION 1. Articles 1, 2, 3, 4 and 5 of Chapter I on

General Concepts and Priiiciples of Republic Act No. 6938,
otherwise known as the “Cooperative Code of the Philippines”
are hereby amended to read as follows:

CHAPTER I
GENERAL,CONCEPTS AND PRINCIPLES

“ARTICLE 1. Title. - This Act shall be known

as the “Philippine Cooperative Code of 2008”.
 “ART. 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 a n
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.

“ART. 3. General Concepts. - A cooperative is

a n 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 t o 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.

“ART. 4. Cooperative Principles. - 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:
 3

“(1) Voluntary a n d 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) Democratic Member Control -

Cooperatives are democratic organizations that are
controlled by their members who actively participate
in setting their policies and making decisions. Men
and women serving a s elected representatives,
directors o r officers a r e accountable to t h e
membership. In primary cooperatives, members have
equal voting rights of one-member, one-vote.
Cooperatives at other levels are organized in the
same democratic manner.

“(3) Member Economic Participation -

Members contribute equitably to, and democratically
control, the capital of their cooperative. At least
part of that capital is the common property of the
cooperative. They shall receive limited compensation
or limited interest, if any, on capital subscribed and
paid a s a condition of membership. Members
allocate surpluses for any or all of the following
purposes: developing the cooperative by setting up
reserves, part of which should at least be indivisibIe;
benefitting members in proportion to their patronage
of the cooperative’s business; and, supporting other
activities approved by the membership.

“(4) Autonomy a n d Independence -

Cooperatives are autonomous, self-help organizations
controlled hy their members. If they enter into
agreements with other organizations, including
government, or raise capital from external sources,
they shall do so on terms that ensure democratic
control of their members and maintain their
cooperative autonomy.

“(5) Educution, Training and Information -

Cooperatives shall provide education and training for
4

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 A m o n g Cooperatiues -
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.

“ART. 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 t h e obligations pertaining t o
cooperatives, as provided by this Code, its articles
of cooperation and bylaws: Provided, That for
cooperatives with numerous and dispersed
membership, the general assembly may be composed
of delegates elected by each sector, chapter or
district of the cooperative in accordance with the
rules and regulations of the Cooperative Development
Authority:

“(3) Board of Directors shall mean that body

entrusted with the management of the affairs of the
cooperative under its articles of cooperation and
bylaws;
 5

“(4) Committee shall refer to any body

entrusted with specific functions and responsibilities
under the bylaws 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) Bylaws means the bylaws registered under

this Code and includes any registered amendment
thereof;

“(7) Registration means the operative act

granting juridical personality t o a proposed
cooperative and is evidenced by a certificate of
registration:

“(8) Cooperatiue Development Authority refers

to t h e government agency i n charge of t h e
registration and regulation of cooperatives as such,
hereinafter referred to as the Authority;

“(9) Uniuersally Accepted Principles mean that

body of cooperative principles adhered to worldwide
by cooperatives;

“(10)Representative Assembly means the full

membership of a body of representatives elected by
each of the sectors, chapter or district of the
cooperative duly assembled for the purpose of
exercising such powers lawfully delegated nntc them
by the general assembly in accordance with its
bylaws:

“(11) Officers of the Cooperatives shall include

the members of the board of directors, members of
the different committees created by the general
assembly, general manager or chief executive officer,
secretary, treasurer and members holding other
positions as may be provided for in their bylaws:
6
“(12) Social Audit is a procedure wherein the
cooperative assesses its social impact and ethical
performance vis-&vis its stated mission, vision, goals
and code of social responsibility for cooperatives to
be established by the Authority in consultation with
the cooperative sector. It enables the cooperatives to
develop a process whereby it can account for its
social performance and evaluate its impact in the
community and be accountable for its decisions and
actions t o its regular members;

“(13) Performance Audit shall refer to an

audit on the efficiency and effectiveness of the
cooperative as a whole; its management and officers;
and its various responsibility centers as basi,g for
improving individual, team or overall performance
a n d f o r objectively informing t h e general
membership on such performance;

“(14) A Single-line or Single-purpose

Cooperative shall include cooperative undertaking
activities which are related t o its main line of
business or purpose;
“(15) Service Cooperatives are those which
provide any type of service to its members, including
but not limited to, transport, information and
communication, insurance, housing, electric, .health
services, education, banking, and savings and credit;

“(16) Subsidiary Cooperative refers to any

organization all or majority of whose membership
or shareholders come from a cooperative, organized
for any other purpose different from that of, and
receives technical, managerial and financial
assistance from, a cooperative, in accordance with
the rules and regulations of the Authority; and

“(17)Federation of Cooperatives refers to three

or more primary cooperatives, doing the same line
of business, organized a t the municipal, provincial,
city, special metropolitan political subdivision, or
economic zones created by law, registered with the
 7

Authority to undertake business activities in support

of its member-cooperatives.”

SEC. 2. Articles 6, 7, 9, 10, 11, 12, 13, 14, 16, 17, 18,
20, 21, 23, 24 and 25 of Chapter I1 on Organization and
Registration of the same Code are hereby amended to read,
as follows:

CHAPTER I1

ORGANIZATION AND REGISTRATION

“ART. 6. Purposes of Cooperatives. - A

cooperative may be organized and registered for any
or all of the following purposes:

“(1) To encourage t h r i f t 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;
8
“(IO) To coordinate and facilitate the activities
of cooperatives;
“(11) To advocate for t h e cause of the
cooperative movement;

“(12) To ensure the viability of cooperatives

through the utilization of new technologies;

“(13) To encourage and promote self-help or

self-employment as an engine for economic growth
and poverty alleviation; and

“(14) To undertake any and all other activities

for the effective and efficient implementation of the
provisions of this Code.

“ART. 7 . Objectives and Goals of a

Cooperatiue. - The primary objective of every
cooperative is to help improve the quality of life of
its members. Towards this end, the cooperative shall
aim to:

“(a) Provide goods and services to its members

to enable them to attain increased income, savings,
investments, productivity, and purchasing power,
a n d 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) Mow the lower income and less privileged

groups to increase their ownership in the wealth of
the nation: and
 9

“(0Cooperate w i t h the government, other

cooperatives and people-oriented organizations to
further the attainment of any of the foregoing
objectives.

“ART. 8. Cooperatives Not in Restraint of

Trade. - No cooperative or method or act thereof
which complies with this Code shall be deemed a
conspiracy or combination in restraint of trade or
a n illegal monopoly, or a n attempt t o lessen
competition or fix prices arbitrarily in violation of
any of the laws of the Philippines.

“ART. 9. Cooperative Powers and Capacities.

- A cooperative registered under this Code shall
have the following powers, rights and capacities:

“(1) To the exclusive use of its registered

name, to sue and be sued;

“(2) Of succession;

“(3) To amend its articles of cooperation in

accordance with the provisions of this Code;

“(4)To adopt bylaws 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
t h e limitations prescribed by law and t h e
Constitution;

“(6) To e n t e r into division, merger o r

consolidation, as provided in this Code;

.“(7) To form subsidiary cooperatives and join

federations o r unions, as provided in this Code;
10
“(8) To avail of loans, be entitled to credit and
to accept and receive grants, donations and
assistance from foreign and domestic sources, subject
to the conditions of said loans, credits, grants,
donations or assistance that will not undermine the
autonomy of the cooperative. The Authority, upon
written request, shall provide necessary assistance
in the documentary requirements for the loans,
credit, grants, donations and other hancial support;

“(9) To avail of preferential rights granted to

cooperatives under Republic Act No. 7160, otherwise
known as the Local Government Code, and other
laws, particularly those in the grant of franchises
to establish, construct, operate and maintain ferries,
wharves, markets or slaughterhouses and t o lease
public utilities, including access to extension and
on-site research services and facilities related to
agriculture and fishery activities;

“(10) To organize and operate schools in

accordance with Republic Act No. 9155, Governance
of Basic Education Act of 2001 and other pertinent
laws; and

“(11) To exercise such other powers granted by

this Code or necessary to carry out its purpose or
purposes as stated in its articles of cooperation.

“ART. 10. Organizing a Primary Cooperatiue.

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

“Any newly organized primary cooperative may

be registered as multipurpose cooperative only after
compliance with the minimum requirements for
multipurpose cooperatives to be set by the Authority.
 A single-purpose cooperative may transform into a
multipurpose or may create subsidiaries only after
at least two (2) years of operations.
“ART. 11. Economic Suruey. - Every group of
individuals or cooperatives intending t o form a
cooperative under this Code shall submit to the
Authority a general statement describing, among
others the structure and purposes of the proposed
cooperative: Provided, That the structure and
actual staffing pattern of the cooperative shall
include a bookkeeper: Provided, further, That they
shall not be allowed to operate without the necessary
personnel and shall also submit an economic survey,
indicating therein the area of operation, the size of
membership, and other pertinent data in a format
provided by the Authority.

“ART. 12. Liability. - A cooperative duly

registered under this Code shall have limited
liability.

“ART. 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 a n amendment of the
articles of cooperation, in accordance with this Code:
Prouided, That no extension can be made earlier
t h a n five (5) years prior to the original or
subsequent expiry date/dates unless there are
justifiable reasons for an earlier extension as may
be determined by the Authority.

“ART. 14. Articles of Cooperation. - (1) All

cooperatives applying for registration shall file with
the Authority the articles of cooperation which shall
be signed by each of t h e organizers a n d
acknowledged by them if natural persons, and by
the chairpersons or secretaries, if juridical persons,
before a notary public.
12

“(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 t h e cooperative is t o 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:

“(0 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 Article 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, bylaws, and the general
statement required under Article 11 of this Code
shall be submitted to the Authority.

“(5) No cooperative, other than a cooperative

union as described under Article 25 hereof, shall be
registered unless the articles of cooperation is
accompanied with the bonds of the accountable
officers and a sworn statement of the treasurer
elected by the subscribers showing that at least
 I3
twenty-five p e r centurn (25%) of the authorized
share capital has been subscribed and a t least
twenty-five p e r centurn (25%) of t h e total
subscription has been paid: Prouicled, That in no
case shall ,the paid-up share capital be less than
Fifteen thousand pesos (F15,OOO.OO).

“The Authority shall periodically assess the

required paid-up share capital and may increase it
every five (5) years when necessary upon
consultation with the cooperative sector and the
National Economic and Development Authority
(NEW.
“ART. 15. Bylaws. - (1) Each cooperative to be
registered under this Code shall adopt bylaws not
inconsistent with the provisions of this Code. The
bylaws shall be Hed at the same time as the articles
of cooperation.

“(2) The bylaws of each cooperative shall

provide:

“(a) The qualifications for admission to

membership and the payment to be made or interest
to he acquired as a condition for the exercise of the
right of membership;

“@) The rights and liabilities of membership;

“(e) The circumstances under which

membership is acquired,.maintained and lost;

“(d) The procedure to be followed in cases

of termination of membership;

“(e) The conditions under which the transfer

of a share or interest of the members shall he
permitted

“(0 The rules and procedures on the agenda,

time, place and manner of calling, convening,
conducting meetings, quorum requirements, voting
14

systems, and other matters relative 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;

“ 6 ) The accounting,and. auditing systems;

“(k) The manner of loaning and borrowing,
including limitations thereof;

“(IThe
) method of distribution of net surplus;

“(m) The manner of adopting, amending,

repealing, and abrogating bylaws;
,’
“(n) A conciliation or mediation mechanism
for the amicable settlement of disputes among
members, directors, officers and committee members
of the cooperative; and

“(0) Other matters incident to the purposes

and activities of the cooperative.

“ART. 16. Registration. - A cooperative formed

or organized under this Code acquires juridical
personality from the date the Authority issues a
certificate of registration under its official seal. All
applications for registration shall be finally disposed
of by the Authority within a period of sixty (60) days
from the f i g thereof, otherwise the application is
deemed approved, unless the cause of the delay is
attributable to the applicant: Provided,That in case
 15

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 &om the filing thereof shall mean approval
of said application.
“ART. 17. Certificate of Registration. - A
certificate of registration issued by the Authority
under its official seal shall be conclusive evidence
that the cooperative therein mentioned is duly
registered unless it is proved that the registration
thereof has been cancelled.

“ART. 18. A m e n d m e n t o f Articles o f

Cooperation and Bylaws. - Unless otherwise
prescribed by this Code a n d for legitimate
purposes, any provision or matter stated in the
articles of cooperation a n d bylaws m a y be
amended by two-thirds (2/3) vote of all the
members with voting rights, without prejudice to
the right of the dissenting members to exercise
their right to withdraw their membership under
Article 30.

“Both the original and amended articles andlor

bylaws shall contain all provisions required by law
to be set out in the articles of cooperation and
bylaws. Amendments s h a l l be indicated by
underscoring or otherwise appropriately indicating
the change or changes made and a copy of the
amended articles or amended bylaws duly certified
under oath by the cooperative secretary and a
majority of the directors stating the fact that said
amendment or amendments to the articles of
cooperation andfor bylaws have been duly approved
by t h e required vote of the members. All
amendments to the articles of cooperation and/or
bylaws shall be submitted to the Authority. The
amendments shall take effect upon its approval by
the Authority or within thirty (30) days from the
date of filing thereof if not acted upon by the
16

Authority f o r a cause not attributable to the

cooperative.
“ART. 19. Contracts Executed Prior to
Registration a n d Effects Thereof. - Contracts
executed between private persons and cooperatives
prior t o 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.
“ART. 20. Diuision of Cooperatives. - Any
registered cooperative may, by a resolution approved
by a vote of three-fourths (3/4) of all the, members
with voting rights, present and constituting a
quorum, resolve to divide itself into two (2) or more
cooperatives. The procedure for such division, shall
be prescribed in the regulations of the Authority.
The new cooperatives shall become legally established
upon registration with the Authority: Prouided,
That all the requirements set forth in this Code have
been complied with by the new cooperatives:
Prouided, further, That no division of a cooperative
in fraud of creditors shall be valid.
“ART. 21. Merger and Consolidation of
Cooperatiues. - (1) Two (2) or more cooperatives
may merge into a single cooperative which shall
either be one of the constituent cooperatives or the
consolidated cooperative.

“(2) No merger or consolidation shall be valid

unless approved by a three-fourths (3/4) vote of all
the members with voting rights, present and
constituting a quorum of each of the constituent
cooperatives at separate general assembly meetings.
The dissenting members shall have the right to
exercise their right to withdraw their membership
pursuant to Article 30.
 17

, “(3) The Authority shall issue the guidelines

governing the procedure of merger or consolidation
of cooperatives. In any case, t h e merger o r
consolidation shall be effective upon the issuance of
the certificate of merger or consolidation by the
Authority.

“ART. 22. Effects of Merger and

Consolidation. - The merger o r consolidation of
cooperatives shall have the following effects:

“(I) 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
i n the same manner as if such surviving o r
consolidated cooperative had itself incurred such
liabilities or obligations. Any claim, action or
proceeding. pending by o r against any s u c h
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
cooperatives shall be impaired by such merger or
consolidation.
18

“ART. 23. Types a n d Categories of

Cooperatives. - (1) Types of Cooperatiues -
Cooperatives may fall under any of the following
types:
“(a) Credit Cooperatiue is one that promotes
and undertakes savings and lending services among
its members. I t generates a common pool of funds
in order t o provide financial assistance and other
related financial services to its members 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 t h a t

undertakes joint production whether agricultural or
industrial. It is formed and operated by its
members to undertake the production and processing
of raw materials or goods produced by its members
into finished o r processed products for sale by the
cooperative to its members and non-members. Any
end product or its derivative arising from the raw
materials produced by its members, sold in the
name and.for the account of the cooperative, shall
be deemed a product of the cooperative and its
members;

“(d) Marketing Cooperative is one which

engages i n the upp ply of production inputs to
members and markets their products;

“(e) Service Cooperative is one which engages

i n medical and dental care, hospitalization,
transportation, insurance, housing, labor, electric
light and power, communication, professional and
other services;

“(0 Multipurpose Cooperative is one which

combines two (2) or more of the business activities
of these different types of cooperatives;
 I9

“(g) Advocacy Cooperative is a primary

cooperative w h i c h promotes a n d advocates
cooperativism among its members and the public
through socially-oriented projects, education and
training, research and communication, and other
similar activities t o reach out to its intended
beneficiaries;

“(h) Agrarian Reform Cooperative is one

organized by marginal farmers majority of which
are agrarian reform beneficiaries for the purpose
of -developing an appropriate system of land tenure,
land development, land consolidation or land
management in areas covered by agrarian reform;

“(i) Cooperative Bank is one organized for the

primary purpose of providing a wide range of
financial.services to cooperatives and their members;

“6) Dairy Cooperative is one whose members

are engaged in the production of fresh milk which
may be processed andlor marketed as dairy products;

“(k) Education Cooperative is one organized

for the primary purpose of owning and operating
licensed educational institutions, notwithstanding the
provisions of Republic Act No. 9155, otherwise
known as the Governance of Basic Education Act
of 2001;

“0) Electric Cooperative is one organized for

t h e primary purpose of undertaking power
generation, utilizing renewable energy sources,
including hybrid systems, acquisition and operation
of subtransmission or distribution to its household
members;

“(m) Financial Service Cooperative is one

organized for the primary purpose of engaging in
savings and credit services and other financial
services;
20

“(n) Fishermen Cooperative is one organized

by marginalized fishermen in localities whose
products are marketed either as fresh or processed
products;

“(0) Health Services Cooperative is one

organized for the primary purpose of providing
medical, dental and other health services;

“(p) Housing Cooperative is one organized to

assist or provide access to housing for the benefit
of its regular members who actively participate in
the savings program for housing. It is co-owned and
controlled by its members;

“(q) Insurance Cooperative is one engaged in

the business of insuring life and property of
cooperatives and their members;

“(r) Transport Cooperative is one which

includes land and sea transportation, limited to
small vessels, as defined or classified under the
Philippine maritime laws, organized under the
provisions of this Code;

‘((9) Water Service Cooperative is one

organized t o own, operate and manage water
systems for the provision and distribution of potable
water for its members and their households;

“(t) Workers Cooperative is one organized by

workers, including the self-employed, who are at the
same time t h e members and owners of t h e
enterprise. Its principal purpose is to provide
employment and business opportunities t o its
members and manage it i n accordance with
cooperative principles; and

“(u) Other types of cooperative as may be

determined by the Authority.

“(2) Categories of Cooperatives - Cooperatives

shall be categorized according t o membership and
territorial considerations as follows:
 21

“(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

secondary cooperatives: and

“(b) In terms of territory, cooperatives shall be

categorized according to areas of operations which
may or may n o t coincide with the political
subdivisions of the country.

“ART. 24. Functions of a Federation of

Cooperatives. - A federation of cooperatives shall
undertake the following functions:

“(a) To carry on any cooperative enterprise

authorized under Article 6 t h a t complements,
augments,.or supplements but does not conflict,
compete w i t h , nor supplant t h e business o r
economic activities of its members;

“(b) To carry on, encourage, and assist

educational and advisory work relating t o its
member cooperatives;

“(c) 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 bookkeeping,
accounting, and other systems and procedures;

“(d) To print, publish, and circulate any

newspaper or other publication in the interest of its
member cooperatives and enterprises;

“(e) To coordinate and facilitate the activities

of its member cooperatives;
22

“(0 To enter into joint ventures with national

or international cooperatives of other countries in the
manufacture and sale of products andlor services in
the Philippines and abroad; and
“(g) 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.
“Registered cooperatives may organize a
federation according to the type of business activity
engaged in by the cooperatives.

“ART. 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
a t the provincial, city, regional, and national levels.
Cooperative unions may have the following purposes:

“(a) To represent its member organizations;

”@) To acquire, analyze, and disseminate

economic, statistical, and other information relating
t o 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;

“(0 To advise the appropriate authorities on

all questions relating t o cooperatives:
 23

“(g) To raise funds through membership fees,

dues and contributions, donations, and subsidies &om
local a n d foreign sources whether private or
government; and

‘@) To do and perform such other non-

business 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 i n their respective jurisdictions.”

SEC. 3. Articles 26, 27, 28, 29, 30, 31 and 32 of Chapter

I11 on Membership of the same Code are hereby renumbered
and amended to read, as follows:

CHAPTER I11
MEMBERSHIP

“ART. 2 6 . 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 bas complied

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

“A cooperative organized by minors shall be

considered a laboratory cooperative and must be
affiliated with a registered cooperative. A laboratory
cooperative shall be governed by special guidelines
to be promulgated by the Authority.
24

“ A R T . 27. Government O f f i c e r s and

Employees. - (1) Any officer or employee of the
Authority shall be disqualified t o be elected or
appointed to any position i n a cooperative:
Provided, That the disqualification does not extend
to a cooperative organized by the officers or
employees of the Authority.

“(2) All elective officials of the Government

shall be ineligible t o become officers and directors
of cooperatives: Provided, That the disqualification
does not extend to a party list representative being
an officer of a cooperative he or she represents; and

“(3) Any government employee or official 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 a t the
general assembly, board and committee meetings
of cooperatives as well as cooperqtive seminars,
conferences, workshops, technical meetings, and
training courses locally or abroad Provided, That
the operations of the office concerned are not
adversely affected.

“ART. 28:Application. - An applicant for

membership shall be deemed a member after
approval of his membership by the boadof directors
and shall exercise the rights of member after having
made such payments to the cooperative in respect
to membership or acquired interest in t h e
cooperative as may be prescribed in the bylaws. In
case membership is refused o r denied by the board
of directors, a n appeal may be made to the general
assembly and the latter’s decision shall be final.
For this purpose, the general assembly may opt to
create a n appeal and grievance committee, the
members of which, shall serve for a period of one
(1) year and shall decide appeals on membership
application within thirty (30) days upon ‘receipt
thereof. If the committee fails to decide w i t h the
prescribed period, the appeal is deemed approved in
favor of the applicant.
 25

“ART. 29. 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.

“ART. 30. Termination of Membership. - (1)

A member of a cooperative may, for any valid
reason, withdraw h i s membership from t h e
cooperative by giving a sixty (60) day notice to the
board of directors. Subject to the bylaws of the
cooperative, the withdrawing member shall be
entitled to a refund of his share capital contribution
and all other interests in the cooperative: Provided,
That such 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 or insanity of a member in

a primary cooperative, and the insolvency o r
dissolution of a member in a secondary or tertiary
cooperative may be considered valid grounds for
termination of membership: Prouided, however, 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 he

terminated by a vote of the majority of all the
members of the board of directors for any of the
following causes:

“(a) When a member has not patronized any

of the services of the cooperative for an unreasonable
period of time as may be previously determined by
the board of directors;

“(b) When a member has continuously failed

to comply with his obligations;

“(c) When a member has acted in violation

of the bylaws and the rules of the cooperative: and
26

“(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 t o terminate shall be informed
of such intended action in writing and shall be
given a n opportunity t o 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 t o 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 i n favor of the member. Pending a
decision by the general assembly, the membership
remains in force.

“ART. 31. Refund of Interests. - All sums

computed in accordance with the bylaws to be due
from a cooperative to a former member shall be paid
to him either by the cooperative or by the approved
transferee, as the case may be, in accordance with
this Code.”
SEC. 4. Articles 33, 34, 35, 36, 37, ‘38, 39, 40, 41, 42,
43, 44, 45, 46, 47, 48, 49, 50 and 51 of Chapter IV on
Administration of the same Code are hereby renumbered and
amended to read, as follows:

CHAPTER IV
ADMINISTRATION

“ART. 32. C o m p o s i t i o n of the General

A s s e m b l y . - The general assembly shall be
composed of such members who are entitled to vote
 27

under the articles of cooperation and bylaws of the

cooperative.

“ART. 33. 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
delegated

“(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 guidelines of such electric
cooperative; and

“(3) To approve developmental plans of the

cooperative.

“Subject to such other provisions of this Code

and only for purposes of prompt and intelligent
decision-making, the general assembly may, by 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.

“ART. 34. Meetings. - (1) A regular meeting

shall be held annually by the general assembly on
a date fixed in the bylaws, or if not so fixed, on
any date within ninety (90) days after the close of
each fiscal year: Provided, That notice of regular
meetings shall be sent in writing, by posting o r
publication, o r through other electronic means to all
members of record;
28

“(2) Whenever necessary, a special meeting of

the general assembly may be called at any time by
a majority vote of the board of directors or as
provided for in the bylaws: Prouided, That a notice
in writing shall be sent one (1) week prior to the
meeting t o all members who are entitled to vote.
However, a special meeting shall be called by the
board of directors after compliance with the required
notice within one (1) month after receipt of a request
in writing from a t 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 centurn (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;

“(3) In’ t h e case of a newly approved

cooperative, a special general assembly shall be
called, as far as practicable, within ninety (90) days
from such approval:

“(4) The Authority may call a special meeting

of the cooperative for the purpose of reporting to the
members the result of any examination, or other
investigation of the cooperative affairs; and

“(5) Notice of any meeting may be waived,

expressly or impliedly, by any member.

“ART. 35. Quorum. - A quorum shall consist

of a t least twenty-five per centum (25%) of all the
members entitled to vote. In the case of cooperative
banks, the quorum shall be as provided in Article
99 of this Code. In the case of electric cooperatives
registered under this Code, a quorum, unless
otherwise provided in the bylaws, shall consist of five
per centum (5%) of all the members entitled to vote.
 29

“ART. 36. Voting System. - Each member of

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

“However, the bylaws of a cooperative other

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

“ART. 37. Composition and Term of the Board

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

“ART. 38. Powers of the Board of Directors.

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

“ART. 39. Directors. - (1) Any member of a

cooperative who, under the bylaws of the cooperative,
has the right to vote and who possesses all the
qualifications and none of the disqualifications
provided in the laws or the bylaws 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
30
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.

“(3) The members of the board of directors

shall not hold any other position directly involved
in the day to day operation and management of the
cooperative.

“(4) Any person engaged in a business similar

to that of the cooperative or who in any way has
a conflict of interest with it, is disqualified from
election as a director of said cooperative.

“ART. 40. Meeting of the Board and Quorum

Requirement. - ( 1 ) In t h e case of primary
cooperatives, regular meetings of the board of
directors shall be held a t least once a month.

“(2) Special meetings of the board of directors

may be held a t any time upon the. call of the
chairperson or a majority of the members of the
board Provided, That written notices of the meeting
specifying the agenda of the special meeting shall
be given to all members of the board a t least one
(1) week before the said meeting.

“(3) A majority of the members of the board

shall constitute a quorum for the cqnduct of
business, unless the bylaws provide otherwise.

“(4) Directors cannot attend or vote by proxy

a t board meetings.

‘$ART. 41. 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
a t least a majority of the remaining directors, if
still constituting a quorum; otherwise, the vacancy
must be fded by the general assembly in a regular
or special meeting called for the purpose. A director
 31

so elected to fill a vacancy shall serve only the

unexpired term of his predecessor in office.

“ART. 42. Officers of the Cooperative. - The

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

“ART. 43. Committees of Cooperatiues. - (1)

The .bylaws may create an executive committee to
be ‘appointed by the board of directors with such
powers and duties as may be delegated to it in the
bylaws or by a majority vote of all the members of
the board of directors.

“(2)The bylaws shall provide for the creation

of a n audit, election, mediation and conciliation,
ethics, and such other committees a s may be
necessary for the conduct of the affairs of the
cooperative. The members of both the audit and
election committees shall be elected by the general
assembly and, the rest shall be appointed by the
board. The audit committee shall be directly
accountable and responsible to the general assembly.
I t shall have the,power and duty to continuously
monitor the adequacy and effectiveness of the
cooperative’s management control system and audit
the performance of the cooperative and its various
responsibility centers.
32

“Unless otherwise provided in the bylaws, the

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

“ART. 44. Functions, Responsibilities and

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

“ART. 45. 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 a s such directors, officers or committee
members shall be liable jointly and severally for all
damages or profits resulting therefrom t o the
cooperative, members and other persons.

‘When a director, officer or committee member

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

“ART. 46. Compensation. - (1) In the absence

of any provision in the bylaws fixing their
compensation, the directors shall not receive any
compensation except for reasonable per diems:
Prouided, howeuer, That the directors and officers
shall not be entitled to any per diem when, in the
preceding calendar year, the cooperative reported a
 33

net loss or had a dividend rate less than the official

inflation rate for the same year. Any compensation
other than per diems may be granted to directors
by a majority vote o f the members with voting
rights a t a regular or special general assembly
meeting specifically called for the purpose: Provided,
That no additional compensation other than per
diems shall be paid during the first year of existence
of any cooperative.

“ ( 2 ) The compensation of officers of the

cooperative a s well a s t h e members of the
committees created pursuant to this Code or its
bylaws may be fixed in the bylaws.

“(3) Unless already fixed in the bylaws, the

compensation of all other employees shall be
determined by the board of directors.

“ART. 47. Dealings of Directors, Officers or

Committee Members. - A contract entered into by
the cooperative with one (1)or more of its directors,
officers, and committee members is voidable, at the
option of the cooperative, unless all the following
conditions are present:

“(1) That the presence of such director in the

board meeting wherein 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) T h a t in t h e case of a n officer o r

committee member, the contract with the officer or
committee member has been previously authorized
by the general assembly or by the board of directors.
34

“Where any of the first two conditions set

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

“ART. 48. Disloyalty o f a Director. - A

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

“ART. 49. Illegal Use of Confidential

Information. - (1) A director or officer, or a n
associate of a director or officer, who, for his benefit
or advantage or that of an associate, makes use of
confidential information that, if generally known,
might reasonably be expected to adversely affect the
operation and viability of the cooperative, shall be
held

“(a) Liable to compensate the cooperative for

the direct losses suffered by the cooperative as a
result of the illegal use of information; and

“(b) Accountable t o the cooperative for any

direct benefit or advantage received or yet t o be
received by him or his associate, as a result of the
transaction.
 35

“ ( 2 ) The cooperative shall take the necessary

steps to enforce the liabilities described in subsection
(4.
“ART. 50. Remoual. - All complaints for the
removal of any elected officer shall be filed with the
board of directors. Such officer shall be given the
opportunity to be heard. Majority of the board of
directors may place the officer concerned under
preventive suspension pending the resolution of the
investigation. Upon Ending of a prima fa& evidence
of guilt, the board shall present its recommendation
for removal t o the general assembly.

“An elective officer may be removed by three-

fourths (314) votes of the regular members present
and constituting a quorum, in a regular or special
general assembly meeting called for the purpose.
The officer concerned shall be given an opportunity
to be heard a t said assembly.”

SEC. 5. Articles 52, 53, 54, 55, 56, 57, 58, 59, 60, 61,
62 and 63 of Chapter V on Responsibilities, Rights and
Privileges of Cooperatives of the same Code are hereby
renumbered and amended to read, as follows:

CHAPTER V

RIGHTS AND PRIVILEGES

RESPONSIBILITIES,
OF COOPERATIVES

“ART.51. Address. - Every cooperative shall

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

“ART. 52. Books to be Kept Open. - (1) Every

cooperative shall have the following documents
ready and accessible t o its members and
representatives of the Authority for inspection
during reasonable office hours at its official address:
36
“(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;

“(a) A register of members:

“(e) The books of the minutes of the meetings

of the general assembly, board of directors and
committees:

“(0 Share books, where applicable;

“(g) Financial statements; and

“(h) Such other documents a s may be

prescribed by laws or the bylaws.

“(2) The accountant or the booldteeper of the

cooperative shall be responsible for the maintenance
and safekeeping of the 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 a t 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 the cooperative principles and
generally accepted accounting practices.

“(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 a t any time. The
financial statements, audited according to generally
accepted auditing standards, principles and practices,
shall be published annually and shall be kept posted
 37

in a conspicuous place in the principal office of the

cooperative.
“(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 nonfinancial
operations which are already more than five (5) years
old except those relating to transactions which are
the subject of civil, criminal, and administrative
proceedings. An inventory of the audited documents,
records, and books to be disposed of shall be drawn
up and certified t o by the board secretary and the
chairman of the audit committee and presented to
the board of directors which may thereupon approve
the disposition of said records.

“ART. 53. Reports. - (1) Every cooperative

shall’draw up regular reports of its program o f
activities, including those in pursuance of their
socio-civic undertakings, showing their progress and
achievements a t the end of every fiscal year. The
reports shall be made accessible to its members, and
copies thereof shall be furnished to aU its members
o f record. These reports shall be filed with the
Authority within one hundred twenty (120) days
from the end of the calendar year. The form and
contents of the reports shall be as prescribed by the
rules of the Authority. Failure to.’& the required
reports shall subject the accountable officerls to fines
and penalties as may be prescribed by the Authority,
and shall be a ground for the revocation of authority
of the cooperative to operate as such. The fiscal
year of every cooperative shall be the calendar year,
except as may be otherwise provided in the bylaws.

“@).Ifa cooperative fails to make, publish and

file the reports required herein, or fails t o include
therein any matter required by this Code, the
Authority shall, within fifteen (15) days from the
expiration of the prescribed period, send such
cooperative a written notice, stating its non-
38

compliance a n d the commensurate fines and

penalties that will be imposed until such time that
the cooperative has complied with the requirements.

“ART. 54. Register~ofMembers as Prima Facie

Euidence. - Any register or list of members or
shares kept by any registered cooperative shall ,be
prima facie evidence of the following. particulars
entered therein:

“(1)The date on which the name of any person

was entered in such register or list as member; and

“(2) The date on which any such person ceased

to be a member. ’ , ‘

“ART. 55. Probatiue 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, r.ules 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 a cooperative in possession

of the books of such cooperative shall, in any legal
proceedings to which the cooperative ismot 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.

“ART. 56. 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 by
a duly registered insurance or bonding company for
the faithful performance of their respective’duties
and obligations. The board of .directors shall
determine the adequacy of such bonds.
 39
“Upon the filing of the application f o r
registration of a cooperative, the bonds of the
accountable officers shall be required by the
Authority. Such bonds shall be renewed annually
and the Authority shall accordingly be informed of
such renewal.

“ART. 5 7 . Preference of Claims. - (1)

Notwithstanding the provisions of existing laws,
rules and regulations to the contrary, but subject
t o the prior claim of the Authority, any debt due
to the cooperative from a member shall constitute
a first lien upon any raw materials, production
inputs, and produds 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 the 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.

“ART. 58. 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
hidher salary or wages, commutation of leave
credits and any other monetary benefits payable to
him by the employer and remit such amount as
may be specified in satisfaction of a 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 within ten
(10) days after the end of the payroll month to the
cooperative. The employer shall make the deduction
for as long as such debt or other demand 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 provisions of this article shall apply

to all similar agreements referred to in paragraph
(1) and were enforced prior to the approval of this
Code.
“(5) Notwithstanding the provisions of existing
laws t o the contrary, the responsibilities of the
employer as stated in paragraphs (1) and (2) of this
article shall be mandatory: Prouided, That in the
case of a private employer, t h e actual and
reasonable costs of deducting and remitting may be
collected.

“ART. 59. 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.

“ART. 60. Tax Treatment of Cuoperatiues. -

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
 41

and other tax laws. Cooperatives not falling under

this article shall be governed by the succeeding
section.

“ART. 61. Tax a n d Other Exemptions. -

Cooperatives transacting business with both
members and non-members shall not be subject 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 but not limited to final taxes on
members’ deposits and documentary tax.
Notwithstanding the provisions of any law o r
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 inore than Ten
million pesos ~10,000,000.00) 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 @TI). 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 andlor duties.

“(Z),Cooperatives with accumulated reserves

ana undivided net savings of more than Ten million
pesos (F’lO,OOO,OOO.OO)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 received by members: Frouided,further,
42
That cooperatives, regardless of classification, are
exempt from income t a x from t h e date of
registration with the Authority;
“@) Value-Added Tax - On transactions with
non-members: Provided, however, That cooperatives
duly registered with the Authority, are exempt from
the payment of value-added tax, subject to Section
109, sub-sections L, M and N of Republic Act No.
9337, the National Internal Revenue Code, as
amended: Provided, That the exempt transaction
under Section 109 (L)shall include sales made by
cooperatives duly registered with the Authority
organized and operated by its members to undertake
the production and processing of raw materials or
of goods produced by its members into finished or
processed products for sale by the cooperative to its
members and non-members: Provided, further, That
any processed product or its derivative arising from
the raw materials produced by its members, sold in
the name and for the account of the cooperative,
shall be deemed a product of the cooperative:
Provided, finally, That a t least twenty-five per
centum (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
socioeconomic projects within the area of operation
of the cooperative may be tax deductible.

“(3) AU cooperatives, 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:
 43

Prouided, further, That nothing in this article shall

preclude the examination of the books of accounts
or other accounting records of the cooperative by
duly authorized internal revenue officers for internal
revenue t a x purposes only, after previous
authorization by the Authority.

“(4)In areas where there are no available

notaries public, the judge, exercising his ex officio
capacity as notary public, shall render service, kee
of charge, to any person or group of persons
requiring t h e administration of oath o r the
acknowledgment of articles of cooperation and
instruments of loan kom cooperatives not exceeding
Five hundred thousand pesos (P500,OOO.OO).

“(5) Any register of deeds shall accept for

registration, kee of charge, any instrument relative
t o a loan made under this Code which does not
exceed Two h u n d r e d fifty thousand pesos
(P250,OOO.OO) or the deeds of title of any property
acquired by t h e cooperative o r any paper o r
document drawn in connection with any action
brought by t h e 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 sheriffs 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 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 for seeking to
set aside any third party claim: Prouided, That a
certification of the Authority showing that the net
assets of the cooperative are in excess of the amount
44

of the bond required by the court in similar cases

shall be accepted by the court as a sufficient bond.

“(8) Any security issued by cooperatives shall

be exempt from the provisions of the Securities Act
provided such security shall not be speculative.

“ART. 62. Priuileges 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 valuable papers in the safes of
t h e municipal o r city t r e a s u r e r s 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 fiee 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 therefor, 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 t o supply government
institutions and agencies rice, corn and other grains,
fish and other marine products, meat, eggs, milk,
vegetables, tobacco and other agricultural
commodities produced by their members shall be
granted to the cooperatives concerned;
 45

“(5) Preferential treatment in the allocation of

fertilizers, including seeds and other agricultural
inputs and implements, and in rice distribution
shall be granted to cooperatives by the appropriate
government agencies;

“(6) Preferential and equitable treatment in

the allocation or control of bottomries of commercial
shipping vessels in connection with the shipment of
goods and products of cooperatives;

“(7) Cooperatives and their federations, such as

farm and fishery producers and suppliers, market
vendors and such other cooperatives, which have for
their primary purpose the production and/or the
marketing of products from agriculture, fisheries
and small entrepreneurial industries and federations
thereof, shall have preferential rights in the
management of public markets andlor lease of public
market facilities, stalls or spaces: Prouided, That
these rights shall only be utilized exclusively by
cooperatives: Provided, further, That no cooperative
forming a joint venture, partnership or any other
similar arrangement with a non-cooperative entity
can utilize these rights;

“(8) Cooperatives engaged in credit services

and/or federations shall be entitled t o loans, credit
lines, rediscounting of their loan notes, and other
eligible papers with the Development Bank of the
Philippines, the Land Bank of the Philippines and
other financial institutions except the Bangko
Sentral ng Pilipinas (BSP);

“The Philippine Deposit Insurance Corporation

(PDIC) and other government agencies, govermnent-
owned and controlled corporations and government
financial institutions shall provide technical
assistance to registered national federations and
unions of cooperatives which have significant
engagement in savings and credit operations in order
for these federations and unions to establish andlor
46

strengthen their own autonomous cooperative deposit

insurance systems;

“(9) A public transport service cooperative may

he entitled to financing support for the acquisition
andlor maintenance of land and sea transport
equipment, facilities and parts through the program
of the government financial institutions. It shall
have the preferential right to the management and
operation of public terminals and porta whether land
or sea transport where the cooperative operates and
on securing a franchise for active or potential routes
for the public transport;

“(10) Cooperatives transacting business with

the Government of the Philippines or any of its
political subdivisions or any of its agencies or
instrumentalities, including government-owned and
controlled corporations shall be exempt from
prequalification bidding requirements,
notwithstanding the provisions of Republic Act No.
9184, otherwise known as, t h e Government
Procurement Act;

“(11) 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;

“(12) Cooperatives organized by faculty

members and employees of educational institutions
shall have the preferential right in the management
of the canteen and other services related to the
operation of the educational institution where they
are employed: Provided, That such services are
operated within the premises of the said educational
institution; and

“(13) The appropriate housing agencies and

government financial institutions shall create a
special window for financing housing projects
undertaken by cooperatives, with interest rates and
 47

terms equal to, or better than those given for

socialized housing projects. This financing shall be
in the form of blanket loans or long-term wholesale
loans to qualified cooperatives, without need for
individual processing.

“The Authority, in consultation with the

appropriate government agencies and concerned
cooperative sector, shall issue rules and regdations
on all matters concerning housing cooperatives.”

SEC. 6. Article 64 of Chapter VI on Insolvency of

Cooperatives of the same Code is hereby renumbered and
amended to read, as follows:

CHAPTER VI
INSOLVENCY OF COOPERATIVES

“XRT. 63. Proceedings Upon Insolvency. - In

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

“Nothing in this article, however, precludes

creditors from seeking protection from said
insolvency law.”

SEC. 7 . Articles 65, 66, 67, 68, 69, 70 and 71 of Chapter

VI1 on Dissolution of Cooperatives of the same Code are hereby
renumbered and amended to read, as follows:

CHAPTER mr
DISSOLUTIONOF COOPERATIVES

“ART. 64. Voluntary Dissolution Where no

Creditors are Affected. - If the dissolution of a
cooperative does not prejudice the rights of any
creditor having a claim against it, the dissolution
may be effected by a majority vote of the board of
directors, and by a resolution duly adopted by the
48

affirmative vote of at least three-fourths (3/4) of all

the members with voting rights, present and
constituting a quorum at a meeting to be held
upon call of the directors: Provided, That the notice
of time, place and object of the meeting shall be
published for three ( 3 ) consecutive weeks in a
newspaper published i n the place where the
principal office of said cooperative is located, or if
n o newspaper is published in such place, in a
newspaper of general circulation in the Philippines:
Provided, further, That the notice of such meeting
is s e n t to each member of record either by
registered mail or by personal delivery a t least thirty
(30) days prior t o said meeting. A copy of the
resolution authorizing the dissolution shall be
certified to by a majority of the board of directors
and countersigned by the board secretary. The
Authority shall thereupon issue the certificate of
dissolution.

“ART. 65. Voluntary Dissolution Where

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

“If the petition is sufficient in form and

substance, the Authority shall issue a n order
reciting the purpose of the petition and shall fix a
date which shall not be less than thirty (30) nor
more than sixty (60) days after the entry of the
order. Before such date, a copy of the order shall
be published at least once a week for three (3)
consecutive weeks in a newspaper of general
 49

circulation published i n the municipality or city

where the principal office of the cooperative is
situated, or in the absence of such local newspaper,
i n a newspaper of general circulation i n t h e
Philippines, and a copy shall likewise be posted for
three (3) consecutive weeks in three (3) public places
in the municipality or city where the cooperative’s
office is located.

“Upon expiry of the five (5)-day notice to file

objections, the Authority shall proceed to hear the
petition and try any issue raised in the objection
filed; and if the objection is sufficient and the
material allegations of the petition are proven, it
shall issue a n order to dissolve the cooperative and
direct the disposition of its assets in accordance with
existing rules and regulations. The order of
dissolution shall set forth therein:

“(1) The a s s e t s a n d liabilities of t h e

cooperative;

“(2) The claim of any creditor;

“(3) The number of members; and

“(4) The nature and extent of the interests of

the members of the cooperative.

“ART. 66. Involuntary Dissolution. - A

cooperative may be dissolved by order of a competent
court after due hearing on the grounds of:

“(I) Violation of a n y law, regulation o r

provisions of its bylaws; or

“(2) Insolvency,

“ART. 67. Dissolution by O r d e r of t h e

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:
50

“(1) Having obtained its registration by fraud:

“(2) Existing for an illegal purpose;

“(3) Willful violation, despite notice by the

Authority, of the provisions of this Code or its
bylaws;

“(4) Willful failure to operate on a cooperative

basis; and

“(5) Failure to meet the required minimum

number of members in the cooperative.

“ART. 68. Dissolution by Failure to Organize

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

“ART. 69. Liquidation of a Cooperative. -

Every cooperative whose charter expires by its own
limitation or whose existence is terminated by
voluntary dissolution or through an appropriate
judicial proceeding shall nevertheless continue to
exist for three (3) years after the time it is dissolved,
not to continue the business for which it was
established but for the purpose of prosecuting and
defending suits by or against it; settlement and
closure of its affairs; disposition, conveyance and
distribution of its properties and assets.

“At any time during the said three (3) years,

the cooperative is authorized and empowered tQ
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 t h e cooperative had i n 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 o d y distribute its assets
or properties upon lawful dissolution and after
payment of all its debts and liabilities, except in the
case of decrease of share capital of the cooperative
and as otherwise allowed by this Code.

“ART. 70. R u l e s a n d Regulations o n

Liquidation. - The Authority shall issue the
appropriate implementing guidelines for t h e
liquidation of cooperatives.”

SEC. 8. Articles 72, 73, 74, 75, 76, 77, 78, 79 and 80
of Chapter VI11 on Capital, Property, and Funds of the same
Code are hereby renumbered and amended to read, as follows:

CHAPTER VI11
CAPITAL, PROPERTY, AND FUNDS

“ART. 71. Capital. - The capitalization of

cooperatives and the accounting procedures shall be
governed by the provisions of this Code and the
regulations which shall be issued.

“ART. 72. Capital Sources. - Cooperatives

registered under this Code may derive their capital
from any or all of the following sonrces:

“(1) Members’ share capital;

“(2) Loans and borrowings including deposits;
52

“(3) Revolving capital yhich cons’sts of the

b
deferred payment of patronage refunds, r interest
on share capital: and i

“(4) Subsidies, donatiqns, legacies, grants,

aids and such other assistance from any local or
foreign institution whethe2 public o r private:
Provided, That capital coming from such subsidies,
donations, legacies, grants, aids and^ other assistance
shall not be divided into individual share capital
holdings a t any time but shall instead form part of
the donated capital or fund Of the cooperative.

“Upon dissolution, such

be subject t o escheat.
donated capital shall
“ART. 7 3 . Limitation: on S h a r e Capital
Holdings. - No member of 4 primary cooperative
other than a cooperative itself shall own or hold
more than ten per centurn (10%) of the share
capital of the cooperative. ~

Where a~member of a cooperative dies, his

heir shall be entitled to the shares of the decedent:
Prouided, That the total share holding of the heir
does not exceed ten per centurn (10%) of the share
capital of the cooperative: Provided, further, That
the heir qualify and is admitted as member of the
cooperative: Provided, finally, That where the heir
fails to qualify as a member or where his total
share holding exceeds ten per centurn (10%) of the
share capital, the share o r shares in excess will
revert t o the cooperative upon payment t o the heir
of the value of such shares.

“ART. 74. Assignment o f S h a r e 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:
 53
“(I) He h a s held such s h a r e capital
contribution or interest for not less than one (1)
year;

“(2) The assignment is made to the cooperative

or to a member of the cooperative or to a person
who falls within the field of membership of the
cooperative; and

“(3) The board of directors has approved such

assignment.

“ART. 75. Capital Build-Up. - The bylaws of

every cooperative shall provide for a reasonable and
realistic member capital build-up program to allow
the continuing growth of the members’ investment
in their cooperative as their own economic condltions
continue to improve.

“ART. 76. Shares. - The term ‘share’ refers

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

“ART.77. Fines. - The bylaws of a cooperative

may prescribe a fine on unpaid subscribed share
capital: Provided, That such fine is fair and
reasonable under the circumstances.

“ART. 7 8 . Investment of Capital. - A

cooperative may invest its capital in any of the
following:

“(a) In shares or debentures or securities of

any other cooperative;

“(b) In any reputable bank in the locality, or

any cooperative;
54

“(c) In securities issued or guaranteed by the

Government;

“(d) In real estate primarily for the use of the

cooperative or its members; or

“(e) In any other manner authorized in the

bylaws.

“ART. 79. Revaluing Capital. - The general

assemhly of any cooperative may authorize the board
of directors to raise a revolving capital to strengthen
its capital structure by deferring the payment of
patronage refunds and interest on share capital or
by the authorized deduction of a percentage from
the proceeds of products sold or services rendered,
or per unit of product or services handled. The
board of directors shall issue revolving capital
certificates with serial number, name, amount, and
rate of interest to be paid and shall distinctly set
forth the time of retirement of such certi6cates and
the amounts to be returned.”

SEC. 9. Articles 81, 82, 83, 84 and 85 of Chapter IX on

Audit, Inquiry and Members’ Right to Examine of the same
Code are hereby renumbered and amended to read, as follows:

CHAPTER IX
AUDIT, INQUIRY AND MEMBERS’RIGHT TO EXAMINE

“ART. 80. A n n u a l Audit. - Cooperatives

registered under this Code shall be subject to a n
annual financial, performance and social audit. The
financial audit shall be conducted by an external
auditor who satisfies all the following qualifications:

“(1)He is independent of the cooperative or

any of its subsidiary that he is auditing; and

“(2) He is a member in good standing of the

Philippine Institute of Certified Public Accountants
(PICPA) and is accredited by both the Board of
Accountancy and the Authority.
 55

“The social audit shall be conducted by a n

independent social auditor accredited by the
Authority.

“Performance and social audit reports which

contain the findings and recommendations of the
auditor shall be submitted to the board of directors.

“The Authority, in consultation with the

cooperative sector, shall promulgate the rules and
standards for the social audit of cooperatives.

“ART. 81. Audit Report. - The auditor shall

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

“Thereafter, the board of directors shall

present the complete audit report to the general
assembly in its next meeting.

“ART. 82. Nonliability for Defamation. - The

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 t o do pursuant
to this Code.

“ART. 83. Right to Examine. - A member

shall have the right to examine the records required
to be kept by the cooperative under Article 5 2 of
this Code during reasonable hours on business days
and he may demand, in writing, for a copy of
excerpts &om said records without charge 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
56
an offense which shall he punishable under Article
140 of this Code: Provided, That if such refusal is
pursuant to a resolution or order of the board of
directors, the liability under this article shall be
imposed upon the directors who voted for such
refusal: Prodded, further, That it shall he a defense
to any action under this article that the member
demanding to examine and copy excerpts from the
cooperative records has improperly used any
information secured through any prior examination
of the records of such cooperative or was not acting
in good faith or for a legitimate purpose in making
his demand.

“ A R T . 84. S a f e t y o f R e c o r d s . - Every
cooperative shall, a t its principal office, keep and
carefdy 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.”

SEC. 10. Articles 86 and 87 of Chapter X on Allocation

and Distribution of Net Surplus of the same Code are hereby
renumbered and amended to read, as follows:

CHAPTER X
ALLOCATION AND DISTRIBUTION OF NET SURPLUS
“ART. 85. Net Surplus. - Notwithstanding the
provisions of existing laws, the net surplus of
cooperatives shall he determined in accordance with
its bylaws. Every cooperative shall determine its
net surplus at the close of every fiscal year and a t
such other times as may be prescribed by the
bylaws.

“Any provision of law t o t h e contrary

notwithstanding, 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
 57

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 t o them if the same is distributed as
prescribed herein.

“ART. 86. Order of Distribution. - The net

surplus of every cooperative shall be distributed as
follows:

“(1)An amount for the reserve fund which

shall be a t least ten p e r centurn (10%) of net
surplus: Prouided, That, in the first five (5) years
of operation after registration, this amount shall not
be less than fifty per centurn (50%) of the net
surplus:

“(a) The reserve fund shall be used for the

stability of the cooperative and t o meet net losses
i n its operations. The general assembly may
decrease the amount allocated to the reserve fund
when the reserve fund already exceeds the share
capital.

“Any sum recovered on items previously

charged to the reserve fund shall be credited to such
fund.

“(b) The reserve fund shall not be utilized for

investment, other than those allowed in this Code.
Such sum of the reserve fund in excess of the share
capital may be used a t 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 t o which the
cooperative is affiliated; and
58

“(i) 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 t o the federation or union to
which the cooperative is affiliated.

“(2) An amount for the education and training

fund, shall not be more than ten per centurn (10%)
of the net surplus. The bylaws may provide that
certain fees or a portion thereof be credited to such
fund. The fund shall provide for the training,
development and similar other cooperative activities
geared towards the growth of the cooperative
movement:

“(a) Half of the amounts transferred to the

education and training fund annually under this
subsection shall be spent by the cooperative for
education and training purposes; while the other
half may be remitted to a union or federation
chosen by the cooperative or of which it‘ is a
member. The said union or federation shall submit
to the Authority and to its contributing cooperatives
the following ‘schedules:

“(i) List of cooperatives which have remitted

their respective Cooperative Education and Training
Funds (CETF);

“(ii)Business consultaney assistance to include

the nature and cost; and
“(iii) Other training activities undertaken
specifying therein the nature, participants and cost
of each activity.

“(b) Upon the dissolution of the cooperative, the

unexpended balance of the education and training
fund appertaining t o the cooperative shall be
credited to the cooperative education and training
fund of the chosen union or federation.
 59

“(3) An amount for t h e community

development fund, which shall not be less than three
per centurn (3%) of the net surplus. The ,community
r.development fund shall be used for projects or
activities that will benefit the community where the
cooperative operates.

“(4) An optional fund, a land and building,

and any other necessary fund the total of which
shall not exceed seven per centurn (7%).

,: “(5) The, remaining net surplus shall he made

available,to the members in the -form of interest on
share capit4not.to exceed the normal rate of return
on .investments and patronage refunds: Prouided,
That any amount remaining after the allowable
interest and the patronage; ,refund have been
deducted shall be credited to ,the reserve fund.
, . ., , .
“The sum allocated for patronage refunds shall
be made available a t 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

p a i d - u p s h a r e . c a p i t a l Contribution, his
proportionate amount of patronage refund shall be
paid t o him unless he agrees to credit the amount
t o h i s account a s additional s h a r e capital
contribution;

“@) In the case of , a member patron with

uneaid share’ capital contribution, his proportionate
amount’of patronage refund’ shall be credited to,his
account until his share capitaleontribution 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
60
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 a t any time within a period specified
in the bylaws, such patron shall be deemed and
become a member of t,he cooperative if he so agrees
or requests and complies with the provisions of the
bylaws for admission to membership; and

“(d) If within any period of time specified in

the bylaws, 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 t o comply with the
provisions o f ’ t h e bylaws for,- admission t o
membership, the amount so accumulated or credited
t o their account together with any .part of the
general fund for nonmember patrons shall be
credited to the reserve fund or to the education and
training fund of the cooperative, a t the option of the
cooperative.”

SEC. 11. Articles 88, 89, 90, 91, 92; 93, 94 and 95 of
Chapter XI on the Special Provisions Relating to Agrarian
Reform Cooperatives of the same Code are hereby renumbered,
retitled and amended to read, as follows:

CHAPTER XI
AGRARIANREFORMCOOPERATIVES

“ART. 87. Couerage. - The provisions of this

Chapter shall primarily govern agrarian reform
cooperatives: Provided, That the provisions of the
other chapters of this Code shall, apply,suppletorily
except insofar as this Chapter otherwise provides.

“ART. 88. Definition and Purpose. - An

agrarian reform cooperative is one organized by
marginal farmers, majority of which are agrarian
reform beneficiaries, for the purpose of developing,an
appropriate system of land tenure, land development,
 61

land consolidation or land management in areas

covered by agrarian reform.

“An agrarian reform cooperative as defined

shall be organized for any or all of the following
purposes:

“(I) To develop an appropriate system of land

tenure, land development, land consolidation or land
management in areas covered by agrarian reform;

“ ( 2 ) To coordinate a n d facilitate t h e
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 a t 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,

vocationdtechnical training, and livelihood programs
to beneficiaries and marginal farmers;

“(7) To act as conduits 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
62

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.

“ART. 89. Cooperative Estates. - Landholdings

like plantations; estates or haciendas acquired by
the State for the benefit of the workers ixvaccnrdmce
with the Comprehensive Agrarian Reform Program
which shall be collectively owned by the worker-
beneficiaries under a cooperative set-up.

“ART. 90. Infrastructure. - In agrarian reform

and resettlement areas, the Government shall grant
to a g r a r i a n reform cooperatives preferential
treatment in the construction, maintenance and
management of roads, bridges, canals, wharves,
ports, reservoirs, irrigation systems, waterworks
systems, and other ,infrastructurestwith governmefit
funding. For this purpose, the Government .shall
provide technical assistance, facilities and equipment
to such agrarian reform cooperatives.

“ART. 91- Lease of Public Lands.’ - The

Govermient may lease public lands to any agrarian
reform cooperative for a period not exceeding twenty-
five (25) years, subject t o 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.

“ART. 92. Preferential Right. - In agrarian

reform areas, an agrarian reform cooperative shall
have the preferential right in the grant of franchise
 63
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. If there is an electric
service provider in the area, it shall, upon the
request of a n a g r a r i a n reform cooperative,
immediately provide electric services to the agrarian
reform areas. If the electric service provider fails to
provide the services requested within a period of one
(1) year, d the agrarian reform cooperative concerned
may undertake to provide the electric services in the
area through its own resources. All investments
made by the said agrarian reform cooperative for
t h e electrification of t h e a g r a r i a n reform
resettlement areas shall be the subject of sale to the
electric service provider once it tapes on the service.

“ART. 93. Priuileges. - Subject to such

reasonable terms and conditions as the Department
o f Agrarian Reform’(DAR) and, the Authority may
impose, agrarian reform cooperatives may be given
the exclusive right to do any or all of the following
economic activities i n a g r a r i a n reform and
resettlement areas:

“(1) Supply and distribution of consumer,

agricultural, aqua-cultural, and industrial goods,
production inputs, and raw materials and supplies,
machinery, equipment, facilities and otlier services
and,requirements of the beneficiaries and marginal
farmers a t reasonable prices;

“(2) Marketing of the products and services of

the beneficiaries in local and foreign markets;

“(3) Processing of the members’ products into

finished consumer o,r industrial goods for domestic
consumption or for export;

“(4) Provision of essential public services a t

cost such as power, irrigation, potable water,
64

passenger andlor cargo transportation by land or

sea, 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 t o
compliance w i t h t h e laws and regulations on
environmental and ecological controls; and

“(6) Provision of financial, technological, and

other services and facilities required by t h e
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 article. The DAR, the
Authority and the BSP shall draw up a joint
program for the organization and financing of the
agrarian reform cooperatives subject of this Chapter.
The joint program shall be geared towards the
beneficiaries’ gradual assumption of fnll ownership
and management control of the agrarian reform
cooperatives.

“ART. 94. Organization and Registration. -

Agrarian reform cooperatives may be organized and
registered under this Code only upon prior written
verification by ‘the DAR tb 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 ita operations;
and that the same may now be organized and
registered in accordance with the requirements of
this Code.
“The Authority, in consultation with the
concerned government agencies and cooperative
sector, shall issue appropriate rules and regulations
pertaining t o the provisions of this Chapter.”
 65

SEC 12. Articles 96, 97 and 98 of Chapter XI1 on the

Special Provisions on Public Service Cooperatives of the same
Code are hereby transferred to another chapter. Chapter XI1
as amended shall now read, as follows:

CHAPTER XI1
BANKS
COOPERATIVE

“ART. 95. Governing Law. - 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 a s they a r e not inconsistent with the
provisions contained in this Chapter.

-
“ART. 96. Supervision. The cooperative
banks registered under this Code shall be under the
supervision of the BSP. The BSP, upon consultation
with the Authority and the concerned cooperative
sector, shall formulate guidelines regarding the
operations, and the governance of cooperative banks.
These guidelines shall give due recognition to the
unique nature and character of cooperative banks.
To this end, cooperative banks shall provide
financial and banking services to its members.

“ART. 97. Organization, Membership and

Establishment of a Cooperative Bank. - (1)
Cooperative organizations duly established and
registered under this Code may organize a
cooperative ,bank, which shall likewise be considered
2 a cooperative registrable under the provisions of this
Code subject t o the requirements and requisite
authorization from the BSP. Only one cooperative
bank may be established in each province: Prouided,
That a n additional cooperative bank may be
established in the same province to cater t o the
needs of the locality depending on the economic
conditions of the province’as may be determined by
the BSP: Provided, further, That the additional
cooperative bank shall be located in the city or
66

municipality other than the city or municipality

where the first cooperative bank is located.

“(2) Membership in a cooperative bank shall

either be regular or associate. Regular membership
shall he limited to cooperative organizations which
are holders of common shares of the bank. Associate
members a r e those subscribing and holding
preferred shares of the bank, which may include but
are not limited to the following:

“(a) Individual members of t h e bank’s

member-primary cooperatives; and

“(b) S a m a h a n g Nayon a n d Municipal

Katipunan ng mga Samahang Nayon (MKSN)which
held common shares of cooperative banks prior t o
the effectivity of this Act shall apply for conversion
to full-fledged cooperatives in order to maintain their
status as regular members of cooperative hanks:
Prouided, That they shall notify the cooperative
bank concerned of their intention.to convert within
a period of ninety (90) days from the effectivity of
this Act. Samahang Nayon and MKSN are hereby
given a period of one (1) year.from the effectivity
of this Act to complete t h e i r conversion a s
cooperatives. Cooperative banks shall exert
reasonable efforts to inform their member Samahang
Nayon and MKSN to finally convert or to give the
notice of conversion withia the prescribed period.
Upon the failure of the Samahang Nayon and
MKSN to &ally convert to a full-fledged cooperative
within the maximum period of qne (1) year, the
cooperative bank concerned may convert the common
shares held by such associations to preferred shares.

“(3) The articles of cooperation and bylaws of

a cooperative bank, or any amendment thereto, shall
be registered with t h e Authority only when
accompanied by a certificate of authority issued by
the BSP. under its official seal.
 67

“ART. 98. Administration of Cooperative

B a n k s . - To maintain t h e quality of bank
management and accord appropriate protection to
depositors and the public in general, the BSP shall
prescribe the fit and proper qualifications of bank
directors and officers for the purposes of this article,
giving due recognition to the unique nature and
character of cooperative banks.

“Notwithstanding the provisions of this Code,

the number, composition and term of the board of
directors shall be defined in the articles of
cooperation and bylaws of the cooperative bank.

“ART. 99. Quorum and Voting Rights. - The

quorum requirement. for general assembly meetings,
whether special or regular, shall be one-half plus one
of the number of voting shares of al1,the members
in good standirig.’In the meetings of the board of
directors, whether special or regular,, the quorum
requirement shall be one-half’plus one of all the
, members
,. of the board of directors. Each director
shaU. only have one vote.

“Notwithstanding the provisions of this Code

t o the contrary, the quorum requirement. for
,.

amendments of articles of cooperation and bylaws

shall be three-fourths (3/4)vote of all the members
with voting rights, present and constituting a
quorum. All other voting requirements shall be as
prescribed by the BSP.

“The voting rights of members shall be

propontionate to the number of their paid-up shares.

“ART. 100. Powers, Functions and Allied

Undertakings of Cooperatiue Banks. - A cooperative
bank shall primarily provide financial, banking and
credit services to cooperative organizations and their
members. However, t h e BSP may prescribe
appropriate guidelines, ceilings and conditions on
68

borrowings of a cooperative organization from a

cooperative bank.

“The powers and functions of a cooperative

bank shall be subject to such rules and regulations
as may be promulgated by the BSP.

“In addition to the powers granted by this

Code and other existing laws, any cooperative bank
may perform any or all of the banking services
offered by other types of banks subject ta the prior
approval of the BSP.

“ART. 101. C a p i t a l R e q u i r e m e n t s of
Cooperatiue,Banks.- (1) A cooperative bank shall
have a minimum paid-up capital in such amount
as may be required by the BSP.’. ,

“The BSP may prescribe ,rules and regulations

on the types of shares a cooperative-bank may
issue, including the terms thereof and rights
appurtenant thereto t o determine compliance with
laws and regulations goveriiing capital and equity
structure of banks: Prouided, ’ That cooperative
banks shall issue par value shares only.

“(2) The Barrio Savings Fund (BSF) and

Barrio Guarantee Fund (BGF) collecteddeducted by
various banks throughout the country from the loan
proceeds of farmer-borrowers who were members of
cooperatives and Samahang Nayon in compliance
with Presidential Decree No. 175 and accompanying
letters of instruction, which are still floating and
outstanding either as active or dormant deposit
accounts in the books of those banks, shall be
deposited to the cooperative bank located in the
province where the depository banks of the BSF and
BGF are located, or if there is no cooperative bank
in the province, to the cooperative bank nearest to
the province. The BSP, in coordination with the
Authority, shall come up with the implementing
guidelines on how to credit the owners of the funds.
 69

Those funds whose owners could not be located or

identified shall be subject to escheat.

“ART. 102. PriviZeges and Incentives of

Cooperatiue Banks. - The cooperative banks
registered under this Code shall be^ given the same
privileges and incentives granted to the rural banks,
private development banks, commercial banks, and
all other banks to rediscount notes with the BSP,
:the Land Bank,,of the Philippines, and other
government banks without affecting in any way the
provisions of this Code.

“(1) Subject t o the approval of the BSP, a

Cooperative bank shall publish a statement of its
financial condition, including those of its subsidiaries
and affiliates, in such terms understandable to the
layman and i~ such frequency as may be prescribed
by the BSP, in English or Filipino, a t least once
every quarter in a newspaper of local circulation in
the city or province where the principal office is
located or, if no newspaper is published in the same
province, then i n a newspaper published in the
nearest city or province or in a newspaper of
general circulation. The BSP, however, may allow
the ,posting of the financial statements of the
cooperative bank in conspicuous places it may
determine in lieu of the publication required in the
,preceding sentence w h e n warranted by t h e
.circumstances.
,,
..
I I

“However, in cases of foreclosure of mortgages

covering loans granted by a cooperative bank, and
the execution of judgments thereon involving real
properties and levied upon by a sheriff, it shall be
exempt from publication requirement where the total
amount; of the loan, excluding interest and other
charges due and unpaid, does not exceed Two
hundred fifty thousand pesos (P250,OOO.OO) or such
amount as the ESP may prescribe, as may be
warranted by the prevaling’economicconditions and
by the nature and character of the cooperative
banks. It shall be sufficient publication in such
70

cases if the notice of foreclosure and execution of

judgment are posted in conspicuous areas of the
cooperative bank’s premises, the municipal hall, the
municipal public market, the barangay hall, or the
barangay public market, if there be any, where the
property mortgaged is situated, within a period of
sixty (60) days immediately preceding the public
auction or the execution of judgment. Proof of
publication as required herein shall be accomplished
by an affidavit of the sheriff or officer conducting
the foreclosure sale or execution of judgment, and
shall be attached to the record of the case.

“(2) A cooperative bank shall be allowed t o

foreclose lands mortgaged t o it subject to the
provisions of Republic Act No. 6657, otherwise
known as the Comprehensive Agrarian Reform Law
of 1988.

“ART. 103. Assistance to Cooperative Banks.

- In accordance with existing policies, government
agencies, government-owned or controlled
corporations and financial institutions shall provide
assistance, ,technical or otherwise, to cooperative
banks to permit them to grow, develop and perform
their role in countryside development towards a
sustainable national economic development.
Whenever a cooperative bank organized under this
Code is in a state of continuing inability or
unwillingness to maintain a period of liquidity, the
BSP may designate one of its officials or a person
of recognized competence, preferably with experience
in cooperative banking and finance, as conservator
of the said bank pursuant to the appropriate
provisions of existing banking laws.

“ART. 104.Applicability of Banking &ws and

Regulations. - With respect to the provisions and
governance of the cooperative banks, the provisions
of the banking laws, rules and regulations shall
prevail, notwithstanding Section 71 of Republic Act
No. 8791, otherwise known as the General Banking
Act of 2000.
 71

“The BSP and the Authority, in consultation

with the concerned cooperative sector, shall issue
appropriate rules and regulations pertaining to the
provisions of this Chapter.”

SEC. 13. Articles 99, 100, 101, 102, 103, 104, 105, 106,
107, 108 and, 109 of Chapter XI11 on Special Provisions
Relating t o Cooperative Banks of the same Code are hereby
transferred to another chapter. Chapter XI11 as amended shall
now read, as follows:

CHAPTER XI11
INSURANCE COOPERATIVE

“ART. 105. Cooperative Insurance Societies. -

Existing cooperatives. may organize themselves into
a cooperative insurance entity for the purpose of
engaging i n .the business of insuring ‘life and
-property of cooperatives and their members.

“ART. 106. Types of Insurance Prouided: -

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.

“ART.107. Applicability of Insurance Laws.

- The’provisions of the Insurance Code and all other
laws and regulations relative to the organization and
operation of a n insurance company shall apply t o
cooperative insurance entities organized under this
Code. The requirements on capitalization,
investments and reserves of insurance &ms may be
liberally modified upon consultation with t h e
Authority and the cooperative sector, but in no case
72

may the requirements be reduced to less than half

of those provided for under the Insurance Code and
other related laws.

“ART. 108. I m p l e m e n t i n g Rules. - The

Insurance Commission and the Authority, in
consultation with the concerned cooperative sector,
shall issue the appropriate rules and regulations
implementing the provisions of this Chapter.”

SEC. 14. Articles 110, 1.11, 112, 113 and 114 of Chapter
XIV on Special Provisions relating to Credit Cooperative of this
Code are hereby transferred to another chapter. Chapter XIV
as amended shall now read, as follows:

CHAPTER XIV
PUBLICSERVICECOOPERATIVES
“ART. 109. Definition .and Coverage. .- A
public service cooperative, within. the meaning. of
this Code, is one organized to render public services
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; ‘a ,

“(2) Ice plants and cold storage services;

“(3) Communication services including

telephone, telegraph, and telecommunications;

“(4) Land and sea transportation cooperatives

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
 73

“(6) Such other types of public service 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.

“ART. 110. Registration Requirements. -

Unless otherwise provided in this Code, no public
service cooperative shall be registered unless it
satisfies the following requirements:

“(1)Its articles of cooperation and bylaws

p.rovide for the membership of the users andlor
producers o f the service. of such Cooperatives; and

“(2) Such other requircments as ,may be

imposed by the other pertinent government agencies
concerned.,In case there aSe 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.

“ART. 111. Regulation of’F’ublic Service

Cooperatives. - (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) AU 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 t h e proper government agency
concerned.
74

“(3) The Authority and the proper government

agency concerned shall jointly issue the necessary
rules and regulations to implement this Chapter.

“(4) The Authority shall establish a committee

for the monitoring of transportation service
cooperatives composed of representatives from the
Authority, the Land Transportation Franchising and
Regulatory Board (LTFRB), the Land Transportation
Office (LTO), Office of Transport Cooperatives (OTC),
other concerned government agencies, as may be
necessary, a n d t h e National Federation of
Transportation Cooperatives. A local monitoring
committee shall likewise be established a t the
extension offices of the Authority to facilitate the
monitoring of transportation ‘cooperatives.

“ART. 112. Engagement in Allied Businesses

by Transportation Seruice Cooperatives. - Subject
t o pertinent national laws and local ordinances,
primary transportation service cooperatives including
secondary and terbary federation of cooperatives may
engage i n a business related t o transportation
services, including hut not limitekl to:

“(I) Importation, distribution and marketing

of petroleum products in accordance with existing
laws;

’ “(2) Operation of gasoline stations and

transportation service centers:

“(3) Importation, distribution and marketing

of spare parts and supplies; and

“(4) Marketing of vehicle/drivers insurance

policies.

“ART. 113. Renewal of Franchise and Vehicle

Registration. - Renewals of franchise and veh?cle
registration shall be granted to transportation
service cooperatives: Prouihd, That such cooperative
 75

presents a certscate of good standing issued by the

Authority, OTC, and the local government unit
concerned as proof that it has continuously provided
the required public transportation services.

“The Authority, in consultation with the

concerned government agencies and cooperative
sector, shall issue appropriate rules and regulations
pertaining t o the provisions of this Chapter.”

SEC. 15. Articles 115, 116, 117 and 118 of Chapter XV

on Special Provisions relating to Cooperative Insurance
Societies of the same Code are hereby transferred to another
chapter. Chapter XV as amended shall now read, as follows:

CHAPTER X V
CREDIT COOPERATIVES
“ART. 114. Coverage. - This Chapter shall
apply to credit cooperatives and other cooperatives,
including multipurpose cooperatives, that provide
savings and credit to their members only. 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.

“ART. 115. Definition and Objectives. - A

credit cooperative is a financial organization owned
and operated by its members with the following
objectives:

“(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.
76
“ART. 116. Organization and Registration. -
Credit cooperatives shall be organized and registered
in accordance with the general provisions of this
Code.

“ART. 117. Organizational Linkage. - Credit

cooperatives may organize chapters or subsidiaries, ,
or join leagues and federations for the purpose of
providing ,commonly needed essential services
including but not limited to the following:

“(1) Interlending 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
a t the provincial, regional and national levels may
continue as such under this Code.”

SEC. 16, A new Article is inserted in Chapter Xv on

Credit Cooperatives and shall now -read, as follows:

“ART. 118. Conversion of Credit Cooperatives

to Financial Service Cooperatives; -.Existing credit
and multipurpose cooperatives with savings and
credit facilities shall formally inform the Authority
of its intention t o continue performing its present
 77
functions. Should the said cooperatives decide t o
exercise enhanced ‘functions, it shall notify the
Authqrity and satisfy t h e requirements for
conversion t o financial service cooperative.”

SEC. 17. A new Chapter on Financial Service

Cooperatives shall he inserted in this Chapter and shall read,
as follows:

CHAPTER XVI
FINANCIAL
SERVICE COOPERATIVES

“ART. 119. Definition and Functions of

Financial Service Cooperattues. - A financial service
cooperative is a financial organization owned and
operated by its members and authorized to provide
the following services, exclusively to its members:

“(a) The functions of credit cooperatives and

other cooperatives, including multipurpose
.cooperatives, that, provide savings and credit to their
members; and

“(b) Other financial services subject t o

.regulation
. by the BSP.

“The articles of cooperation and bylaws of any

financial service cooperative, or any amendment
thereto, shall be registered with the Authority only
if accompanied-by a certificate of authority issued
by, the BSP, under its official seal.

“The authority granted under this provision

may be revoked by the BSP if any of the grounds
for receivership mentioned under Section 30 of
Republic Act No. 7653 and Sections 53 and 56 of
Republic Act No. 8791 is present or if the financial
service cooperative has willfdly violated this Code
or any of the related rules and regulations.
78
“The BSP shall issue a cease and desist order
to cooperatives exercising the functions of a financial
service cooperative without authority &om the BSP.

“The BSP may charge equitable rates or fees,

as may be prescribed by the Monetary Board for
licensing, examination and other services- which it
renders under this Code.

“Upon the favorable certification of the BSP

a n d t h e prior approval of t h e , A u t h o r i t y , a
cooperative, the main purpose of which is to perform
savings and credit functions, ,may convert t o
financial service cooperative subject to the required
qualifications and procedures provided under ‘this
Code and in the implementing rules &d regulations.

“ART. 120. Membership and Affiliation. A -

financial service cooperative shall have tvo (2) types
of members:
“(1)Regular members, who a r e naturril
persons; and

“ ( 2 ) Associate members,, who a r e natural

persons but who do not immediately quahfy under
the requirements for membership set out in the
bylaws of the cooperative. All assodate members
who are natural persons shall be given two. (2) yejrs
to become regular members. Failure t o convert
within %aidperiod shall mean automatic, withdrawal
of their associate membership. They may, however,
re-apply as regular members after two (2) years.

“Minors who are dependents of r e g u l m

members can qualify as associate members. When
they reach the age of majority a s d within two (2)
years from acceptaim of their associate membership,
they have the option to convert into regular
members: As associate members, they may open
accounts, deposit funds and withdraw from their
account, subject t o the bylaws and rules of the
cooperative, and the rules and regulations of the
 79

Authority, notwithstanding the provisions of existing

laws to the contrary.

“ART. 121. Regulation and Supervision. - The

Authority shall exercise lead regulatory powers and
supervision over the operations of the financial
service cooperatives, to wit:

“(1) Issue rules and regulations for the safe

and sound conduct of operations of Gnancial service
cooperatives;

“ ( 2 ) Establish standards of operation for

uniform application t o all financial service
cooperatives;

.“(3) Prescribe ratios, ceilings, limitations, or

other forms of regulation on the different types of
accounts and practices of financial service
cooperatives, which shall, conform to internationally
accepted standards;

“(4) Investigate t o determine whether a

financial. service cooperative, is conducting its
business in a safe and sound manner;
I ,

“(5) Conduct regular examination of the books

of accounts, records and other documents of financial
service cooperatives;

“(6) Inquire into the solvency and liquidity of

a financial service cooperatives;

“(7) Prescribe appropriate fees for supervision

and examination of financial senice cooperatives to,
among others, monitor and oversee that existing
laws and regulations are complied with;

“(8) Pass upon and review the qualifications

and disqualifications of individuals elected or
appointed directors or officers and disqualify those
found unfit;
80

“(9) Disqualify, suspend or remove any director

or officer who commits or omits a n act which
render him unfit for the position;

“(10) Select, designate and deputize federations,

through an approved accreditation criteria, that will
supervise primary financial service cooperatives and
issue basic guidelines therefor;

“(11) Require the submission of relevant

reports from the deputized supervisor;

“(12) Provide remedial measures in the

operations of financial service coop’eratives that are
in a state of continuing inability or unwillingness
to maintain a period of liquidity a t the request of
the deputized supervisor or when the deputized
supervisor fails to perform its functions;

“(13) Accredit external auditors in accordance

with standards for audit and financial reporting in
cooperation with the PICPA; and

“(14) Appoint a conservator or a receiver as

may be necessary :subject to t h e rules a n d
regulations to be promulgated by the Authority in
coordination with t h e BSP, taking into consideration
the grounds, powers and procedures under Sections
29 and 30 of Republic Aqt No. 7653’as may be
deemed appropriate to financial service cooperatives.

“The Authority-shall include in its rules and ’

regulations, appropriate sanctions and penalties, on
the financial service cooperatives, its members,
officers and responsible persons, for any action that
fails t o adhere to sound and prudent management
practices or are inconsistent with the provisions of
this Code, other applicable laws on cooperatives,
rules, regulations, circulars or orders issued by the
Authority, and require the cooperative to undertake
corrective or remedial measures relative thereto.
 81

“The BSP is authorized t o conduct risk-based

s,upervision and examination of financial service
cooperatives as it may deem necessary.

“ART. 122. P r o m u l g a t i o n of R u l e s a n d
Regulations. - The BSP, in coordination with the
Authority, shall prescribe the appropriate prudential
rules and regulations applicable to the financial
service cooperatives.
“Subject to the regulations of the BSP, the
banking laws, rules and regulations shall have
suppletory application t o financial services
cooperatives: eouided, howeuer, That the provisions
on access to borrowings or financial assistance to
be extended by the BSP or the Philippine Deposit
Insurance Corporation (PDIC) shall not apply t o
financial service cooperatives: Prouided, further,
That the deposit liabilities of the financial service
cooperatives shall not be, insured by the PDIC.

“ART. 123. Financial Seruice Cooperative

Federations. - Financial service cooperatives may
organize themselves into kancial service cooperative
federations, and register their federation with the
Authority. These financial service cooperative
federations may be deputized by the. Authority as
the supervisor of their members, and they shall
have the following functions:

“(a) Develop standards and provide services

for the benefit of its affiliates and their members
in accordance with the rules and regulations of the
Authority;

“(b) Define common objectives and coordinate

activities for the financial service cooperative
federation;

“(e) Establish and administer funds such as

l i q u i d i t y , fund, ,loan fund, investment fund,
stabilization fund and such other funds;
a2

“(d) Establish a savings guarantee system for

the protection of their affiliates’ member-depositors
within three (3) years from the approval of this
Code:

“(e) Exercise on-site and off-site supervisory

power over its members;

“(0 Provide remedial assistance t o its

members concerning their operations a n d
management;

“(g) Act a s t h e liquidator and w h e n

applicable, sequester properties to satisfy an
obligation secured by a mortgage when authorized
by the Authority; and

“(h) Transmit relevant and required

information regarding t h e operations a n d
performance of member-cooperatives t o t h e
Authority.

‘The Authority and other governinent agencies,

government-owned or controlled corporations”and
government financial institutions shall provide
technical and such other assistance that may be
allowed by their charters t o financial service
cooperative federations ‘for the establishment and/or
strengthening of their respective cooperative savings
guarantee system. The technical assistance to be
provided shall include, among others, training
supervision and examination.

“ART. 124. Designation of Existing Unit at the

Cooperative Development Authority to Perform
Regulatory a n d , Supervisory Functions. - Within
six (6) months from the approval of this Code, the
Authority shall designate the unit to formulate and
implement the necessary regulations, rules, policies,
guidelines and standards applicable solely to
financial service cooperatives and deputized
federations in the performance of their savings, credit
 83
and,such, other related enhanced financial service
operations.

“The Department of Finance, the BSP and

other concerned government agencies shall provide
technical and training support for the effective and
efficient implementation of the regulatory and
supervisory functions and responsibilities of the
Authority.

“ART. 125. Prohibition. - The terms ‘credit

cooperative,’ ‘financial service cooperative’, and
‘hancial service cooperative federation’ shall be used
exclusively by those who are duly registered under
this. Code, and no person, group of persons, or
organizations shall use the said terms ,unless duly
registered with the Authority. Violations of this
prohibition shall he punishable in accordance with
Article 140 of this Code.”

SEC. 18. A new Chapter on Electric Cooperatives shall

be inserted and shall read, as follows:

CHAPTER XVII
ELECTRICCOOPERATIVES

“ART., 126. Couerage. - The provisions of this

Code shall apply~tod,eledric cooperatives registered
with the Authority. This shall ‘also cover new
distribution utilities that will register with the
Authority.

“Electric cooperatives may undertake power

generation utilizing renewable energy sources,
including hybrid systems, acquisition and operation
of subtransmission or distribution as its primary
purposes.

“ART. 127. Registration, o f Electric

Cooperatiues. - The registration of a n electric
cooperative with the Authority under this Code shall
be submitted for approval to the members through
84

a referendum, called for the purpose as provided for

under Articles 128 and 129 of this Code.

“ART. 128. Voting Requirement for

Registration. - In compliance with the referendum
as a voting procedure, the required number of votes
’
for registration with the Authority shall be twenty
percent (20%) of all members in good standing.

“ART. 129. Documents to be Submitted for

Registration with the Authority. - For purposes of
registration, electric cooperatives shall submit the
following documents:

“(a) Copy of the board resolution wrtlfying tc

t h e r e s u l t of t h e vote approved through a
referendum ap’proving the registration of the
cooperative with the Authority in compliance with
Article 128;

“(h) Certified copy of . t h e articles of

incorporatiodcooperation and bylaws as required by
the Authority;

“(c) Duly audited financial statements for the

past two (2) years;

“(d) List of names of incumbent board of

directors and their ?addresses certified’by the board
secretary and attested t o by the chairperson;

“(e) Within six (6) months from t h e

registration, the treasurer shall submit a sworn
statement of ‘the, authorized share capital, the
subscribed share capital of ntembers, and ‘th’e
amount of pajd-up share capital of meinbers and the
amount of paid-up share capital received’by the
treasurer; and

“(0 Bonds of accountable officers.

“ART. 130. Registration Options of Electrjc
Cooperatives. - Electric cooperatives registered with
 85
the National Electrification Administration (NEA)
under Presidential Decree No. 269, as amended,
which opt not to register with the -Authority are
allowed to retain the word ‘cooperative’ in their
registered names: Prouided, That they shall not be
entitled to the benefits and privileges under this
Code.
“ART. 131. Role of the Energy. Regulatory
Commission. - All rates and tariffs of electric
cooperatives registered under the Authority shall be
subject to the rules on application and approval of
and by the Energy Regulatory Commission for
distribution utilities.

“ART. 132. Effects of Registration with the

Authority. - (1) Up.on the effectivity of this,Code,
electric cooperatives that are duly registered with the
Authority, and issued a certificate of ;registration,
shall no longer be covered by Presidential Decree No.
269, a s amended by Presidential Decree No. 1645:
Provided, That electric cooperatives registered with
the Authority shall now be covered by the provisions
of this Code as well as future rules and issuances
of the Authority: Prouided, howeuer, That the
security of tenure and the collective bargaining
agreement between the cooperative management and
its employees shall be respected, with no diminution
of their existing salaries, emoluments, ranks and
other benefits;

:‘(2) The electric cooperatives registered with

the Authority with existing loans obtained from the
NEA after June 26, 2001 shall continue t o observe
the terms o f such loans until full payment or
settlement thereof;

“(3) Except as provided in the immediately

preceding paragraph, the NEA shall no longer
exercise regulatory or supervisory powers on electric
cooperatives duly registered with the Authority;
86
“(4) Electric cooperatives registered with the
Authority are entitled to congressional allocations,
grants, -subsidies and other financial assistance for
rural electrification which can be coursed through
the Department of Energy, the Authority and/or
local government units. The electric^ cooperatives
registered under this Code can avail of the financial
services and technical assistance provided by the
government financial institutions and technical
development agencies on terms respecting their
independence as autonomous cooperatives;

“(5) All condoned loans, subsidies, grants and

other assistance shall form part of the donated
capital and funds of the electric cooperatives and as
such; it shall not be sold, traded nor be divided into
shareholdings a t any time: these donated capitall
fund shall be valuated for the sole purpose of
determining the equity participation of the membere:
Provided, That in the case of dissolution of the
cooperative, said donated capital shall be subject to
escheat; and

“(6) Electric cooperatives registered and

con6rmed with the Authority under Republic Act No.
6938 and Republic Act No. 6939 are hereby deemed
registered under this Code.

“ART. 133. Share Capital in the Electric

Cooperatives. - The electric cooperative shall issue
and distribute share certificates under the name of
their members, taking, into consideration their
previous equity contributions, the amdrtization
component through the payments made, capital
build-up and other capital contributions.

“ART. 134. Cancellation of i?!egistration with

the Authority. - The cancellation of t h e registration
of an electric cooperative shall be granted by the
Authority as provided under Articles 64 to 70 of this
Code.
 87

“The Authority, i n consultation with the

concerned cooperative sector, shall issue appropriate
rules and regulations pertaining to the provisions of
this Chapter.”

SEC. 19. Articles 119, 120 and 121 of Chapter XVI on

Miscellaneous Provisions of the same Code are hereby amended
and shall now read, as follows:

CHAPTER XVIII
MISCELLANEOUSPROVISIONS

“ART. 135. Compliance With Other Laws. -

The Labor Code and all other labor laws, the
Social Security Act, the Medical Care Act, and all
other social legislations, and all other laws and
executive orders. shall apply to cooperatives duly
registered under this Code.

“ART. 136. .Register of Cooperatives. - The

Authority shall establish a register which shall
contain a chronological entry of the name of every
cooperative registered or dissolved uuder this Code
together with the basic information required for
registration or dissolution and any other information
considered useful. The Authority shall publish
annually a list of existing cooperatives, cooperatives
under dissolution and those whose registration are
cancelled during the year together with such
information on each of them as may be prescribed
in the rules and regulations.
“ART. 137. Settlement of Disputes,
Conciliation, a n d Mediation Proceedings. -
Disputes among members, officers, directors, and
committee members, and intra-cooperative, inter-
cooperative, intra-federation or inter-federation
disputes shall, as far as practicable, be settled
amicably in accordance with the conciliation or
mediation mechanisms embodied in the bylaws of
cooperatives and in such other applicable laws.
88

“The conciliation and mediation committee of

t h e cooperative shall facilitate the amicable
settlement of intra-cooperative disputes and disputes
among members, officers, directors, and committee
members.

“Should such conciliation or mediation

proceedings fail, the matter s h d be settled through
voluntary arbitration: Provided, howeuer, That
before any party can validly file a complaipt with
the Authority for voluntary arbitration, it must first
secure a certification from its conciliation and
mediation committee and from the cooperative union
or federation to which it belongs that despite all
efforts to settle the issues, the same have failed.

“The jurisdiction of the voluntary arbitrators

shall be exclusive and original and their decisions
shall be appealable to the Office ‘of the President.
The Authority shall issue and adopt the proper rules
of procedure governing arbitration as the primary
and exclusive mode fol dispute resolution i n
accordance with the Alternative Dispute Resolution
Act of 2004.

“For this purpose, the Authority shall

constitute a list of quaWied voluntary ar5itrators.”

SEC. 20. A new article is inserted in Chapter XVIII on

the Miscellaneous Provisions of the same Code and shall read,
as follows:

“ART. 138. Joint Congressional Ouersight

Committee on Cooperatiues (JCOCC). - There is
hereby created a Joint Congressional Oversight
Committee composed of the Chairman of the Senate
Committee on Cooperatives and the Chairman of’the
House Committee on Cooperatives Developme’nt,
with four (4)members each from both Houses. The
said members shall be duly appointed by the Senate
President a n d t h e Speaker of t h e House of
Representatives €-om the members of the respective
committees based on the proportional representation
of the parties or coalition therein.
 89

“The Joint Oversight Committee shall review

and approve the implementing rules and regulations
of this Code and monitor its proper implementation.

“The annual appropriation for the oversight

committee shall be charged t o the budget of both
Houses of Congress in the General Appropriations
Act (GAA).”

SEC. 21. Article 122 is hereby deleted. Articles 123,

124, 125; 126,, 127, 128, 129 and 130 of Chapter XVII on Final
Provisions of this Code are amended t o read, as follows:

CHAPTER XIX
FINALPROVISIONS
“ART. 139. Implementing R d e s and
Regulations. - The Authority shall issue rules and
regulations to implement those provisions of this
Code which expressly call for the issuance thereof.
Thisparagraph shall not apply to those cases
wherein a specific provision of this Code expressly
designates particular government agencies which
shall issue the regulations called f o r by any
provision of this Code.

‘%ART.140. Penal Prouisions. - 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, unless duly
registered as a cooperative under this Code except
as provided for under Article 130 hereof. In case of
violation, 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 of not less than two (2)
years nor more than five (5) years and a fine not
exceeding Twenty thousand pesos (P20,OOO.OO) or
both at the discretion of the court;
90
“The Authority may motu proprio, initiate
complaints for violations of this provision.

“(2) Any person who willfully attempts in any

manner to evade or defeat tax in violation of the
provisions of Articles 60 and 61 of this Code shall,
in addition to other penalties provided by law, upon
conviction thereof, be punished by a h e of not less
than Thirty thousand pesos (€‘30,000.00) but not
more than One hundred thousand pesos
(F‘lO0,OOO.OO) and suffer imprisonment of not less
than two (2) years but not more than four (4)years:
Provided, That the conviction or acquittal obtained
under this article shall not be a bar to the filing
of a civil suit for the collection of taxes;

“(3) Direct or indirect violation or

circumvention of the provisions of Articles 60 and
61 of this Code committed by any public official or
employee of any bureau, office or agency of the
government that deprives, diminishes or in any
manner hinders , o r restricts any duly registered
cooperative from the full enjoyment of the exemption
from the payment ‘of the taxes, few and charges
enumerated therein, shall upon conviction, 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,OOO.OO) or both a t the discretion of the court
and shall further be disqualified t o hold any other
office;

“(4) Direct o r indirect interference o r

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;
 91

“(b) Requiring prior clearance for any policy

or decision within the cooperative;
“(e) 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 mdependence of cooperatives.

“(5) A director, officer or cornmime memher who

viohted the provisions of Article 45 on the Liability of
Directors, Officers and Committee Memhers, Article
48 on the Disloyalty of a Director, and Article 49 on
the Illegal Use of Confidential Information shall upon
conv;ction s d e r a h e of not less than Five thousand
pesos (P5,000.00) nor more than Five hundred thousand
pesos (P500,OOO.OO) or imprisonment of not less than
five (5) years but not more than ten (10) years or both
.at the court’s discretion;
“(6) The following are considered offenses
p-ble by a penalty of imprisonment of.not less than
one (1) year nor more than five (5) years or a h e of
not mare than F&y thousand pesos (P50,000.00) or both
at the discretion of the court:

“(a) Omission or refusal to furnish any

information, report or other document that is
required under this Code;

“(b) Providing information, reports or other

documents to the Authority that are required under
this Code which the person knows to be false or
misleading;

“(e) Omission or refusal to keep a book or

register required under this Code or to make the
required entry therein;
92

“(d) Making an entry required under this

Code in a book or register, which the person knows
to be false or misleading;

“(e) Hindering an authorized person from

making a n inspection, audit, examination or
investigation required under this Code;

“(0 Failure t o comply with a n order or

written instructions issued o r given by t h e
Authority;

“(g) Violation of the provisions regarding

transactions with a restricted party; and

“(h)Abetting, counseling, allowing, authorizing

or commanding another person to commit an offense
punishable by this Code: Prodded, That in case the
violator is a cooperative or juridical person, the
penalty shall be imposed on its directors and
officers.

“(7) 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.

“The cooperative or any of its members can

file a case against any officer or employee of the
Bureau of Internal Revenue or of any other
government agency with the Ombudsman, Civil
Service Commission, other appropriate government
agency or the courts of law.

“In case of violation of any provisioh of this

Code, the individual or individuals, and in the case
of organizations or government agencies, its officers,
and directors shall, upon conviction by a Court, each
suffer a penalty of not less than two (2) years but
not more than five (5) years imprisonment or a fine
 93

in the amount of not less than Twenty thousand

pesos (PZO,OOO.OO),or both a t the discretion of the
court. In the case of a public official or employee,
the offender shall upon conviction, suffer the
accessory penalty of temporary absolute
disqualification.

“ART. 141. Printing and Distribution. - (1)

The National Printing Office shall publish this Code
in the Official Gazette in f d 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 cooperatives and their

federations, unions and associations, and cooperative
corporations shall be given one (1) copy each at cost.
Thereafter, every newly registered cooperative shall
be issued a t cost a copy of this Code and the
regulations promulgated thereon together with its
certificate of registration.

“ART. 142. Interpretation and Construction.

- In case of doubt as t o 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.

“ART. 143. Repealing Clause. - Except as

expressly provided by this Code, Presidential Decree
No. 175 and all other laws, or p a r t s thereof,
inconsistent with any provision of this Code shall
be deemed repealed: Prouided, That the provisions
of Sections 3, 5, and 7 of Presidential Decree No.
1645, Executive Order No. 623, series of 2007,
Revenue Regulation No. 20-2001, and all laws,
decrees, executive orders, implementing rules and
regulations, BIR circulars, memorandum orders,
letters of instruction, local government ordinances,
94

o r parts thereof inconsistent w i t h any of the

provisions of this Act are hereby repealed, amended
or modified accordingly.
“ART. 144. Transitory Prouisions. - (1) All
cooperatives registered and confirmed with the
Authority under Republic Act No. 6938 and Republic
Act No. 6939, are hereby deemed registered under
this Code, and a new certificate of registration shall
be issued by the Authority: Provided, That such
cooperatives shall submit to the nearest office of
t h e Authority a copy of their certificate of
registration or c e a c a t e of conhmation, the articles
of cooperation, their bylaws, and their late@ audited
financial statements within one (1) year from the
effectivity of this Code, otherwise they shall be
deemed cancelled motu proprio.

“(2) Following the issuance of t h e new

certificate of registration, the registered cooperatives
shall secure their certificate of tax exemption from
the nearest office of the Bureau of Internal Revenue
(BIR): Provided, That such exemptions shall be
valid for a period of five (5) years from the date of
issue: Provided, f u r t h e r , T h a t all unpaid
assessments of previously registered cooperatives
shall be the subject of comprgmise settlement on
terms favorable to such cooperatives; and: Prouided,
finally, That the BIR and the Authority shall jointly
issue the necessary regulations on this exemption
and compromise within ninety (90) days from the
effectivity of this Code.

“(3) Registration of electric cooperatives with

the Authority shall not be considered as a transfer
of ownership of its assets and liabilities nor shall
it constitute a change in the nature, structure, and
status of the cooperative. Said registration shall not
result in the revocation of the condoned loans under
Republic Act No. 9136, otherwise known as the
Electric Power Industry Reform Act: Provided, That
electric cooperatives with existing loans shall not be
subject to the control and supervision of its creditors
 95

and shall only be limited to the fulfillment of its

civil obligations.

“ART. 145. Separability Clause. - Should any

part of this Code be declared unconstitutional, the
validity of the remaining provisions hereof shall
remain in full force and effeot.

“ART. 146. Effectiuity Clause. - This Code

shall take effect fifteen (15) days *om its publication
in a newspaper of general circulai.ion.”

Apprrnied,

PR
of the House
of Representatives

This Act whichis a consolidation of Senate BilINo. 2264 and

House Bill No. 4312 was finally passed by the Senate andthe
House of Representatives on December 16,2008.

Secretary General Secretary of the Senalr.

House of Representatives