Cooperative Code of the Philippines

Cooperative principles and governance standards

Section Article 4 requires every cooperative to conduct its affairs under Filipino culture and experience and universally accepted cooperative principles, including:
- Open and Voluntary Membership: membership is voluntary and available to all individuals regardless of social, political, racial, or religious background or beliefs.
- Democratic Control: affairs are administered by persons elected or appointed as agreed by members; primary cooperatives must use one-member-one-vote; secondary and tertiary cooperatives follow Article 37.
- Limited Interest in Capital: share capital receives a strictly limited rate of interest.
- Division of Net Surplus: net surplus belongs to members and is equitably distributed for cooperative development, common services, indivisible reserve fund, and limited interest on capital and/or patronage refund in the manner provided by the Code and bylaws.
- Cooperative Education: all cooperatives must provide education for members, officers, employees, and the general public based on cooperative principles.
- Cooperation Among Cooperatives: cooperatives must actively cooperate at local, national, and international levels to best serve members and communities.
Section Article 8 provides that any cooperative or any method/act that complies with the Code is not deemed a conspiracy or combination in restraint of trade, an illegal monopoly, an attempt to lessen competition, or a violation of laws on price-fixing.
Section Article 7 sets the primary objective of every cooperative: provide goods and services to members so they attain increased income and savings, investments, productivity, and purchasing power, and promote equitable distribution of net surplus through economies of scale, cost-sharing, and risk-sharing without operating for eleemosynary or charitable purposes.
Section Article 7 further requires cooperatives to maximize economic benefits to members, teach efficient cooperative methods, propagate cooperative practices and new business/management ideas, and help lower-income groups increase ownership in national wealth.

Definitions and who can be involved

Section Article 5 defines Member, General Assembly, Board of Directors, Committee, Articles of Cooperation, Bylaws, Registration, Cooperative Development Authority, and Universally Accepted Principles.
Section Article 26 provides that any natural person who is a citizen of the Philippines, a cooperative, or a nonprofit organization with juridical personality is eligible for membership if the applicant meets qualifications in the bylaws.
Section Article 26 limits primary cooperative membership: only natural persons may be admitted as members of a primary cooperative.
Section Article 27 provides that a cooperative may have regular members and associate members:
- regular members have all membership rights and privileges,
- associate members have no right to vote or be voted upon, and are entitled only to rights and privileges provided by the bylaws.
Section Article 27 establishes that a cooperative organized by minors is a laboratory cooperative and must be affiliated with a registered cooperative; laboratory cooperatives are governed by special guidelines to be promulgated by the Cooperative Development Authority.
Section Article 28 disqualifies certain persons:
- any Cooperative Development Authority officer or employee is disqualified from election or appointment to any cooperative position,
- elective government officials (except barangay officials) are ineligible as cooperative officers or directors,
- any government employee may, with permission of the head of office, use official time for cooperative general assembly, board, committee meetings, and cooperative seminars/conferences/workshops/technical meetings/training locally or abroad if office operations are not adversely affected.
Section Article 29 provides the membership application rule:
- approval by the board of directors creates membership status,
- membership rights begin after required payments for membership or acquisition of interest as prescribed in bylaws,
- board refusal or denial allows appeal to the general assembly, whose decision is final.

Organization, registration, and cooperative categories

Section Article 6 allows organization and registration by at least fifteen (15) persons for cooperative purposes, including thrift/savings mobilization, credit to members, production and marketing, goods/services to members, expertise and skills development, land acquisition and housing benefits, insurance against member losses, promotion of members’ economic/social/educational status, establishing cooperative banks/complexes/insurance/processing enterprises/public markets, coordinating and facilitating cooperative activities, and any activities implementing the Code.
Section Article 10 allows a primary cooperative to be organized by fifteen (15) or more Philippine citizens with a common bond and residing or working in the intended operating area.
Section Article 11 requires groups intending to form a cooperative to submit to the Cooperative Development Authority a general statement describing structure, purposes, and economic feasibility, including area of operation, membership size, and other pertinent data.
Section Article 12 establishes that cooperatives registered under the Code have limited liability.
Section Article 13 sets the term:
- cooperatives exist for a period not exceeding fifty (50) years from registration unless sooner dissolved or extended,
- extensions for periods not exceeding fifty (50) years may be made by amendment,
- no extension may occur earlier than five (5) years prior to the original or subsequent expiry date(s) unless the Cooperative Development Authority determines justifiable reasons exist.
Section Article 14 requires Articles of Cooperation for registration:
- organizers must sign and acknowledge (notarization rules apply to natural/juridical organizers),
- the articles must state: cooperative name including the word “cooperative”; purposes/scope of business; term of existence; area of operation and postal address of principal office; names/nationality/postal addresses of registrants; common bond; list of directors; and share capital details including whether the cooperative is primary, secondary, or tertiary.
- registration applications must include bonds of accountable officers and a sworn statement of the treasurer elected by subscribers showing at least twenty-five per centum (25%) of authorized share capital is subscribed and at least twenty-five per centum (25%) of total subscription is paid, with a minimum paid-up share capital of Two thousand pesos (P2,000.00).
- registration applicants must submit four (4) copies of proposed articles, bylaws, and the general statement under Article 11.
Section Article 15 requires bylaws:
- bylaws must be adopted not inconsistent with the Code and filed at the same time as articles,
- bylaws must provide detailed rules on membership qualifications/conditions; member rights/liabilities; acquisition/maintenance/loss of membership; termination of membership procedures; share transfers; meeting agendas/time/place/manner, quorum and voting systems for general assembly/board/committees; general conduct and powers/duties/qualifications and disqualifications of governing bodies and officers; capital raising and use; custody/investment of net surplus; accounting and auditing systems; loaning/borrowing and limitations; distribution method of net surplus; manner of adopting/amending/repealing bylaws; conciliation/mediation for amicable settlement of disputes among specified persons; and other incidental matters.
Section Article 16 provides registration and effect:
- juridical personality arises on the date the Cooperative Development Authority issues a certificate of registration under its official seal,
- registration applications must be finally disposed of within thirty (30) days from filing; otherwise, the application is deemed approved unless the delay is attributable to the applicant,
- denial triggers appeal to the Office of the President within ninety (90) days from notice,
- if the Office of the President does not act within ninety (90) days from filing of the appeal, the application is deemed approved.
Section Article 17 provides that the certificate of registration is conclusive evidence of due registration unless cancellation is proven.
Section Article 18 governs amendments to articles and bylaws:
- articles may be amended for legitimate purposes by two-thirds (2/3) vote of all members with voting rights (with dissenting members’ right to withdraw under Articles 31 and 32),
- amendments must be indicated and certified under oath by the cooperative secretary and a majority of directors stating that required approval was obtained,
- amendments to the articles must be submitted to the Cooperative Development Authority,
- amendments take effect upon approval by the Authority or within thirty (30) days from filing if not acted upon for a cause not attributable to the cooperative.
Section Article 19 establishes that contracts executed before registration remain valid and binding upon registration, and require adoption of a formal written contract in the cooperative’s name or on its behalf before registration.
Section Articles 20 to 22 regulate division, merger, and consolidation:
- Division (Article 20): a registered cooperative may resolve to divide into two (2) or more cooperatives by two-thirds (2/3) vote of eligible members at a general assembly; division procedure is set by Authority regulations; new cooperatives become legally established upon registration; no division in fraud of creditors is valid.
- Merger/Consolidation (Article 21): two (2) or more cooperatives may merge into one (surviving cooperative) or consolidate into a new cooperative; no merger/consolidation is valid unless approved by two-thirds (2/3) of all eligible members in separate general assemblies of each constituent cooperative; dissenters may withdraw under Articles 31 and 32; Authority issues guidelines; effectiveness comes upon Authority issuance of a merger/consolidation certificate.
- Effects (Article 22): constituent cooperatives become a single cooperative (surviving or consolidated as applicable); separate existence ceases except for the surviving/consolidated cooperative; surviving/consolidated cooperative inherits rights/powers/duties/liabilities/assets and franchises; pending claims/actions may be prosecuted by or against the surviving/consolidated cooperative; creditor rights and liens are not impaired by merger or consolidation.
Section Article 23 classifies cooperatives:
- Types: credit, consumers, producers, marketing, service, and multipurpose.
- Categories by membership: primary (natural persons), secondary (members are primaries), tertiary (members are secondaries upward to one or more apex organizations); those cooperatives with members that are cooperatives are known as federations or unions.
- Categories by territory: categorized according to areas of operation, which may or may not coincide with political subdivisions.
Section Article 24 allows federations of cooperatives with primary/secondary members and single line or multipurpose activities to be registered for enumerated purposes (including cooperative enterprise authorized under Article 6; education/advisory; services for simplicity/efficiency/economy and facilitating bookkeeping/accounting/systems; printing/publishing/circulating publications; coordination; joint ventures with national or international cooperatives for manufacture and sale in the Philippines and abroad; and other necessary functions). A federation may be registered by carrying out cooperative registration formalities, and registered cooperatives may organize federations at provincial, city, regional, and national levels.
Section Article 25 permits cooperative unions to represent cooperative interests and welfare at provincial/city/regional/national levels; unions may pursue purposes including representation; acquiring/analyzing/disseminating economic/statistical/other information; sponsoring studies in economic/legal/financial/social phases and publishing results; promoting cooperative principles/practices; developing cooperative movement; advising appropriate authorities; raising funds through membership fees/dues/contributions/donations/subsidies from local and foreign sources private or government; and other necessary activities; unions may assist national and local governments in development activities within jurisdictions.

Membership liabilities and termination rights

Section Article 30 limits member liability: a member is liable for cooperative debts only to the extent of the member’s contribution to the share capital.
Section Article 31 governs termination of membership:
- a member may withdraw by giving the board of directors sixty (60) day notice,
- withdrawal entitles the member to a refund of share capital contribution and all other interests, except when refund would make the cooperative’s asset value less than the aggregate amount of its debts and liabilities exclusive of the withdrawing member’s share capital contribution,
- death, insanity, insolvency, or dissolution automatically terminates membership,
- termination by board is allowed by majority vote of all board members for: failure to patronize for an unreasonable period fixed by board; continuous failure to comply with obligations; continuous or repeated violation of bylaws/rules; or acts/omissions injurious or prejudicial to cooperative interest or welfare,
- before board makes a termination decision, the member must receive written notice and an opportunity to be heard,
- board decisions must be in writing, communicated in person or by registered mail, and are appealable to the general assembly within thirty (30) days after promulgation, with general assembly decision final (in regular or special session),
- pending a general assembly decision, membership remains in force.
Section Article 32 requires refund rules: all sums computed per bylaws due from the cooperative to a former member must be paid either by the cooperative or by the approved transferee, as applicable, in accordance with the Code.

Cooperative administration bodies and voting rules

Section Article 33 provides that the general assembly is composed of members entitled to vote under articles of cooperation and bylaws.
Section Article 34 makes the general assembly the highest policy-making body and gives it powers stated in the Code, articles, and bylaws, including exclusive powers that cannot be delegated:
- determine and approve amendments to articles and bylaws,
- elect or appoint board members and remove them for cause,
- approve developmental plans,
- approve other matters requiring a two-thirds (2/3) vote of all general assembly members as provided in the Code.
Section Article 35 governs meetings:
- regular meetings must be held annually on a date fixed in bylaws, or otherwise within ninety (90) days after close of the fiscal year, with written notice sent to members of record at least two (2) weeks prior (unless bylaws set a different period),
- special meetings may be called when necessary by board majority vote or under bylaws cases, with at least one (1) week written notice to all members,
- special meeting must be called by board after required notice within one (1) month after receipt of a written request from at least ten per centum (10%) of total members for specific business in the call,
- if board fails to call regular/special meeting within the given period, the Cooperative Development Authority may, upon petition of ten per centum (10%) of all cooperative members and for good cause, issue an order directing petitioners to call the meeting using notice required by Code or bylaws,
- newly approved cooperatives must call a special general assembly within ninety (90) days from approval,
- the Authority may call special meetings for audit/examination/investigation reporting results or when the cooperative fails to hold an annual general assembly during the required period so members can secure information on affairs and benefits they are entitled to receive,
- notice of meetings may be waived expressly or impliedly by any member.
Section Article 36 sets quorum: unless bylaws provide otherwise, quorum is twenty-five per centum (25%) of all members entitled to vote.
Section Article 37 sets voting system:
- primary cooperatives use one-member-one-vote with only one (1) vote per member,
- secondary or tertiary cooperatives vote as delegates of member-cooperatives and have only five (5) votes; delegate votes are deemed votes of the delegates’ member cooperatives,
- no voting agreement or other device to evade one-member-one-vote is valid except as provided in Article 37(1),
- no proxy voting for primary cooperatives unless provided in bylaws,
- bylaws of cooperatives other than a primary may provide proxy voting; proxy voting means a delegate of a cooperative represents or votes for another delegate of the same cooperative.
Section Article 38 provides board composition:
- board manages affairs and has not less than five (5) nor more than fifteen (15) directors,
- directors are elected by general assembly for a term fixed in bylaws not exceeding two (2) years,
- directors hold office until successors are duly elected and qualified or duly removed,
- no director may serve more than three (3) consecutive terms.
Section Article 39 gives board power to direct and supervise business and manage property; board may by resolution exercise cooperative powers not reserved to the general assembly by the Code and bylaws.
Section Article 40 sets director eligibility:
- eligible directors are members entitled to vote under bylaws who meet qualifications and none of disqualifications in law or bylaws,
- the board may 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 membership; such director/committee member need not be a cooperative member and has no powers/rights/responsibilities except technical assistance.
Section Article 41 sets board meetings and quorum:
- regular board meetings occur monthly unless bylaws provide otherwise,
- special board meetings may be called anytime by the President or per bylaws,
- quorum is a majority of board members unless bylaws provide otherwise,
- directors cannot attend or vote by proxy at board meetings.
Section Article 42 governs board vacancies:
- vacancies not due to term expiration may be filled by a vote of at least a majority of remaining directors if still constituting quorum; otherwise the general assembly fills the vacancy in a regular or special meeting,
- directors elected to fill vacancies serve only for the unexpired term.
Section Article 43 establishes officer selection and removal:
- board elects chairman and vice-chairman from among themselves,
- board elects or appoints other officers from outside the board in line with bylaws,
- officers serve during good behavior and may be removed only for cause after due hearing,
- loss of confidence is not valid unless evidenced by acts or omissions causing loss of confidence in honesty and integrity,
- no two or more persons with relationships within the third civil degree of consanguinity or affinity may serve as elective or appointive officers in the same board.
Section Article 44 requires/permits committees:
- bylaws may create an executive committee appointed by board, with powers/duties delegated in bylaws or by majority vote of all board members,
- bylaws must provide for an audit committee and such other committees as needed,
- if committees have vacancies and bylaws do not provide otherwise, the board may elect or appoint to fill vacancies, with the appointee/elected person serving only the unexpired term portion.
Section Article 45 provides that director, officer, and committee functions/responsibilities are detailed in the bylaws.
Section Article 46 imposes liability for misconduct and conflicts:
- directors/officers/committee members who willfully and knowingly vote for or assent to patently unlawful acts, or are guilty of gross negligence or bad faith, or acquire personal/pecuniary conflict interests are jointly and severally liable for all damages or profits resulting therefrom to the cooperative, members, and other persons,
- those who acquire adverse interests in violation of duty are liable as trustees for the cooperative for damages and double the profits that otherwise would have accrued to the cooperative.
Section Article 47 governs compensation:
- absent bylaws fixing compensation, directors receive no compensation except reasonable per diems,
- compensation other than per diems requires a majority vote by members with voting rights at a regular or special general assembly meeting called for that purpose,
- no additional compensation other than per diems is paid during the first year of any cooperative,
- officers’ compensation and committee members’ compensation may be fixed in bylaws,
- unless already fixed in bylaws, compensation of other employees is determined by the board.
Section Article 48 regulates conflict contracts:
- a cooperative contract with one or more directors/officers/committee members is voidable at the cooperative’s option unless conditions are met: presence of the director was not necessary for quorum; the director’s vote was not necessary for approval; contract is fair and reasonable; and for officer/committee member contracts, prior authorization by general assembly or board,
- if either of the first two conditions is absent (director contracts), the contract may be ratified by two-thirds (2/3) vote of all members with voting rights in a meeting called for the purpose, with full disclosure of adverse interest and contract fairness/reasonableness.
Section Article 49 prohibits disloyalty:
- a director who acquires for himself an opportunity that should belong to the cooperative is liable for damages and must account for double the profits that would have accrued, unless ratified by two-thirds (2/3) vote of all members with voting rights; this applies even if the director used personal funds.
Section Article 50 prohibits illegal use of confidential information in share/debt transactions:
- directors/officers or their associates who use confidential information to benefit themselves or associates in transactions involving shares or cooperative debt obligations are liable to compensate for direct loss (unless the information was known or should reasonably have been known to the person) and accountable to the cooperative for direct benefits/advantages received or yet to be received,
- the cooperative must take necessary steps to enforce these liabilities.
Section Article 51 provides removal procedure:
- elective officers/directors/committee members may be removed by two-thirds (2/3) of voting members present constituting a quorum in a regular or special general assembly meeting called for that purpose,
- the person involved must be given an opportunity to be heard.

Cooperative records, reports, inspection duties

Section Article 52 requires every cooperative to have an official postal address for notices and communications, and any change must be registered with the Cooperative Development Authority.
Section Article 53 requires books to be kept open for inspection at the official address during reasonable office hours, including:
- a copy of the Cooperative Code and other cooperative laws,
- copies of Cooperative Development Authority regulations,
- copies of articles and bylaws,
- register of members,
- minutes books of general assembly, board, and committees,
- share books where applicable,
- financial statements,
- other documents prescribed by law or bylaws.
Section Article 53 designates audit committee chair responsibilities:
- chair is responsible for books and records of account in accordance with generally accepted accounting practices,
- chair must produce them at the time of audit or inspection.
Section Article 53 requires continuous accounting records enabling ascertainment of true condition and results of operations at any time, and requires publication annually of audited financial statements according to generally accepted auditing standards, principles, and practices.
Section Article 53 allows document disposal after five (5) years through burning or complete destruction, except documents/records/books relating to civil, criminal, and administrative proceedings as subject matters; an inventory of items to be disposed must be drawn up and certified by the cooperative secretary and audit committee chair, then presented to and approved by the board of directors.
Section Article 54 requires annual reporting:
- every cooperative must draw up an annual report of affairs as of end of each fiscal year, publish it, and furnish copies to members of record,
- a copy must be filed with the Cooperative Development Authority within sixty (60) days from end of each fiscal year; the Authority prescribes form and contents,
- failure to file is a ground for revocation of the cooperative’s authority to operate,
- fiscal year is calendar year unless bylaws provide otherwise.
Section Article 54 imposes delinquency enforcement:
- the Cooperative Development Authority must send a registered notice within fifteen (15) days after the prescribed period expires, stating delinquency and consequences,
- if not filed within thirty (30) days from receipt of the notice, any member or the Government may petition the court for mandamus to compel filing/publishing and may require payment of proceeding expenses including counsel fees if the petition is filed by a member.
Section Article 55 gives evidentiary force to the register of members kept by cooperatives: the register/list entries are prima facie evidence of membership entry dates and cessation dates.
Section Article 56 provides evidentiary rules:
- duly certified copies of entries in regularly kept books/registers/lists are admissible as evidence of existence of entry and prima facie evidence of matters/transactions recorded,
- unless the cooperative is a party, no one is compelled to produce cooperative books when contents can be proved, unless by order of a competent court.
Section Article 57 requires bonding:
- directors/officers/employees handling funds/securities/property must execute and deliver adequate bonds for faithful performance,
- board determines bond adequacy.
Section Article 58 creates preferential claims and lien enforcement for cooperative loans/credit:
- a cooperative debt due from a member is a first lien upon specified raw materials/production inputs/products or upon land/buildings/facilities/equipment/goods/services acquired and held by the member through cooperative loan/credit proceeds as long as unpaid,
- property subject to the lien cannot be sold or conveyed to third parties without prior cooperative permission, and the lien continues even after sale/conveyance until extinguished,
- any sale/conveyance in contravention is void.
Section Article 59 authorizes salary or wage deduction for cooperative debts:
- a cooperative member may execute an instrument authorizing employer deductions from salary/wages to satisfy cooperative debt/demand,
- the employer must deduct and remit forthwith upon request and must continue deductions until debt/demand is fully paid,
- “employer” includes private firms and national/local governments and government-owned/controlled corporations employing members who agreed to execute and carry out the instrument,
- existing agreements of the same nature in force at the approval date apply to the rule.
Section Article 60 establishes a primary lien: a cooperative has a primary lien on the capital, deposits, or interest of a member for any cooperative debt due from the member.
Section Article 61 and Section Article 62 provide tax treatment and exemptions (including eligibility based on whether cooperatives transact with nonmembers/public and thresholds on accumulated reserves and undivided net savings), plus privileges and fee exemptions described below.

Tax rules and legal privileges

Section Article 61 provides tax treatment for cooperatives that do not transact business with nonmembers or the general public: they are not subject to government taxes or fees under internal revenue laws and other tax laws.
Section Article 62 provides tax and other exemptions for cooperatives that transact with both members and nonmembers:
- cooperatives are not subject to tax on transactions to members,
- cooperatives dealing with nonmembers enjoy enumerated exemptions