Question & AnswerQ&A (Act No. 2508.)
The associations formed under Act No. 2508 are officially known as "Agricultural Credit Cooperative Associations." Each association must adopt and affix a specific denomination consisting of the names of the municipality and province where it is organized.
The purpose is to accumulate funds through cooperation to extend credit on reasonable terms exclusively for agricultural operations and to encourage thrift, activity, and punctuality in meeting obligations among members.
Not more than one association can be organized within the limits of a municipality.
They may extend credit for securing land titles, purchasing agricultural land, buying livestock, fertilizers, seeds, and machinery exclusively for agriculture, redeeming encumbrances on agricultural lands, cultivation and improvement, expenses related to crops, loans upon gathered products up to 50% of market value, and construction or maintenance of irrigation or drainage works.
Credit operations require a promissory note or other document signed by the borrower and accompanied by either personal security (a bond signed by two or more persons of recognized solvency) or pignorative security (pledging stock, crops, machinery, livestock, or mortgage on real estate).
No director shall vote on loans requested by himself or any member of his family up to the third degree, nor on loans requested by persons owing him or any family member. Directors also cannot become bondsmen, sureties, or endorsers of loans contracted with the association.
The rate of interest on loans shall not exceed 10% per annum and shall be fixed annually according to the by-laws.
If a borrower is three months in arrears in payment of dues or interest on any loan, the board of directors may declare the entire loan due and payable.
Associations may receive deposits payable on notice and time deposits, with the total deposits not exceeding the paid-up capital stock. Deposits are guaranteed by the association's assets, and depositors may be required to give notice up to 30 days before withdrawal.
Any officer or director making or authorizing loans or investments from depositors' funds in violation of the law can be punished by imprisonment of up to one year or a fine not exceeding one thousand pesos.
No person may hold shares exceeding five hundred pesos in value. Shares must be paid in full upon issuance and registered; transfer, mortgage, or pledge requires board consent.
The Executive Secretary acts as legal adviser, revises and approves by-laws, issues orders and rules regarding operations, and conducts audits and examinations at least every six months. He may order remedies or removal of directors for violations.
Associations may be dissolved upon expiration of their period, by a two-thirds vote of stockholders, by court order for fraud or injury, or bankruptcy. Liquidation is made by the board or appointed liquidators within one year.
They are exempt from registration fees, internal revenue taxes, court fees, certain registration fees for mortgages, taxes on deposits or loans, and enjoy preference in claim collection; they can deposit cash with treasurers without charge and loan or deposit with postal savings banks at individual rates.
Annually, the board must prepare a balance sheet, determine profits and losses, and declare dividends based on net profits, less losses and bad debts.