Law on Cooperatives Flashcards
What is a Cooperative
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
What are the Cooperative Principle (VEDAPECC)
- Voluntary and Open Membership
- Democrative Member Control
- Member Economic Participation
- Autonomy and Independence
- Education, Training and Information
- Cooperation among Cooperatives
- Concern for Community
Cooperative Principles: Voluntary and Open Membership
Cooperatives are open to all personas able to use their service and willing to accept the responsibilities of the membership without gender social racial cultural political or religious discrimination.
Cooperative Principles: Democrative Member Control
Democratic organizations that are controlled by their members who actively participate in setting their policies and making decisions
Cooperative Principles: Democrative Member Control
Democratic organizations that are controlled by their members who actively participate in setting their policies and making decisions
Cooperative Principles: Member Economic Participation
Members contribute equitably to and democratically control the capital of their cooperatives.
Cooperative Principles: Autonomy and Independence
Cooperatives are autonomous, self- help organization and controlled by their members
Cooperative Principles: Education Training and Information
Cooperatives shall provide education and training for their members, elected and appointed representatives, managers and employees so they can contribute effectively and efficiently to the development of the cooperatives
Cooperative Principles: Cooperation among Cooperatives
Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structure
Cooperative Principles: Concern for Community
Work for the substantial development of their communities through policies approved by their members
Characterisitics of Cooperations
- Limited Liability
- Separate Personality from its members
- Term for a period not exceeding 50 years from the date of registration
Requirements for Registration
- Articles of Cooperation
- A sworn statement of the treasurer elected by the subscribers
- By-laws
- Bonds of the accountable officers
- General statement describing the structure
- Economic Survey
Contents of the Articles of Cooperation
- Name of the Cooperative
- Purpose and scope of business for which the cooperative shall be registered
- Term of existence
- Area of operation and postal addresses of principal office
- Names, nationality, and postal address of the registrants
- Common bond of membership
- List of directors
- Amount of its share capital, names and residences of its contributors
- A statement whether the cooperative is primary, secondary, or tertiary
Economic Survey
A general statement describing amount other the structure and purposes of the proposed cooperative, also indicating the following
1. Area of Operationm
2. Size of membership
3. Other pertinent data in a format provided by the CDA
Organizing a Primary Cooperative
15 or more natural persons who are
1. Filipino Citizen
2. Legal Age
3. Having a common bond of interest; and
4. Residing or working in the intended area of operation
Minimum Subscription and Paid-up capital requirement for a cooperative
25% of the Authorized capital must be subscribed and at least 25% of the subscribed capital must be paid up but has a minimum requirement of 15,000 for primary cooperatives
Conversion to Multipurpose Cooperative
After at least 2 years of operations, a primary cooperatives may transform into a multipurpose cooperatives or may create subsidiaries. Must have a minimum paid-up capital of 100,000 or as required in the feasibility study, whichever is higher
Approval of Applications for Registration
All applications shall be finally disposed of by the Authority within a period of sixty days from the filing, otherwise the application is deemed approved
Appeal in Case of Denial
In case of denial of the application for registration an appeal can be made to the Office of the President within 90 days from receipt of such denial
Rules on Cooperative Name
- Required to have either Cooperative, Kooperatiba or Cooperativa
- Discouraged: Development and Intergrated
- Not Allowed:
a. Identical Cooperative Names
b. Use of Incorporated, Corporation, Company, Incorporation, Partnership
c. Use of Federation and Union except if it is part of the registered name of the association or institution where the members of the proposed cooperative comes from
d. Written in all capital letters except if it is an acronym, it shall be written after the full name of the cooperative
Requirements for a Secondary Cooperatives: Minimum number of members and minimum paid up share
Federation- 10 primary cooperatives & 500,000
Union- 15 Primary Cooperatives & Not Applicable
Requirements for Tertiary Cooperatives: Minimum members and minimum paid-up captial
Federation- 10 secondary Cooperatives & 5,000,000 or feasibility study requirements whichever is higher
Union- 15 Secondary Cooperatives & Not Applicable
Registration Fee
1% of the authorized share capital or the amount prescribed in the CDA schedule of fees whichever is highert
Division of Cooperatives
Any registered cooperatives may bey a resolution approved by a vote of 3/4 of all the members with voting rights, present and constitute a quorum, resolve to divide itself into 2 or more cooperatives
Advocacy Cooperative
Primary Cooperative which promotes and advocates cooperativism among its members and the public through socially oriented projects, education and training, research and communication and other similar activities to reach out to its intended beneficiaries
Dairy Cooperatives
Members are engaged in the production of fresh milk which mayh be processed and or marketed as dairy products
Fishermen Cooperatives
Organized by marginalized fishermen in localities whose products are marked either as fresh or processed products
Multipurpose Cooperatives
One which combines two or more of the business activities of these different types of cooperatives
Workers Cooperatives
Provide employment and business opportunities to its members and manage it in accordance with cooperative principle
Agriculture Cooperatives
Raising/ Culture of plants, animals, fungi, and other living organism for productive and economic purpose
Agrarian Reform
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
Consumers Cooperatives
Procure and distribute commodities to members and non-members
Marketing Cooperative
Supply of production inputs to members and markets their product
Producers Cooperative
Undertake the production and processing of raw materials or goods produced by its members into finished or processed products
Cooperative Bank
Wide Range of Financial Services to Cooperatives and their members
Credit Cooperative
Savings and Lending Services to its members
Financial Service Cooperative
Savings, credit and other financial services to no one specified in definition
Union
Cooperative the members of which are registered cooperatives and or federations organized purposely to represent the interest and welfare of all types of cooperatives at the provincial, city, regional, and national levels
Federation
Cooperative the members of which are primary cooperatives doing the same line of business
Function of a Federation
Carry on any cooperative enterprise authorized under Article 6 that complements augments or supplements but does not conflict with the business of its members
2. Carry on educational and advisory work relating to its member cooperatives
3. To render services designed to encourage simplicity, efficiency and economy in the conduct of the business of its member cooperatives
4. To publish any newspaper in the interest of its member cooperatives
5. Coordinate and facilitate the activities of its members
6. Enter into joint ventures with other cooperatives
7. To perform other necessary functions
Laboratory Cooperatives
A cooperative organized by minors who shall be affiliated with a registered cooperatives
Purpose of Laboratory Cooperatives
- Serve as a training ground for its members to prepare them for membership in regular cooperatives
- To teach the values of thrift and saving mobilization among its members
- Instill cooperative values, principles, financial discipline, business skills, and leadership skills among members
- Promote and advocate Filipino social and cultural values
Rules Applicable to Laboratory Cooperative
- Certificate of Registration issued to laboratory cooperative will not give juridical personality
- Dissolution of Guardian Cooperative shall result in the revocation of Certificate of Registration
- Guardian Cooperative shall be liable for any violation committed in the operation of laboratory cooperative
- Any member who reaches age of majority has the option to join the guardian cooperative
- A guardian Cooperative may supervise multiple laboratory Cooperatives
Regular Member vs Associate Member
Regular- One who has complied with all requirements and entitled to rights and privileges of membership
Associate- Has no right to vote nor be voted upon and shall be entitled only to such rights and privileges as the bylaws may provide
Requisites of Regular Members
- Meets Minimum Requirements of regular membership
- Continues to patronize the cooperative for two years
- Signifies intention to be a member
Rules on Government Employees
- Any officer of the CDA shall be disqualified to be elected into any position in a cooperative
- All elective officials of the government shall be ineligble to become officers and directors of cooperatives
Rules on Government Employees
- Any officer of the CDA shall be disqualified to be elected into any position in a cooperative
- All elective officials of the government shall be ineligible to become officers and directors of cooperatives
- Any government employee in the discharge of his duties as a member in the cooperative be allowed by the end of office concerned to use official time for attendance of technical meetings
Termination of Membership
- Withdrawal for valid reason and giving a sixty day notice
- Valid grounds for termination: Death or Insanity (Primary) & Insolvency or Dissolution (Secondary or Tertiary)
- Majority vote of all the members of the board of directors
Procedure for Termination
- Notice in writing of intended termination
- Opportunity to be heard before BOD
- Decision of BOD in writing
- Appeal- 30 days
- 30 Days to decide; inaction results in gran of appeal
General Assembly
Full membership of the cooperative duly assembled for the purpose of exercising the rights and performing all the obligations pertaining to cooperatives and is considered the highest policy making body of the cooperative
Exclusive Powers that cannot be delegated
- Determine and approve amendments to the articles of cooperation and by laws
- To elect or appoint the members of the board of directors to remove them for cause
- Approve the developmental plans of the cooperative
Regular Meeting
Annual on a dated fixed in the by laws, if no date indicated, 90 days after the close of each fiscal year
Ways of calling Special Meeting
- Receipt in writing at least 10% of the total members
- The authority upon 10% of all the members
- For newly approved cooperatives, 90 days from approval
- Purpose of reporting to the members the result of any examination or other investigation
Quorum of Cooperative
25% of all members entitle to vote except:
1. Cooperative Banks 1/2 plus 1 (EXCEPT amend articles and by laws, 3/4)
2. Electric Cooperatives 5% of all members entitled to vote
Voting System
Primary Cooperative- 1 member, 1 vote
Secondary or Tertiary- one basic vote and as many incentive votes not exceeding 5
Composition of BOD
Not less than 5 but not more than 15 elected by the general assembly
Term of BOD
2 years maximum
Prohibitions for Directors
- Directors shall not hold any other position directly involved in the day to day operation and management of the cooperative
- 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
Prohibitions for Directors
- Directors shall not hold any other position directly involved in the day to day operation and management of the cooperative
- 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
Vacancy
Cause- Who will fill up
1. Expiration- General Assembly
2. Other Causes- BOD if they still constitute a quorum
Committees Required to be provided under by laws
- Audit
- Election
- Mediation and Conciliation
- Ethics
- Such other necessary committees
Committees whose members are elected by the GA
- Audit
- Election
Disloyalty of a Director
A directory acquires for himself an opportunity which should belong to the cooperative shall be liable for:
1. Damages
2. Must account for double the profits that would have been accrued to the cooperative
Use of Confidential Information by a director
- Liable to compensate the cooperative for the direct losses suffered by the cooperative as a result of illegal use of information; and
- Accountable to the cooperative for any direct benefit or advantage received or yet to be received by him as a result of the transaction
Tax Exemption of Cooperatives
- Registered Cooperatives who do not transact any business with non-members or general public shall not be subject to any taxes and fees imposed under tax laws
- Cooperatives who transacts with both members and non-members shall only be taxable on their transactions with non-members subject to following rules
a. Cooperatives with accumulated reserves and undivided net savings of not more than 10,000,000 shall be exempt from all taxes
b. Cooperatives with accumulated reserves and divided net savings of more than 10,000,000 shall be taxed at full rate except:
i. Income tax
ii. VAT
iii. All other Taxes
iv. 3% OPT - All cooperatives shall be exempt from payment of local taxes and taxes on transactions with banks and insurance companies
Other Exemptions of Cooperatives
- Notarial fees of loans not exceeding 500,000 pesos
- Registration fees
- Court filing fees for any action that will be initiated by the Cooperatives
- All cooperatives are exempt from putting up a bond for bringing an appeal
- Any security issued by cooperatives shall be exempt from registration requriement
Privileges of Cooperatives
- Can deposit cash boxes , documents, or any valuable papers in the safes of the municipal or city treasurer and other government free of charge
- Use of any available space in their agency
- Cooperatives rendering special types of services and facilities shall a secure a franchise and such cooperatives shall open their open their membership for all those qualified
- Cooperatives have preferential rights to supply government institutions
- Preferential treatment in allocation of fertilizers
- Preferential or equitable treatment in allocation of commercial shipping vessels
- Preferential rights in the management of public markets and or lease of public market facilities
- Cooperatives engaged in credit services shall be entitled to loan credit lines, rediscounting of their loan nots with the DBP, LBP and other financial institution except BSP
- PDIC shall provide technical assistance to national federations and unions of cooperatives which have engagement in saving and credit
Sources of Capital of Cooperatives
- Member’s share capital (cannot exceed 1000 in value
- Loans and borrowings including deposits
- Revolving capital
- Subsidies, donations, legacies, grants, aids, and such other assistance from any institution whether public or private
Limitation on Share Capital Holdings
- No member of the primary cooperative shall own or hold more than 10% of the share capital of the cooperative
- When a member cooperative dies, his heir shall be entitled to the shares of decedent, provided
a. total shareholdings does not exceed 10%
b. The heir qualifies and is admitted as a member of cooperative
c. if fails to qualify to be a member or exceed 10% the share in excess will revert to the cooperative as treasury upon payment to heir the value of such shares
Assignment of Interest
Cannot transfer his share or interest in cooperative or any part thereof unless.
1. Held share for not less than 1 year
2. Assignment is made to the cooperative or a member of the cooperative
3. BOD has approved such assignemtn
Share of Capital in Cooperative
Unit of capital in a primary cooperative the par value of which may be fixed to any figure not more than 1000 pesos
Share of Capital in Cooperative
Unit of capital in a primary cooperative the par value of which may be fixed to any figure not more than 1000 pesos
Revolving Capital
The GA may authorize the BOD to raise a revolving capital to strengthen its capital structure by:
1. Deferring payment of patronage refunds
2. The authorized deduction of a percentage from proceeds of products sold or services rendered or per unit of product or services handled
Social Audit
Procedure wherein the cooperative assesses its social impact and ethical performance vis-a 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
Performance AUDIT
Audit on the efficiency and effectiveness of the cooperative as a whole; its management and officers and its various responsibility centers as basis for improving individual team or overall performance.
Distribution of Net Surplus
- Reserve Fund
- Education and Training Fund
- Community Development Fund
- Optional Fund
- Remaining Surplus
Reserve Fund (Purpose and Amount)
Amount: Minimum 10% of the net surplus (not be less than 50% of net surplus after first 5 years)
Purpose:
1. Used for the stability of the cooperative and to meet the net losses in its operations
2. Not be utilized for investment other than those allowed in RA 9520
Education and Training Fund (Purpose and Amount)
Amount: Maximum 10% of Net Surplus
Purpose: Training and Development and similar other cooperative activities geared towards the growth of the cooperative movement
Community Development Fund (Purpose and Amount)
Amount: Minimum 3% of the Net Surplus
Purpose: Projects or activities that will benefit the community where the cooperative operates
Optional Fund (Purpose and Amount)
Amount: Maximum 7% of Net Surplus
Purpose: Land Building and other necessary fund
Remaining Surplus (Purpose and Amount)
Amount: Not exceed normal rate of return on investments and patronage fund
Purpose: Interest on Share Capital
Voluntary Dissolution where no creditors are affected
- Majority vote of the Board of Directors and 3/4 of members with voting rights
- Notice of meeting for 3 consecutive weeks in a published newspaper
- Notice is sent to each member
- A copy of the resolution shall be certified by the board
- CDA will issue certificate of dissolution
Voluntary Dissolution where creditors are affected
- Petition will be filed by CDA
- Petition is signed by:
a. majority of BOD
b. verified by chairperson
c. set forth all claims
d. 3/4 of all members with voting rights
3.CDA shall issue an order reciting the purpose of the petition - Published for 3 weeks in newspaper
- CDA shall hear the petition and try an issue raised in the objection filed
- Order of dissolution shall set forth
Dissolution by failure to organize and operate
- Has not commenced business and its operation within 2 years after the issuance of certificate of registration
- Has not carried business for two consecutive years
Liquidation
- Exist for three more years after dissolution
- Authorized to convey all of tis properties to trustees for the benefit of its members, creditors and other persons in interest
