The Philippine Cooperative Code of 2008 (Republic Act No.

9520)
Salient Features

Legal Basis

1986/1987 Philippine Constitution RA 6938/6939 RA 9520 IRRs Articles and By-Laws

1986 Constitution
Sec 1, paragraph 3, second sentence of Article XII provides that private enterprises, including corporations, cooperatives, and similar collective organizations shall be encouraged to broaden their base of ownership. Sec 6, second sentence of the same article states that individual and private groups including corporations, cooperatives, and similar collective organizations shall have the right to own, establish, and operate economic enterprises, subject to the duty of the state to promote distributive justice and to intervene when the common good so demands.

1986 Constitution
Sec 15 of the article directs that the Congress shall create an agency to promote the viability and growth of cooperatives as instruments for social justice and economic development. Sec 5 of Article XIII holds that the state shall recognize the right of farmers, farm workers, and landowners, as well as cooperatives, and other independent farmers organizations to participate in the planning, organization, and management of the program, and shall provide support to agriculture through appropriate technology and research, and adequate financial, production, marketing, and other support services.

1987 Constitution

Sec. 23, Article II provides that the state shall encourage nongovernment, communitybased or sectoral organizations that promote the general welfare of the nation.

The Republic Act No. 6938

The Cooperative Code of the Philippines Enacted into law on March 10, 1990

The Republic Act No. 6939

Creation of the Cooperative Development Authority (CDA) Regulatory Developmental Quasi-Judicial

RA 9520 Backgrounder
Amended the Coop Code (ra6938) promulgated in 1990; Discussed in four (4) Congresses (starting the 11th Congress up to the 14th) spanning over ten (10) years; Approved by the Bicameral Committee on November 18,2008; Signed into law last February 17,2009

The Republic Act No. 9520

The Philippine Cooperative Code of 2008 (Article1) Signed on February 17, 2009 Published on March 7, 2009 Effective March 22, 2009

State Policy

(Article 2)

Foster creation and growth of cooperatives as a practical vehicle for selfreliance and harnessing people power for the attainment of economic development and social justice Encourage private sector to undertake actual formation and organization; Create an atmosphere conducive to the growth and development of cooperatives

State Policy
Ensure technical guidance, financial assistance and other services Recognizes the principle of subsidiarity wherein the sector will initiate the promotion and organization, training and research, audit and support services with government assistance where necessary

Cooperatives defined

(Article 3)

An autonomous and duly registered association of persons, with a common bond of interest, who have voluntarily joined together to achieve their social, economic and cultural needs and aspirations by making equitable contributions to the capital required, patronizing their products and services, and accepting a fair share of the risks and benefits of the undertaking in accordance with universally accepted cooperative principles.

Cooperative Principles

(Article 4)

Patterned after the Principles as formulated by the International Cooperative Alliance (ICA)
Voluntary and Open Membership Democratic Member Control Member Economic Participation Autonomy and Independence Education, Training and Information Cooperation Among Cooperatives Concern for Community

Additional Definitions

(Article 5)

Representative assembly full membership elected by sectors, chapter or district to exercise powers delegated to them by the general assembly

Additional Definitions
Officers members of board of directors; different committees created by the GA; general manager or CEO; secretary; treasurer; and other positions as provided for in their by-laws

Additional Definitions
Social Audit 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 coops

Additional Definitions
Performance Audit refer to an audit on the efficiency and effectiveness of the cooperative as a whole, its management and officers, and its various responsibility centers

Additional Definitions
Subsidiary cooperative any organization all or majority of whose membership comes from a cooperative, organized for any other purpose different from that of, and receives technical, managerial and financial assistance from, a cooperative

Purposes of Cooperatives

(Article 6)

Encourage thrift and savings mobilization; Generate funds and extend credit; Encourage systematic production and marketing; Provide goods and services and other requirements; Develop expertise and skills among members; Acquire land and provide housing benefits

Purposes of Cooperatives
Insure against losses of members; Establish, own, lease or operate cooperative banks, wholesale and retail complexes, insurance and agricultural/ industrial processing enterprises and public markets; Coordinate and facilitate activities of cooperatives; Advocate for the cause of the cooperative movement

Purposes of Cooperatives
Ensure viability of cooperatives through utilization of new technologies; Encourage and promote self-help or selfemployment as an engine for economic growth and poverty alleviation; and Undertake any and all activities for the efficient and effective implementation of the provisions.

Powers and Capacities

(Article 9)

Exclusive use of registered names, to sue and be sued; Of succession; To amend its articles; To adopt its bylaws not contrary to law, morals or public policy Deal with real and personal property Enter into division, merger or consolidation

Powers and Capacities

Form subsidiary cooperatives and join federations and unions; Avail of loans, credits, grants, donations from domestic and foreign sources; Avail of preferential rights under RA7160; Organize and operate schools in accordance with RA 9155

Requirements for Registration

(Articles 10,11,14,15,)

Pre-membership Education Seminar mandatory Newly organized primary may be registered as MPC after compliance with requirements set by CDA; SPC may transform into an MPC or create subsidiaries after two (2) years Economic Survey including staffing pattern which includes at least a bookkeeper Articles of Cooperation
At least 15 members Minimum Capitalization of PhP15,000; reviewed every 5 years

By-laws Bonds of accountable officers

Amendments

(Article 18)

Amendments need 2/3 vote of members with voting rights Merger, consolidation and division of cooperatives require 3/4 of all members with voting rights present and constituting a quorum

Types

(Article 23)

Credit promotes and undertakes savings and lending services to its members; Consumers to procure and distribute commodities to members and nonmembers; Producers undertakes joint production whether agricultural or industrial

Types
Marketing supply of production inputs and markets their products; Service engages in medical and dental care, hospitalization, transportation, insurance, housing, labor, electric light and power, communication, professional and other services; Multi-purpose combines 2 or more business activities

Additional Types of Cooperatives

Advocacy promotes and advocates cooperativism among its members and the public; Agrarian Reform organized by marginal farmers majority of whom are agrarian reform beneficiaries; Cooperative Bank providing a wide range of financial services to cooperatives and their members; Dairy production of fresh milk which may be processed and/or marketed as dairy products;

Additional Types
Education owning and operating licensed educational institutions; Electric undertaking power generation, acquisition and operation of subtransmission or distribution to its household members; Financial service engaging in savings and credit services and other financial services;

Additional Types
Fishermen marginalized fishermen where their products are marketed either as fresh or processed products; Health Services providing medical, dental and other health services; Housing assist or provide access to housing for members who participate in the savings program for housing;

Additional Types
Insurance business of insuring life and property of cooperatives and members
Transport services including land and sea transportation; Water Service own, operate and manage water systems for the provision and distribution of potable water to its members;

Additional Types

Workers organized by workers, including self-employed, to provide employment and business opportunities Other types as maybe determined by the Authority

Functions of a Coop Federation

( Article 24)

Functions should complement, augment or supplement but does not conflict , compete with, nor supplant the business or economic activities of its members.

Membership

(Chapter 3, Art.26)

Kinds of Membership 1. Regular member one who has complied with all the membership requirements and entitled to all rights and privileges of membership. 2. Associate member one who has no right to vote or be voted upon and shall be entitled only to such rights and privileges as the by laws may provide.

Membership
Legal age, Filipino citizens Capable and willing to perform the responsibilities of a member Allows associate members but needs to qualify for regular membership within (2) years All elective officials are ineligible to be officers or directors of cooperatives except party-list representatives

Eligibility of Government Officers and Employees (Article 27)

CDA Officers/employees are not eligible for election or appointment provided they organized the coop; All elective officials are ineligible to be officers or directors of cooperatives except party-list representatives

Liability of Members

(Article 29)

Liable for the debts of the cooperative to the extent of the contribution to the share capital of the cooperative

General Assembly

(Art. 32, 35, 36)

Shall be the highest policy making body of the cooperative 3/4 vote of members required to delegate some powers to a representative assembly Quorum is at least 25% of all members entitled to vote Voting in primary cooperatives is strictly one-member, one vote and no proxies allowed except for representative assembly

Board of Directors
39)

(Articles 37,38,

Responsible for strategic planning, direction, setting and policy formulation Term shall be fixed in the coop bylaws. A term is 2 years Prohibition against holding any other position involved in the day-to-day operations and management Disqualification of persons engaged in business similar to the cooperative

Committees and Officers

(Art.43)

Additional committees Mediation and Conciliation Ethics The members of both the Audit and the Election Committee shall be elected by the GA and the rest shall be appointed by the Board of Directors.

Typical Structure of a Coop

General Assembly

Audit Committee Secretary

Board of Directors

Election Committee Treasurer

Ethics Committee

Mediation Committee

Education Committee

Other Committee

General Manager & Management Staff

Functions, Responsibilities and Training Requirements (Article 44)

The functions and responsibilities of the directors, officers and committee members, AS WELL AS THEIR TRAINING REQUIREMENTS, shall be IN ACCORDANCE WITH THE RULES AND REGULATIONS ISSUED BY THE AUTHORITY.

Compensation

(Art. 46)

In the absence of any provision in the by-laws, directors shall not receive any compensation except for per diems. If cooperative reports a net loss for the preceding year, officers are not entitled to per diems

Removal

(Art. 50)

An elective officer may be removed by 3/4 votes of the regular members present and constituting a quorum.

Responsibilities of Cooperatives
(Art. 52)

Accountant or bookkeeper is responsible for maintenance and safekeeping of books of accounts Audit committee responsible for continuous and periodic review of books of accounts; monitor adequacy and effectiveness of managements control system and audit the performance of the cooperative

Responsibilities of Cooperatives
Audited financial statements required to be posted in principal office For MPC, separation of book of accounts for each business activity Settlement of disputes at their own level

Annual Reports

(Article 53)

Filed within 120 days from close of calendar year Regular activities including socio-civic undertakings and list of trainings completed/attended by officers Must show their progress and achievements The form and contents of the report shall be prescribed by the rules of the Authority Liability for non-submission is fines and other penalties imposable until the cooperative has complied with the requirements

Tax Treatment of Cooperatives

(Article 60, 61)

Not subject to taxes and fees imposed under NIRC and other tax laws for cooperatives transacting business with members only Transactions with members are not subject to taxes and fees, including final tax on members deposits and documentary tax

Tax Exemptions
Non-members will pay VAT; coop will collect and remit to BIR Provided, finally that at least 25% of net surplus of coop is returned to members as interest and patronage refund Cooperative is responsible for collection and remittance of individual withholding taxes (proper recording)

Additional Privileges
Faculty cooperatives have right of first refusal in management of canteen and other services related to the operations of educational institutions Housing agencies and financial institutions shall create a window for financing housing projects

Capital

(Chapter VIII)

Subsidies, donations, legacies, grants, and aids shall not be divided into individual share capital holdings anytime but subject to escheat proceedings upon dissolution Limitation on share capital held by one member reduced from 20% to 10% Imposition of fines and penalties for unpaid subscription

Capital
Reasonable and realistic member capital build-up program Par value should not be more than Php1,000.00 Members have the right to withdraw after giving due notice to coops. Provided that the assets would be more than its debt and liabilities if such withdrawal would be made

Audit

(Chapter IX)

Financial audit conducted by external auditor in good standing with PICPA and accredited by Board of Accountancy and CDA Social and performance audits may be conducted by an independent social auditor accredited by CDA

Social Auditing
Based on the 7th Cooperative Principle Concern for Community Defined as the systematic review and appraisal of the cooperative in relation to the development of its most essential building blocks-its members, its people, and its distinctive contribution to the development of its community and society as a whole.

Distribution of Net Surplus

(Chapter x)

At least10% of net surplus; however, in first 5 years after registration, this is not less than 50% of the net surplus Not for than 10% for CETF; half to be used by the cooperative; other half is remitted to the federation/union chosen by the cooperative Federation/ union should submit: (a) list of contributing cooperatives; business consultancy assistance with nature and cost; and (c) training activities specifying the nature, participants, and cost

Distribution of Net Surplus

Not less than 3% for community development fund for projects/activities for the benefit of the community where the cooperative operates Not more than 7% for optional fund, land and building, and other funds

Other Provisions
Additional Special Provisions
Transportation Cooperatives Electric Cooperatives Cooperative Banks Credit Cooperatives Financial Service Cooperatives Housing Cooperatives

Conciliation and Mediation Committee (ADR) Additional Penal Provisions CDA allowed to formulate rules on the Cooperative Code on certain provisions

Other Provisions
Congressional Oversight Committee to review and approve the implementing rules and regulations Re-registration of all cooperatives to confirm their status by submitting: (a) Certificate of Registration/Confirmation; (b) articles of cooperation; (c) bylaws; and (d) latest audited financial statement Must secure tax exemption certificate from BIR

Stephen Covey

Interdependent people combine their own efforts with the efforts of others to achieve their greatest success

MARAMING SALAMAT PO GOD BLESS

MA. VERONICA P. CHONGCO Head -Valenzuela Cooperative Development Office