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